Britain lives behind its means
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Rola Khaleda, FT editor, chooses her favorite stories in this weekly newsletter.
You do not turn into financial risks a report From the budget responsibility office for comic relief. It is generally a realistic look. If there is a report “Actually, guys, everything is good”, I must wash my hair on that day.
On Tuesday, it was a victory for this type. Risks on public financial affairs “Hard” with “big erosion” From the United Kingdom’s ability to respond to future shocks. The basic points of OBR are widely known. The levels of public debt and annual borrowing are not a secret to the state, nor are it a government since David Cameron looked serious about its treatment.
However, one section of the report acquired a wider problem. When examining the effect of the so -called triple lock pensions, OBR indicated that the policy bill that is supposed to cost 5.2 billion pounds annually by 2029/30 is closer to 15.5 billion pounds.
It is expected that government pensions spending will increase in general 5 per cent of GDP today to 7.7 per cent by the 1970s, This is mainly due to the high average life. What makes this worrying is the decrease in the number of adults in the age of work for each retired, is expected to decrease from 3.2 in previous contracts to 2.7 by 2070. In other words, there will be fewer taxpayers to finance higher costs.
The triple lock, which guarantees the pension rising from which to inflation, profits, or 2.5 percent, was a decent plan to treat retired poverty. But it has proven that it is not only more expensive than imagination, but it is politically impossible to give up. When the Conservative Party leader Kimi Badnosh asked about his futureI was attacked immediately by the Labor Party, although it also knows the issue of alleviating this strait. Looking at the recent decline of Mr. Kerr Starmer over his plans Most of the retirees are deprived of 200 pounds of winter fuel It is difficult to see him rushing to deprive them of larger sums.
This is one of the symptoms of a much larger problem. Simply put, the OBR report shows a country behind its capabilities Political system Apparently unable to confront voters with the fact that we outperform a credit card and leave bills for our children.
This is not a party point. Both the two main parties went to the elections, which are not secure alone Spending Discounts. Despite all the beautiful financial rules, there is no serious party on debt reduction. Today’s definition of a wise consultant is a person who does not make matters worse.
At the end of a credibility period otherwise, as a consultant, Jeremy Hunt revealed two signs of sight Unbalanced tax discounts Without any serious reference to the corresponding savings because the Conservative Party strategies saw it was the only remaining shot in their treasury. The Labor Party, which is still inhabited by the “Conservative” Party’s “tax” posters, was imprisoned in hunting discounts and other promises not to raise personal taxes, and thus had to find revenues with an economically destructive success.
By the reluctance of the cost of borrowing and hiking in the market about sovereign debt, the Labor Party spends less than it loves while searching for revenues in places that hope not to notice the damage. (Gordon Brown’s former tax raid led to the collapse of the specific benefits pension plans, which reduces the demand for Gilts in the UK. What is going on around it).
Consequently, the government is fighting to finance increases in basic spending from defense to social welfare. Last week, Labor Party deputies forced Starmer to attach relatively flawed luxury savings. At the same time, he is under pressure Cancel “second hat”That limits the benefits for large families.
Other measures, such as the expansion of breakfast clubs or additional child care support, increase the demands of public spending. It is not necessarily wrong with these measures, but it comes at a cost that someone must eventually pay.
The situation cannot continue. There is no current growth path that will save the situation. The only options are the tax height, new fees for services, spending discounts, or a mixture of the two.
There is no really ready -made side to confront tax -resisting voters with difficult questions about what they want the state to stop doing, the level of sympathy and intervention they ask for and prepare to finance them. None of these questions is easy. The population who advances increases health and luxury costs. Britain’s benefits are not excessive The demands of the age of health ages increased sharply. The main parties are the challenge duck. Starmer prefers the high hidden tax on presenting this argument, while his campaign to his left campaign for wealth taxes that enjoy the richest movement that must be avoided. UK reform provides fake savings and major tax discounts. Nothing offers any plan to reduce debt.
Unfortunately, political incentives in politics have recently worked against clear facts. Rishi Sonak was defeated by Liz Trex to lead the Conservative Party because he raised taxes to reform public financial affairs after the epidemic. BADENOCH is the correct noise, describing the current social care bill as “unjustified and unjustified” in today’s speech, but her party saw an advantage in opposing both winter and luxury fuel discounts.
Britain is not alone in this. France’s debt rate is worse. However, as the aeronal separation explained, it is better for the UK to face this challenge before the bond markets are forced.
It is a bad time to conduct this discussion. Voters still feel the pressure of the stagnant family income. The infrastructure needs to invest, and public services are caught due to the previous austerity. But in good times this conversation will not be necessary.
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