Voters Are Not Stupid - They Know Lower Taxes Probably Mean Cuts To Services

5th June 2024

Speak to any councillor on any council and they will how service cuts over the last few years are down to government squeezing budgets whether in Scotland or England. so any talk of cutting taxes should come with a health warning and statement of what services will be reduced. Council deliver many essential services such as education, social care and roads to name but three.

Over the last 10 years councils and health boards have been under increasing pressure as government payment to them do match the rising costs to deliver essential services. Talk about creating growth in the economy to increase tax yield have not really happened yet still the political parties say they want more growth without really spelling out how it will happen.

The Institute for government spelled out the problem in an article 15 July 2022
Without raising taxes or reducing spending, government finances will head into explosive territory
Recent tensions between No.10 and No.11 over whether to cut taxes were referenced by Rishi Sunak in his resignation letter. But the warnings about the impact of tax cuts are stark, with a new report by the Office for Budget Responsibility (OBR), the government's official forecaster, warning that the public finances are on an unsustainable path. Richard Hughes, chair of the OBR, said at a recent IfG event that the first question to any leadership candidate calling for tax cuts should be whether they are going to pay for tax cuts by reversing increases in spending (for example recent increases in the DHSC budget) or increase borrowing.

This is primarily due to increases in spending on health and social care - a consequence of an ageing population as well as increasing costs in the health sector. The second most important factor is state pensions spending, which is projected to increase significantly, also as a result of the UK's ageing population and the current ‘triple lock' policy.

With ambitious policies levelling up and net zero requiring a significant amount of additional public spending, and the scope for further ‘efficiency’ savings very limited given the past decade of cuts, it is easy to see why most recent chancellors have opted to raise the tax burden to historic highs to balance the books. This is too often read as being a contradiction of Conservative principles or as an expansion of the state, when it is instead a reflection of the fact that providing basic public services such as pensions and health and social care is becoming more expensive.

Public spending (and taxation) would rise even if there was no expansion of the functions of the state, and similarly keeping borrowing and taxation flat would necessarily correspond to a real reduction in the provision of public services (per capita).

Voters decide
The current conservative government had had 14 years to sort things out but now saying they are a party of low tax rings badly in the ears.
Even if Labour as looks likely according to polls has a landslide victory it will take years to improve things. It remains to be seen if the even higher taxes imposed by the SNP will have much affect. A two year freeze on capital spending for councils an other public bodies will have hugely detrimental affect for businesses and employees.