The Chancellor can't just offer jam today
Chief Executive
Just over a year ago, the PM delivered a major speech on the Government’s approach to the NHS. He declared “No more money without reform”.
The following month the 2024 Budget gave the NHS an additional £22.5 billion over two years – with no strings attached. And while there are now reforms on the horizon – our proposal for a virtual hospital being one – the NHS remains broken: patients are passed from pillar-to-post, delayed discharges are costing thousands of bed days, productivity is stagnating and access is rationed. Yet, if rumours are correct, the NHS can expect a further cash injection at this week’s Budget.
That PM pledge had followed another promise, this time by Wes Streeting when he increased junior (now resident) doctor pay by around 22%: “I am delighted that we have agreed an offer that finally paves the way to ending industrial action which has caused untold misery to patients and staff. Everyone agrees we can’t have more disruption, more cancelled appointments, which is why my priority from day one has been to end this dispute.”
Except, just last week those doctors were in the middle of another five-day strike, in the depth of the Winter Crisis, after demanding a further 29% pay rise. Holding their 13th strike since 2023, patients were once again experiencing “misery” and “disruption”.
There is a common theme here: promising future reform, while giving in to present demands. Or, to put it another way, expecting a radically different behaviour from a set of people whose interests do not lie in changing.
Nassim Nicholas Taleb in Skin in the game writes: “No person in a transaction should have certainty about the outcome while the other one has uncertainty.” But that is precisely how the Government has proceeded.
And now we risk the same fate on welfare.
We are told the Chancellor will end the two child benefit cap in the Budget, but will pledge to proceed with welfare reform. That’s a c.£3.5 billion cost today for an unspecified saving in the future.
Achieving such future savings is all the more questionable given Labour’s backbenchers are emboldened from forcing a U-turn in the Summer on planned cuts to disability-related benefit spending, and Sir Stephen Timms, the minister charged with reviewing PIP, has said the “review is not intended to save money”.
The problem, you see, is that all reform inevitably leads to some ‘losers’, sometimes very real, sometimes notional. Which means that those people will organise, their representatives will make those with decision-making power – namely our MPs – feel uncomfortable.
Naturally, it is easier to placate, by spending money – on the NHS generally, on resident doctors specifically, on the 14% of families who have three or more children – while promising that in doing so the hard thing will become easier to execute. It doesn’t.
On the benefit cap specifically, I will not dwell on the fact that just 26% of people want the cap scrapped – and just a third of Labour voters. Nor the fact that when imposed, it only applied to future families – meaning that anyone already with a larger family was protected. Nor the fact that low and, given the high cost of having children, middle income families have to make decisions about the size of their families based on affordability. Nor that those are precisely the families who will pay for more benefits for other people’s additional children, and whose taxes will have to go up to do so – because fiscal drag is as much of a tax rise on “working families” as a straight penny or so increase on income tax.
But I will say this. The continuing expansion of the State is not sustainable without serious tax hikes, and certainly not so without serious tax hikes for everyone. And those paying the taxes are increasingly resenting doing so when they feel they are not benefiting. 67% of people would rather the Government “cut spending on public services” than “put up taxes on working people”; a majority of Labour voters would prefer this.
The legitimacy of the welfare State rests on a social contract that is recognised by the public. That is increasingly broken, which should worry everyone who wants to see a fair and adequate safety net protected.
And ultimately, an economic crash, triggered by a failure to grip the seriousness of the fiscal situation we find ourselves in, will harm the poorest the most. The medium-term drivers of cost – welfare, pensions, the NHS – are those spooking the markets and leading the OBR to forecast 300% debt to GDP in 50 years. A day of reckoning would mean slashing, not reforming.
The Chancellor is doing no one any favours by promising jam today.