

Britain's budget choices

Where the axe should fall

Retrenchment must go hand in hand with reform in Britain to make the state fitter as well as leaner

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Readers' comments




I've just had a terrible nightmare - I'm a poor pensioner trying to survive on my "meagre pension" in a state (and what a state it is) run by the Economist. The government has sqeezed that pension by adding VAT to my food bill, I can look forward to a long cold winter of personal discontent (and discomfort) brought about by the removal of my fuel allowance and I can't leave my hovel to sit on a warm bus because Econogov has even taken away my last harmless pleasure - the bus pass.Bleak prospects indeed - and this from a newspaper that frequently tells us how important the "grey vote" is.

Desk Monkey

As an Australian living in London for the last 9 months my thoughts are:

1. UK is irrational.
2. Holds onto an outdated entitlement culture.
3. Inefficient and don't know it.

It is irrational for the UK population to expect good times to last forever. All the of the wealth created was all due to 1 industry: finance which depends on mostly elite talent from abroad. Once the GFC took hold all of the shortfalls of UK society unfolded.

In the UK there is an entitlement culture built on the public service mentality, the ability for units like the RMT to bring London to a halt is unbelievable. In Australia they trained strike breakers when they tried to deunionise the ports and increase productivity. Everyone likes to complain about the disruptive strikes but nothing is done about it. Rail/(Royal) Mail workers make above average salaries and I am sure plenty of people would want their jobs.

NEETs (Not in Education, Employment or Training), how could there be THAT many of them floating around?

I agree taking away a bus pass won't do anything for the present situation.

Adding more management accountants to the public institutions won't solve a thing because the fat cats in their ivory towers don't take advice (because they know best) and being straight forward isn't appreciated. HARD decisions for HARD times... but the country is full of softies. Softly does it GORDON!

Cherry Farm

One thing that is absolutely essential, speaking as a longtime NHS employee at the sharp end of an urban mental health service is to get a lot more management accountants into these services. Our greatest burden is uncosted innovations which are dumped on us from above. All these do is make us very busy, contrary to popular belief public sector workers work very hard, but rarely at the right things. Most people at the coal face could strip out millions if we had people helping us ask the questions that terrify politicians like what is the real cost of that computerised patient management system, how much is that minor change in mental health law actually going to cost and so on. I would propose that every desired action is costed down to the penny, just like a timing belt change in a garage is, this would reveal a massive demand on the system that is has neither the time, skills or bodies to achieve, without some form of fudge, that particularly since labour has got in has insidiously bloated the system due to running it on overdrive driven by policy rather than fiscal considerations. Front line people detest this way of operating and notably people creaming off vast sums to fulfil various newly invented obligatory statutory functions which have been built in mostly it seems to make money for lawyers and other forms of what the French would describe as people in the frame, all justifying their existence on some vague pretext of protecting human rights or mediating the financial balance between central and local authority budgets.


Too busy at the moment, but I've got to bookmark this article and come back to it later. Suffice it to say, for some of the reasons previously stated by others, and a few more reasons to come...

Worst. Economist. Leader. Ever.


But how would any fiscally conservative government go about doing this? The Labour government has spent the past 10-11 years being Father Christmas, dolling out little gifts from the state. It is so easy to introduce these schemes but near impossible to reverse.

Think of the headlines, a government that takes pensioners free bus passes, that takes their winter fuel allowance. Some commentators here are already outraged. It makes Maggie-Maggie-the-milk-snatcher sound pleasant. The crime of course is that these schemes should have never been brought in at all, but people only remember the leader that takes them away.

M C Mullen

How much would removing free bus travel for pensioners net? That would be a disgraceful move. With the minimal state pension free travel is a tremendous way of keeping impoverished pensioners minds active particularly in the cities where it allows them to keep exploring until they are hit by a slow-moving bus on Oxford Street.

Anthony Z

I've been in a bank once, and let me tell you all those bankers are overpaid fatcats. They've been bloated by years of soft treatment by one right-wing government after another (I'm looking at you, Blair) and we don't need them. Get rid of half of them, put a 90% tax on salaries above £150,000 and let them sod off to Luxembourg if they fancy dying of boredom rather than paying their way in society. Then the rest of us can enjoy a real economy rather than a fantasy one.

I don't believe that, but it's of the same analytical quality as the "bloated public sector" tosh most commenters are spouting. I suspect it might even be nearer the truth.

Paul Marks

I support the Economist's desire for reductions in government spending (although I dislike the Economist, to put the matter mildly, fairness demands that I have to say you are right when you are right).

However, I can find no specific suggestions in your article for reducting government spending - perhaps they are in the British section of your publication (which I have not yet read), but as this is your cover article (or editorial) surely there should be specific suggestions here - not just pius words. Here are two specific suggestions (of many I could make) - abolish "Regional Government" (not just the unelected assemblies - but all the "development agencies" and so on as well) and get Britain out of the European Union. These suggestions would not cut government spending enough on their own (not even close) - but they are specific suggestions, whereas you suggest nothing specific at all.

As for raising taxes (especially on the poor - which is what higher VAT means) - that suggestion is foolish and would do nothing to deal with the real problem (the explosion of government spending). Besides the National Debt (which you claim to be concerned about) is being dealt with by the Bank of England via a de facto DEFAULT - which is what buying government debt with money the Bank of England creates out of nothing, really is. The Federal Reserve in the United States is following the same policy - and both the Bank of England and the Fed are also following the policy of CORPORATE WELFARE by buying up the debt of politically connected business enterprises (again with money they create out of nothing).

Major Cynic

With all due respect....

The UK is a failed and failing state. Too many public sector employees. We need to chop 15% plus - and abandon inflation linked pensions.

I've worked with NHS logisitics for a client and frankly the level of incompetence beggars belief - 25% savings would not be difficult for anyone to see.

In the long run any country lives by its productivity and what the world wants to buy, and the world wants almost nothing the UK produces.

Within 5 years we will probably see 20% unemployment (well its nearly there anyway if you properly count the "sickness benefit" numbers) hyperinflation and a pound equal to less than Euro 0.60.


State pensions and unemployment benefits in the UK rank amongst the lowest in the EU, not little scope for cuts here I think. As for suppressing free bus tranport and heating alloowance for pensioners, this would save a tiny amount of what is required.
20% VAT on all products and services and a basic income tax rate of 30% are unavoidable in my opinion.
The UK will soon have scandinavian levels of taxation with US-style low quality public services and infrastructures.......
Perhaps the Economist would like to reflect on how we got there?


The suggestion that government should reign in the budget deficit by removing food's zero rated VAT status strikes me as unwise. As a regressive tax, this will hit the poor and growing ranks of unemployed where it hurts most, not to mention the fact that food prices have risen faster than general inflation these last few years. If taxes really must rise, far better to tinker with the basic rate of income tax to reverse the deficit quickly.


I find it fascinating that The Economist which routinely attacks California Republicans as reactionary cavemen for resisting tax increases and advocating drastic spending cuts, is advocating those same steps as a cure for Britain's budget problems. And of course The Economist, as evidenced by the Labor Party's initial agreement, is correct. So why are those steps not applicable to California?


The value of Sterling has been a product of demand for the currency. Its a free market. The revenues from Oil and from financial services, and the manipulations in areas like carry trades, have distorted demand for the currency which surely has been overvalued as a result. Our trading partners in the EU and Japan have gorged themselves selling us Champagne, Beamers and LCD tellys. For my part, I have seen the world on the cheap.

Now the financial crash has come we have been hoist. But it is not totally impossible to recover from this position given skilled political leadership.

The present administration has blown the oil fund. I hope the voters remember that next year, and for years to come. We had a golden opportunity to restructure our economy and they have squandered it on white elephants and lined pockets for themselves and their Cronies. To be fair I doubt the other side would have done much differently, but that does not forgive the present lot their sins.

Now we have to look to the future, learning from the past. I suspect as individuals many many people have learned the folly of borrowing too much. That is unlikely to happen again for a generation or two. Viz the net repayments lately of mortgages. There is a mood in the country that the party is over. That can be harnessed by honest politicians ( a contradiction in terms perhaps), to tell it like it really is, and persuade us to take the necessary medicine.

This island has a long history of pulling itself up by its bootstraps. We don't surrender. We just need a bit of leadership. We just need people to pull together.

I think it is most important of all for the pain to be spread equally. We should featherbed no-one. Those who would be elected must have their incomes brought back down to earth. Those bankers who - like GM in your next article - should have been allowed to go to the wall, should be in sackcloth and ashes for years. Those who don't want to work should not fuss if their welfare is withdrawn. Those straight off the boat should not expect any welfare at all.

Which of our would be leaders is going to come up to the mark?

If the next parliament doesn't fix this mess we might as well switch the lights out. But we still have hope. 5 years from now lets see where we are. Don't count us out yet.


"If money is tight, schools and hospitals will rethink whether they need to employ all the extra staff they have hired in recent years."

Yes, all those pesky teachers and doctors making people better and teaching our kids stuff. I couldn't agree more. I certainly think it's the mark of a civilized society to maximize defence expenditure and minimize that of education and healthcare. Yeah. Go North Korea!


The issue of UK government spending is more likely to be forced by the bond and currency markets than decided by politicians, who will follow, not lead events. They pretend to do the opposite.

The matter is simple, government spending since 1997 is out of control. Current borrowing requirements are based on maintaining this bloated spending.

The government now employs directly and undirectly through quasi private companies (still reliant on the taxpayer) over half the UK workforce. This is clearly unsustainable.

The NHS is the third largest employer (of largely migrant labour) in the world. An unsustainable position for a mid sized European country without third world health problems.

Government spending on quangos (government sinecures) must cease. And the role of the state must shrink.

Welfare and the welfare state must undergo a fundamental reform to make it fit for the 21st Century.
It should support the family to be independent of welfare and not reward the indolent.

Government spending has grown exponentially since WWII, rather than shrinking it grew in times of increasing prosperity. Blair's government ramped it massively. It isn't only house that are unaffordable, it is government spending.

The idea of VAT on food is the stuff of which social disorder and revolutions are made and the death of regimes. From Marie Antionette, the Czar of Russia to the Weimar Republic, and the rise of Hitler. Thatcher wouldn't countenance it, nor will Cameron.

No new agencies like the Institute of Fiscal Studies are needed to monitor public spending. That is only to create yet another quango, and yet more six figure salary public spending.


It would be so easy if the majority of brits would be like the characters in the excellent TV series "Shameless".

What I am afraid of is that some of the proposals put forward by the Economist would indeed produce a large number of "Shameless" characters.


An excellent article, one omission being detail on Canada's exemplary response to their crisis, well thought through and eminently sensible. Sadly though, as our politicians lack spine and our media usually defaults to the lowest common denominator, it will not happen and many wealth creators will leave for pastures new.

Eric A B

I do not think there could be a more despicable policy than charging VAT on food. Its suggestion here has seriously reduced my respect for this newspaper!


The economy has 'flourished' on the basis of financial services - yes. But employment has flourished on the basis of public sector jobs and also, more insidiously, state funding of projects delivered by the 'voluntary' sector. This has most effectively silenced many experts who might otherwise have spoken out at the impact of policies in health, child protection, caring for the disabled, housing etc etc. The vital role of the voluntary sector in enabling people who both care and know about their subject matter has been at best seriously compromised.

VAT on food? For pity's sake! As others have said, nothing more daft has previously fallen from the Economst's pen.

Public sector pensions are being looked at. For the general state pension, the only logical way forward I can see is for a big increase in compulsory deducations, ring-fenced for pensions, combined with a bigger pension paid out of current revenue, taxed as now. My remaining anxiety though is how (badly) will government spend this revenue?

Pensioners' winter fuel allownce? Child benefit? Free bus/travel passes? Disability benefits? Even job-seekers' allowance? Tax the lot at marginal rate! (ie, DO NOT treat them as 'income'). Recipients will still feel 'loved and wanted' but make a valuable contribution to revenue.

Controlling the NHS? How about an NHS card, onto which everything you get is entered, and then taxed again at marginal rate, either via PAYE or at the year end (memo to self: DO TAX RETURN).

University education? Stop messing with these stupid and complicated tuition fees etc. Once again, much like the NHS, have an overall 'HE account' and then a tax rate for graduates.

But one big remaining question: just exactly how is it that we employ everyone in this day and age? We're struggling as it is, but public sector cuts are going to result in huge job losses, including from scaling back the military. And then all those required to keep working beyond current retirement. I really would like to know!


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