The election debate has got tangled up in discussion of a few billion extra spending, rather than a sensible analysis of the £742bn of total spending this year.
Worse still Labour and some in the media seem to think if you wish to propose any additional spending you need to show hypothecated new revenue to pay for the item. They rarely propose offsetting economies in public spending and never discuss the overall balance of the budget and the rate of increase in tax revenues. Uk government does not of course work on the basis of hypothecation. Most revenues are aggregated in the Treasury and used to pay for whatever bill comes up next in the general public spending budget. Thus NI contributions, Road licence fees, Vat, Stamp duty and the rest are just part of the general pot.
Conservatives say they will increase Health spending by £8Billion a year by 2019-20. It will be paid for out of the general rise in tax receipts likely over the next five years and already in the Treasury budget figures from economic gr0wth. The Conservatives point out that health spending is up £7bn in real terms over the last five years, paid for out of rising revenues,so the deficit was still able to fall. Over the next four years the Treasury forecasts an increase of £124 billion a year in tax revenues on present tax rates.
Labour say they will increase health spending by £2.5bn a year paid for out of specific new taxes. In practice anyone running the government will end up spending more than an extra £2.5bn a year for the NHS.
There are two important issues to discuss. How quickly can tax revenues rise? With more growth and lower tax rates there should be faster growth in total tax revenues, which will help. That is why the main deate should be about how to sustain the current good gr0wth rate of the UK economy. Higher taxes as in France will not do that.Labour knew that in office but has forgotten it in opposition. How can total spending be brought under control and how can we secure more value for the large sums now being spent and promised?
Debating the odd additional billion is debating the rounding errors or ralatively small changes in total public spending. There is too much sound and fury over a few billion of “new” money and far too little debate about how to spend the bulk of the money wisely. I will deal with these issues in future posts.