The Tory-voting baby boomer has some tough choices to make over the next year.
Fearful that their accumulated wealth is being threatened by one economic shock after another, they could choose to support the government’s return to austerity. Or they might consider sharing their lucky gains from the property market and a private occupational pension system that clearly benefits older generations.
With a general election due in 2024, it is clear that Conservative ministers believe their core constituency of voters – those over 60 – prefer the state to continue its withdrawal from the public sphere, begun in 2010 by George Osborne and David Cameron, to restrict tax rises and preserve their wealth.
Last week’s U-turn on public sector pay illustrated the point. There was relief that the teachers’ strike was called off after a 6.5% deal was put on the table, but concern after the prime minister said he would be clawing back the money from Whitehall day-to-day spending.
Pay awards worth 3.5% were budgeted for, forcing as-yet-unnamed departments to make cuts or find efficiencies worth between £3bn and £5bn. Doctors’ unions have refused to agree to a deal, which may mean that when their pay is finally settled, there are even larger cuts to make in government spending.
As a guide to the likely savings, there is speculation inside the Department of Health that a deal to improve the flow of hospital patients into care homes, worth about £600m, will be among many “investments” to be redirected into financing the pay deal. With thousands of patients trapped in hospitals up and down the country – who could escape if a care home place was available – it is a shortsighted policy that is likely to add to health bills in future.
And it undermines the need expressed by participants in the Covid-19 inquiry to ramp up spending to make the entire health system more resilient against pandemics for future generations.
On the first day of the hearings, counsel to the inquiry, Hugo Keith KC, said: “If you conclude that as a country, we were insufficiently resilient and that in future, different political and financial choices may have to be made in order to render us better able to [deal with the] shock, you will want to say so.
“As for wealth, it is self-evident that the capacity of any country’s public health care and social care systems to be able to cope with a pandemic is constrained by funding, and therefore you need to inquire how well funded were the United Kingdom’s health structures.”
To keep a tight rein on spending, ministers also seem grateful that in other areas, budgets are being underspent. Michael Gove has handed back an allocation of £1.9bn that he has failed to use, to sighs of relief inside the Treasury.
Gove’s Department for Levelling Up, Housing and Communities has surrendered funds due to be spent in 2022-23, including £255m to fund new affordable housing and £245m meant to improve building safety. These are capital budgets, but all savings are welcome.
In other areas, spending has also followed the low-cost route. For instance, new children’s homes are mostly being built where land is cheap in the north of England, often far from the children’s parents and grandparents. Again, this laissez-faire policy stores up problems future governments will spend even more money trying to solve.
These examples of penny-pinching are guided by ageing voters who want government to defend the panoply of subsidies and tax breaks they already enjoy and to consider cuts to taxes that currently punish them, inheritance tax being a prime example. It is why attempts to implement climate change policies have proved to be so difficult, unless the plan is to build wind farms far out at sea.
Under Boris Johnson, there was a mini-boom that pushed everyday departmental budgets to £573bn this year, up £160bn from 2019. For a while it marked a return to annual increases above inflation, but the past year of double-digit price rises has wrecked that.
The Office for Budget Responsibility, which passes judgment on the government’s tax and spending plans, said last week in a report looking ahead to the next 50 years that without a rise in taxes the current 100% ratio of debt to national income will soar to more than 300% and probably nearer its worst case of 435% by the mid-2070s.
The EU’s “green deal” chief, Frans Timmermans, warned that all of Europe was in a similar position, saying that lobbying efforts to preserve the status quo were harmful. “We are investing in a worse future, not a better one. We are paying to put our children and grandchildren in harm’s way,” he said.
With limited room for extra borrowing, Tory boomers need to reconsider their stance. They need to share some of their property and pension gains for the greater good.
