Britain’s national debt has crossed the bleak £3 trillion threshold, a figure so vast that it is difficult to grasp. Putting the sum into perspective helps reveal its extraordinary scale.
That amount could theoretically finance the construction of 10 million homes, 30 HS2-style rail networks or 2,000 skyscrapers the size of The Shard.
It could also cover NHS spending for 12 years—perhaps less time than many would expect—or pay for England’s state schools, colleges and universities for two generations.
If the entire £3 trillion were spent during a single year, it could fund the salaries of 60 million teachers, 67 million nurses or 33 million doctors.
Economist Liam Halligan highlighted another troubling comparison yesterday. Between April and September this year, the Government spent £61 billion merely servicing the national debt. That money, used up in six months, is comparable to the annual defence budget, almost the entire education budget or Slovenia’s yearly economic output.
The UK needs to reach a point where it can invest properly in defence, education and healthcare without continually adding to its borrowing.
Yet the Government does not appear to be treating that objective as an urgent priority. Instead, it seems determined to make the already costly British state even more expensive.
During his emotional keynote speech at last month’s Labour Party conference, the Prime Minister unveiled a series of proposals that are expected to carry a substantial price tag.
If the entire £3 trillion were spent in one year, it could pay the salaries of 60 million teachers, 67 million nurses or 33 million doctors
Joseph Dinnage, senior press officer at the Prosperity Institute, explains the extraordinary scale of Britain’s £3 trillion national debt
Consider the proposed flagship National Care Service. It is expected to closely resemble the National Health Service, a system criticised for high costs and inefficiency and forecast to require almost £300 billion this financial year.
Chancellor John Healey is expected to set out tax increases on banks and online retailers in next week’s Budget. But imposing further levies on some of the country’s few remaining profitable sectors risks damaging economic growth. Critics would describe such measures as short-term politics with long-term consequences. With the economy already under severe pressure, the question is why ministers would pursue policies that could weaken it further. The answer, of course, is political.
The controversy surrounding Keir Starmer’s unsuccessful Welfare Bill offered a clear example. The legislation would have reduced benefits spending by just £5 billion, but opposition from socialist backbenchers helped derail it and dealt a major blow to his premiership. The argument is that Labour remains ideologically reluctant to make economic growth its central priority, preferring instead to expand public spending.
Political games over the economy can no longer continue. Another serious financial shock could leave Britain dangerously close to defaulting on its debt.
Consider the consequences if another pandemic were to emerge next month. The virus would arrive, but the Government might lack the resources to pay workers to stay home, let alone support schemes such as subsidised meals.
Companies could collapse across the country, triggering a wave of unemployment. Without sufficient funds for benefits, or for emergency facilities such as Nightingale hospitals, the consequences would be devastating. Britain could be forced into insolvency and, as it did under another Labour Chancellor named Healey in 1976, might have to seek financial assistance from the International Monetary Fund.
That is why Labour must resist pressure from its most hard-line factions and begin reducing spending. The challenge is not a lack of possible savings, but whether ministers have the political courage to make them.
The NHS would be an obvious place to begin. Britain currently has a healthcare system that performs poorly compared with those of many other developed countries.
Life expectancy has stagnated, while healthy life expectancy has dropped by two years over the past decade. At the same time, NHS expenditure continues to climb.
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With carefully designed reforms, healthcare could remain free at the point of use, as socialists insist, while reducing long-term costs. A more efficient system could also give private healthcare providers greater room to operate and help people remain healthier for longer.
The Chancellor, John Healey, is expected to announce tax rises on banks and online retailers in next week’s Budget
Specifically, we at the Prosperity Institute recommend the reintroduction of tax relief on private medical insurance – lowering the cost of private healthcare for individuals and employers.
This would ease the burden on the NHS while also boosting growth in the wider healthcare industry. Polling commissioned by the Prosperity Institute also found that the public, who have seen for themselves the chaos and filth of state-run hospitals, is on board. Almost 60 per cent of participants preferred systematic healthcare reform to continuing to throw billions at a broken system.
The soaring cost of the welfare state must also be addressed. In the current financial year, Britain is projected to spend almost £335billion on social security and welfare benefits – roughly 10.6 per cent of GDP.
As Mail readers will know, over four million adults in England and Wales claim personal independence payments (PIP), £37.3 billion is spent annually on social housing, and according to the Office for National Statistics over half the population of the UK (53.3 per cent) are net recipients of the state, rather than net contributors.
Fixing this requires root-and-branch reform. The Timms Review, launched last year to assess the system, found that PIP is unfit for purpose and requires reform.
As my colleague, economist Emmanuel Igwe, has argued, PIP does not need reform, it needs to be scrapped and replaced with a properly means-tested, robustly assessed alternative.
It is controversial, yes, but the state pension should also be re-examined. While Andy Burnham has announced that he will ‘reform’ the triple lock in 2030, he is only doing so to fund other extortionate schemes.
The Centre for Policy Studies think tank calculates that since its introduction in 2010, this shameless bribe to pensioners has cost £78billion and will continue to rise with inflation.
Similarly, unfunded, gold-plated public sector pensions in the NHS and education sector carry liabilities in the hundreds of billions.
The Government is making promises to public servants it will never be able to fulfil. A brave government would do well to switch the remaining public sector pensions to defined contribution schemes, like millions of working taxpayers in the private sector.
Of course, to get working-age people off benefits and into jobs, those jobs need to exist in the first place. Increased red tape, business taxes and a minimum wage soaring far ahead of other earnings have shuttered businesses and made it uneconomic to hire.
We have worked out that by freezing the National Living Wage for five years – it is already hugely generous by global standards – Britain could create up to 600,000 new jobs for young people and contribute £2.4billion to the Exchequer.
This must also be accompanied by giving businesses the freedom to hire talented staff by repealing Angela Rayner’s catastrophic Employment Rights Act.
Another great issue of our time is energy. Net Zero has cost us dearly, and though it has come far too late, it is welcome that Burnham has decided to amend some of the worst excesses of Ed Miliband’s green madness by approving production at the Jackdaw gas field.
He must go further. We have found that Net Zero will add the equivalent of £1,400 a year to every British household’s energy bills by 2030. By reversing this and making the most of the resources we have in the North Sea, Britain could generate an extra £13.4billion in investment. This is a no-brainer for any government serious about repairing the balance sheet.
The answers are staring Burnham and Healey in the face. If the Chancellor stands before the House on Wednesday and delivers yet more expensive tax rises and dodges tricky decisions, know this: he will be doing so out of political expediency – not because it’s the right thing.
Joseph Dinnage is senior press officer at the Prosperity Institute.
