by Rishi Sunak left the D-Day celebrations early, got caught in the rain and came under fire over some Treasury forecasts of tax hikes. The Labor Party went on about “change” endlessly repeating some imaginary numbers about “investing” in the NHS and creating “green jobs”. Meanwhile, the Dems launched a lib for the past six weeks with fun days out at CenterParcs.
Over the course of the election campaign, the main parties have had furious arguments about their successful shenanigans and have created photo ops straight out of Tony Blair’s playbook. But there is an ugly truth behind this election: Britain is much closer to bankruptcy than our political elites are willing to admit. Even worse, no one even wants to talk about it.
Now that the campaign is over, it’s worth taking a look at the statistics that really matter. Unfortunately, they make sobering reading. Taxes are already 70 years higher, and we’re still nowhere near balancing the books.
Over the course of this year, we will add another £87 billion, or around 3 per cent of GDP, to the national debt, according to the Office for Budget Responsibility (OBR). And this is happening at a time when the economy is recovering, and the Government is pushing through a series of punishing tax increases.
We should be paying back debt at this point in the cycle, not getting even bigger. Our debt-to-GDP ratio is close to 100 per cent, tripling in the 16 years to 2023, according to the Resolution Foundation, the biggest increase on record in peacetime. We are very close to the 112 percent level that has just resulted in a shameful downgrade of France’s credit rating twice in the last six months.
It doesn’t stop there. We are still racking up massive off balance sheet debt. As? There is already £200 billion of student debt outstanding, and this is predicted to rise to over £400 billion by the 2040s. Few believe that graduates will earn enough to pay back their loans in full, especially since our zero growth economy is barely creating any new professional jobs to absorb them all.
We expect approximately £2.6 trillion in “unfunded” public sector pension entitlements. As the state employs more and more people – we added another 135,000 to the government payroll in the year to September 2023 – that figure will continue to grow and grow. We are legally mandated to reach a net zero target which, the OBR has calculated, could add at least another £300 billion to government costs over three decades. In Wales, a whopping 28 per cent of working age people are now on benefits, relying on the state to support them, while the figures are slightly better in the rest of the country.
A few minor reforms to the tax system, such as cracking down on tax avoidance or getting tougher on non-payments, will make no difference to that. As the OBR has indicated, the tax burden is expected to rise to 37.7 per cent of GDP by 2027-28, the highest level in our history. Sure, you can argue that a handful of European countries manage to put more pressure on their jaded citizens, but there is no empirical evidence that this could be the case in the UK.
Anyone who tries to argue that we are still “underdogs” compared to much of the rest of Europe needs to explain to Labor adviser and former HMRC boss Sir Edward Troup why anyone over 40 to reach. percent of GDP from the taxpayer in the past. Amazingly, even Labor chancellors in the 1970s, such as Denis Healey, who famously promised to tax the rich “until the pips squeak”, raised less than Jeremy Hunt is under present.
Britain is entering uncharted fiscal waters. We will have to spend more on health and social care as the population ages. We have record levels of economic inactivity, and those who are not working need to be supported and sought. We have stagnant productivity – but only through increased output can we achieve real growth. The “peace dividend” is over. Politicians of all stripes are committed to breaking hundreds of billions into net zero.
And yet, we are at or near the taxable limit. There is only so much the country can take, before entrepreneurs go elsewhere, companies relocate, and individuals take early retirement. Were any politicians honest during this election campaign about the state we are in, and about the very difficult decisions that must be made to free us from this torpor?
In late June, the Institute for Fiscal Studies (IFS) published research into these outrageous spending claims. He argued that there was a “conspiracy of silence”, and that “painful choices” were being ignored. Curiously, since the IFS is respected by a political class that pays lip service to “evidence-based” policymaking, its report was completely ignored, with depressing predictability. No one wants to talk about it. Why? Perhaps we are in collective denial. Perhaps the reality of our predicament is too harsh.
But this cannot last. The UK is facing a fiscal crisis, and the global economy looks as precarious as ever. The United States, under President Biden, is riding an unprecedented wave of government borrowing, but the sugar rush is now winding down and our largest trading partner may well have slipped into recession by the end of the year. The eurozone appears incapable of sustainable growth, and could be pushed back into crisis at any time, especially if France goes into debt crisis.
China’s economy is not expanding as it was 10 years ago, and a wave of cheap goods could soon undermine British and European industries. As we discovered during the main short-term truss competition, the UK is at risk of a collapse in confidence in the bond market.
The Bank of England has very little credibility left, we are not in the habit of printing the world’s reserve currency, and we do not have the full size of the euro to protect us. If the bond markets decide to no longer finance our delusional belief that we are still a rich country, then we will go straight into a cataclysmic financial crash.
So here’s what politicians aren’t telling us: the UK is dangerously close to national bankruptcy. It could only take a mild global downturn to push us forward. And no one dares to mention it. Of the many deceptions that occurred during this election, this was the biggest of all.
