Tax, tax, and more tax: This is a fair summary so far of the Tory leadership race. As a former HMRC civil servant and a bit of a tax nerd, I’ve rather enjoyed it.
But talking about tax without discussing the other side of the equation – what those taxes are spent on – means the conversation so far has been worryingly unbalanced. This is especially true when Tory candidates for leadership have stated that they want to do two things: maintain fiscal accountability and reduce taxes, now or in the future.
This is going be hard. It is very difficult. Due to an ageing population, we spend more on public services. So to maintain both today’s service levels and the UK’s fiscal position requires tax rises. Rishi Sunak, for example, introduced higher National Insurance contributions to finance increased public service spending.
To be fair, Truss is more flexible here; she has been open about increasing deficit. But Sunak – who wishes before the next election to cut taxes And maintain fiscal responsibility – really has his work cut out.
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Tax cuts could spur economic growth and solve the fiscal challenge, but it seems unlikely. academic research shows corporation tax cuts have done little for growth rates. This shows that fiscal responsibility cannot be maintained despite tax cuts.
There are two options. One is another round of austerity – cutting back what services the state provides. Yet there is little to demand from the public for this, after last decade’s failed policy experiment which may have caused, among other things, a decline in the UK’s life expectancy. Nobody wants to go through it again.
The second route is, in the wonk’s jargon, public service reform. Simply put, it means improving the operation of public services, without reducing the amount that is offered. This can result in a decrease of overall spending on services, especially if the services are more effective at preventing problems. Yet ideas for this are hard to come by in the Tory leadership race, as Public First’s excellent policy tracker demonstrates.
On the benefits system, the furthest we’ve got is “we need to reform welfare” (Truss). On health and social care, the ideas floated range from the vague (Mordaunt called for a task force to address NHS paralysis) to those unlikely to do much to fix root causes (Tugendhat called for binding A&E targets).
With respect to crime and policing, most calls have been for tougher sentences for various baddies (drug users and dealers, mainly) – a failed approach to tackling the causes of crime. Bold ideas to transform the public services so they can do a better job of preventing problems are not yet visible.
This vision is useful for candidates. At Demos, we call it ‘relational public services’. This is the idea of human connections being vital to our health, and that if public services in everyday life harnessed them better, we would spend less.
The power of connections is well-established. A UK academic study found that having one friend in work increased the chance of someone unemployed moving into employment by 15%. This is a return that should not be taken lightly.
And while this might all sound a bit ‘pie in the sky’, it’s a vision grounded in work happening across the country already. From Barking & Dagenham to Wigan, councils are experimenting with new ways of working.
To be fair, I can’t fault the candidates for not taking up these ideas. Recent governments – of which they have almost all been part of – have had little to say on public service reform.
I do hope the final candidates can rectify this situation over the summer. Alongside getting economic growth going again – which as discussed above, tax cuts seem unlikely to deliver – reforming our public services is the only sustainable way to reduce demands for taxation over time. Almost anything else is, to use Sunak’s favourite phrase, a fairytale.
