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OBR – We Can’t Afford The Welfare State We’ve Already Got

The Office for Budget Reponsibility – what a name, eh, proof perfect that those who spend the money aren’t responsible with it – has insisted today that we cannot afford the welfare state that we’ve already promised ourselves. This does rather put the kibosh on plans to extend it.

More specifically, it says that in order to fund the things which we have already promised ourselves we must raise taxes. That is, within the amount that we’re already willing to pay we cannot afford those promises. Oh, and the implication is that those surveys about willingness to pay more tax also don’t work.

The government must raise taxes or cut spending to fund Theresa May’s planned increase in NHS funding or risk putting the country’s finances under pressure, the UK’s fiscal watchdog has warned.

The Office for Budget Responsibility said the long-term outlook for public finances was now “less favourable”.

It questioned a plan to partly fund the NHS boost through a “Brexit dividend”.

It said Brexit “is more likely to weaken the public finances than strengthen them”

That Brexit argument is dependent upon whether the economy grows or not, of course. Given that unilateral free trade is the only arrangement for Brexit which does make the economy grow we’d better have unilateral free trade then, eh?

“Our provisional analysis suggests Brexit is more likely to weaken than strengthen the public finances overall,” the OBR said in its latest Fiscal Sustainability Report.

“There will be direct savings from the net contributions to the EU budget that the UK will no longer have to make, but it is unclear how much will be available after payments towards the agreed withdrawal settlement and other Brexit-related spending commitments.”

That’s nonsense of course. For what we’ve got to pay to leave is – by definition – what we’d have to pay if we stayed in. For that’s what the claim is, we’ve agree to pay those amounts so we must even as we leave. But it’s this which is the most important point:

In our baseline projection and the many variants we consider in Chapter 3, we would
eventually expect to see public sector net debt on a continuously rising trajectory as a share
of GDP. This would be unsustainable. But the fiscal challenges of an ageing population and
non-demographic health spending pressures are common to many countries and our
conclusions are similar to those of a variety of international institutions and other bodies.

We’ve promised ourselves lots of goodies and we’ve not been paying for them. Thus in order to gain those promises we’ve got to pay more in taxation. Within the boundaries of what we’re currently taxed we cannot afford our welfare state that is.

We cannot use those surveys that people will pay more for more to counter this. For there are surveys which say that people would pay more tax in return for more spending on the NHS or whatever cause. But that’s not what needs to be asked. Are you willing to pay more for what you already get? The stuff promised but not affordable? At which point we might well have a different answer, no?

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6 years ago

“The fiscal challenges of an ageing population” is gibberish. The issue is the welfare challenges. The public sector would like to do more, and tax more, and the fact that the population is aging is the excuse of the day. (Admit one million more young Arabs and the situation does not get better.) What we have been promised is not actionable, including the fact that we have been promised the return of “our money” as a pension. What we have been promised is not a good excuse to raise taxes, except to the professional excuse-maker.

6 years ago

The response to those surveys where people are willing to pay more in taxes. What utter bollocks because in my not-so-humble view there are three golden principles of taxation: (i) it is inevitable, (ii) other people never pay enough and (iii) whoever answers the surveys believes they already pay too much.

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