That sinking feeling
Originally published in the Local Government Chronicle [19/11/24]
Apocryphally, it was Napoleon who derided Imperial Russia as ‘So vast, so weak.’ The same thought applies to the nature of the British state, which from recent Budget documents is forecast to be spending £1.5 trillion by 2029/30 – having only breached the trillion barrier at the start of the 2020s.
Thatcherite flame-holders the Centre for Policy Studies, who have been at the forefront of making this warning about the perils of the Super State, might well want to take inspiration from the most eye-catching early initiatives from the incoming Trump Presidency – the establishment of a Department of Government Efficiency (DOGE).
While certain media outlets and influencers such as Clifton Suspension Bridge and Museum are migrating from his social media platform ‘X’ for BlueSky, the Tesla owner and world’s richest man Elon Musk is getting started to reduce US federal government expenditure by $2 trillion – around a third of annual spend. Alongside failed Republican presidential contender and venture capitalist Vivek Ramaswamy, Musk is to create a time-limited start-up venture – deadline 4 July 2026 – as a modern-day Manhattan Project to vastly reduce and streamline the US state.
Meanwhile, on this side of the Atlantic, this is not America. We have a new Treasury body, the Office for Value for Money (OVfM) with its own time-limited frame of reference to root out waste. It is chaired by David Goldstone, a CIPFA trained former Audit Commission accountant who led the 2012 Olympic Regeneration projects and is now a serial Non-Executive Director including at the financially incontinent disaster that is HS2.
So, while the Trump presidency has something of a mix between Oppenheimer and Veep to restrain the Leviathan that is the federal government, our smaller scale version is another rerun of ‘Yes Minister’ episode ‘The Efficiency Drive’ – which a LGC briefing last year referenced when Conservative chancellor Jeremy Hunt went in hunt of a public sector productivity drive.
“You don’t need brilliant Treasury analysts to tell you the consequence of a state growing faster than the economy: higher borrowing, higher taxes or a combination of the two,” opined Chancellor Hunt at the time in response to Office for Budget Responsibility projections that the growth in the size of the UK state will exceed that of the size of our economy by half a percent.
On current projections, from a standing start of debt running at 100% of GDP by 2071 it will be nearly triple the size at 271% with public spending rising from 45% of GDP to 60& over the next five decades. Long-term public finances are evidently unsustainable without piling on further taxes or returning to the post-war levels of productivity that we simply can’t and won’t in what will soon be two lost decades.
The existential danger for local government and successful place policy is suffocation under the weight of an uncontrollably expanding failed Super State. We know it can’t continue like this, running a National Health Service with a government attached swallowing half of day-to-day spending, or a Home Office pebble-dashing billions against the wall in failed migration schemes or cash out £100m in a tunnel to preserve the bats of Buckinghamshire from the depredations of HS2.
And that’s before we turn our eyes to the Annual Managed (or in Whitehall black joke ‘Unmanaged) Expenditure for inexorably rising welfare where long-term sickness has risen this year to a record high of 2.8 million people. Or the giant Ponzi scheme which is the unfunded public sector pension liabilities of £1.3 trillion – or a neat 100% of GDP and rising which. This is just taken for granted while Rachel Reeves eyes up the fully funded Local Government Pension Schemes with their abundant surpluses to plug the many gaps in financing regional infrastructure.
We haven’t really had a serious conversation about the ideal size of the state since the Coalition years when George Osborne used the opportunity of the 2008 financial crisis to usher in a reduction in the size of the state to 35% of GDP under the guise of remedial austerity.
The decision to axe the Office for Place this week is a hatchet job on the previous government’s drive to ‘build beautiful’ and doesn’t herald an attack on waste or for those with memories Eric Pickles quixotic war on the secret state of local quangos.
In the absence of a national conversation about the desired size, scope and reach of the central state and its relationships with our regions and localities, all there is to do is keep raising council tax to the fullest to keep a criminally unreformed social care system going, and hope that promises of financial and public service reform can be attained.
As Elon Musk would no doubt post on ‘X’, let that sink in.
Jonathan Werran is chief executive, Localis