Add thelocalreport.in As A Trusted Source
ABritain is preparing for this Budget Announcement, familiar debates are taking shape. want a chancellor Rachel Reeves Cut welfare spending? or improvement “Triple lock” on state pensions.,
Other debates focus on revenue: how Labor should raise money without breaking its manifesto promises. Taxes should not be increased on working people,
But these discussions are taking place in a strange vacuum, with no mention of the three huge expenses that got Britain to this point.
covid loan, Energy Assistance Schemes And Brexit fundamentally shaped the UK financial crisis. Yet voters and politicians alike seem determined not to talk about them.
Instead, they are regarded as shocks imposed on the country, although they involved extremely consequential political choices.
There is a gloomy atmosphere this coming Budget, and Britain’s strange collective amnesia is preventing the country from learning the lessons needed for future crises and talking honestly about the best way forward.
ghost of the past
The Covid pandemic required unprecedented government intervention. Between 2020 and 2022, the Office for Budget Responsibility, the UK spending watchdog, estimates support measures will total £169 billion, or 7 per cent of UK GDP. Most of this (£100 billion) went on direct support for things like the furlough scheme.
If you look back vaccine roll-out This was an important moment when the country showed its ability to operate on a large scale. Some other decisions were less glorious.
There was a general lack of transparency in the Eat Out to Help Out scheme to support the procurement of health equipment and hospitality during the first wave of the pandemic. which further increased the infection,
But the most important, unanswered questions are rarely discussed. despite this A lengthy inquiry examining government failuresThere is no debate about how much risk we are willing to take as a country, and how much we are willing to pay to reduce that risk.
Covid support schemes increased public debt from 80.4 percent of GDP in 2018 to 107.4 percent in 2021. The government paid almost zero interest on the loan at that time.
But now high interest rates make it a heavy burden on taxpayers. Loan interest expenditure exceeds the budget for education, which more than doubled in 2018. This is why Reeves now appears so determined to reduce UK debt levels.
We also know how much burden the lockdown has placed on school children. But we know very little about the costs of reducing, or existing alternatives to, vaccinating people.
Perhaps the main impact on the UK’s budget capacity has come from the global pandemic, something that will happen again in the future. The focus has been on getting finances back on track without discussing how to manage similar trade-offs next time.
The ghost of our current energy transition
When? Russia invaded Ukraine And as energy prices soared, the UK faced a choice: reduce demand or subsidize consumption. It chose the latter.
The government stepped in with massive support packages to help people pay their energy bills. It cost £78.2 billion or more than 4 per cent of GDP (compared with an average of less than 3 per cent in Europe).
About the author
Renaud Foucart is Senior Lecturer in Economics at Lancaster University Management School, Lancaster University.
This article was first published Conversation And it is republished under a Creative Commons license. read the original article
There were strong arguments in favor of this view. It would have been terrible to allow fuel poverty to grow during a cost-of-living crisis, and there was little time to target policy. But to be clear about what happened: The public was given huge leeway to avoid changing lifestyle, technology or consumption patterns.
This happened in the midst of an energy transition. Ostensibly the goal is decarbonization, reducing dependence on fossil fuels from dictators, and modernizing infrastructure.
These are complex decisions that require public support, some level of sacrifice, but also a clear collective commitment that change is inevitable. But the country is not facing these challenges as such, it has just demonstrated that the government will step in when energy costs rise.
Just like the Covid loan, UK taxpayers bear the cost of the energy support loan, while hiding the decisions that led to it.
The ghost of Brexit still lingers
UK’s relationship with Brexit Appears more confused than ever. Only 11 percent of British adults think Brexit is more of a success than a failure, and 56 percent would vote to rejoin the EU. As yet Many see Reform UK leader Nigel Farage as the frontrunner to become the next Prime Minister as well as blaming him (among others) for the Brexit failures.
This may be because Brexit has largely disappeared from the public’s radar, as Prime Minister Keir Starmer has begun to move toward greater integration with the EU.
Every effort is made to avoid reopening old wounds in conversations on this topic. But economists are gradually realizing the damage caused to the economy. An unprecedentedly comprehensive study, based on comparisons with other countries and detailed data from Bank of England business surveys, estimates that Brexit will reduce UK GDP by 6 per cent to 8 per cent. At the time of the referendum these figures were at the most pessimistic end of projections.
To put this in perspective, with UK tax receipts being 40 per cent of GDP, a GDP that was 7 per cent higher would give the Chancellor an extra £77 billion per year. This is more than half the £137 billion budget deficit for 2024-25.
Still, there hasn’t been Comprehensive trade agreement with America And there was no attempt to replace the EU in any major way. Britain is paying a heavy price for choosing one of the hardest possible versions of Brexit, but it has yet to be defined how much economic benefit it could bring.
Covid debt, energy aid and the Brexit deficit are three ghosts that will haunt this Budget – ghosts that no one wants to face. The UK cannot prepare for future pandemics without learning from how it dealt with Covid.
It will not complete its energy transition without facing choices about who will bear the costs of energy security. And it will not develop a coherent economic strategy without assessing what to do with Brexit. Until Britain confronts these issues, it will continue to discuss small austerity measures and hope for a Christmas miracle.