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Writer's pictureAndres De Miguel

Plasters for Severed Legs: A Guide to Britain’s Political Economy


Change’ cried Starmer at his post-election acceptance speech, as the country tentatively awaited the new government’s solutions for an atrophying Britain. It’s safe to say we were quickly disappointed. 


For all the change and innovation Starmer’s government proclaims it seeks to implement, Downing Street seems to simultaneously take every precaution to ensure it cannot be carried out. The Treasury’s self-imposed commitment to bringing the budget back into balance, and reduce the public debt to GDP ratio by the end of Labour’s term, is reminiscent of the Conservative’s myopic fiscal policy. Where Labour have pledged to boost investment spending in the economy, its strengthening of the Office for Budget Responsibility will paralyse the dynamism required to make effective fiscal decisions. As public under-investment fuels economic stagnation, the ensuing social and environmental problems will only require more funding to resolve. Therefore, the decision to cut public spending will only propel Britain further down this vicious cycle.


Prompted by the cuts to pensioners’ winter fuel allowance, the wealth accumulated by the richest in society over the past 16 years has become the target of much public outrage. Frustrated individuals have intensely opposed the backwards logic of having the most vulnerable members of society suffer for the sake of slimming the budget, after COVID saw the wealth of those on the upper end of income distribution soar. 


The implementation of a progressive wealth tax, while at first proving understandably difficult, reveals a decades-old rot that has taken hold of the British state - and crippled it beyond recognition.


For all the discourse surrounding the role of the UK Government’s failures and successes, it is very hard to discern what government activities can be attributed to the capacity of the state. As the outsourcing of public responsibilities became more extensive in the 90s and 00s, motivated by the neoliberal project and its belief in inherent state inefficiency; prisons, education, social service provision and the NHS have all been significantly reorganised and restructured in the private interest. So egregious was and still is the use of the private sector in state functioning that private consultancies are even involved in drafting and reviewing tax legislation that its wealthy clients would benefit from avoiding. 


A government whose bite is controlled by those who would rather see it muzzled has no capacity for institutional change. At least, not change British people would like to see enacted.


Notwithstanding the evident conflict of interest of private firms intervening in the state, the encroachment of the private sector into the everyday functioning of the government presents a broader systemic threat to public life. The continuous outsourcing of government responsibilities to private enterprises and consultancies, where the government and the public often incur most of the risk, means over time the public sector is hollowed out of its expertise. Without in-house expertise and an institutional memory , both factors that cannot simply be bought off the shelf, any new initiative a government may wish to pursue will be structurally hindered.


In no sector of government is this issue more prevalent than in IT, where some government departments lack databases altogether and are forced to look through information manually, without the in-house expertise to build functioning electronic systems. Where local authorities and government departments are expected to work tightly as a unit, the lack of an effective digital database in the 21st century will not only deplete the little productive potential left, both for current policy projects and future crises. The longer these shackles remain fastened, the government will be increasingly forced to rely on the cheaper, more attractive, but ultimately flawed private sector.


The current Tory leadership race also reveals a further insidious byproduct of private-sector outsourcing and reduced governmental capacity: its ideological self-affirmation. As government productivity atrophies, the private organisations that have a hand in carrying out the government mandate are often obfuscated from public view. What remains is an image of a weak and ineffective state, giving credence to the decades of neoliberal rhetoric emphasising government’s inherent deficiencies. What also remains is the consensus that the government has failed, and it is in fact more privatisation that will solve the problem, as opposed to being its source.


Keir Starmer is correct in one sense. The decisions that will have to be made to fix the UK are going to be hard, and real change will not happen in one term, perhaps not even two. However, for all his rhetoric of ambitious reform, he has conveniently avoided the biggest structural problem the British economy has faced in modern history. The much-anticipated October budget is a red herring. The UK has been stagnating for decades, and if Reeves continues with her myopic balancing act of the public finances, this will remain true.



Image: Flickr/HM Treasury

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