Andrew Griffith is the Member of Parliament for Arundel & South Downs and Shadow Secretary of State for Science and Technology. He is former Economic Secretary to the Treasury.
Last year as Science Minister I visited the UK’s National Physical Laboratory and saw the actual yardsticks, made of brass, dating back to Henry VII, designed to enforce the principle of objective measurement.
That is foundational in finance but as we look to next week’s Budget and briefings emerging from the Chancellors visit to the IMF, all the signs are that Reckless Reeves intends to fiddle the books and change the yardstick by which Labour are measured.
Amidst the headline noise on tax rises and the broken promises on National Insurance, the biggest number to look out for in next week’s budget is the projected peak Public Sector Net Debt.
That’s how much the government intends to borrow, and I expect it to be the crime scene of a smash and grab raid by Labour to fund a wild spree of public sector spending.
Despite stating clearly before the election that she was “not going to fiddle the figures or make something to get different results” and that “we will use the same models the government uses”, well sourced articles suggest that this is precisely what the Chancellor plans.
Rachel Reeves is breaking promises like a runaway horse charging through the jumps in the Grand National.
The Blair and Brown governments became synonymous with Private Finance Initiative contracts. ‘Private finance’ was a misnomer as the taxpayer ultimately remained on the hook whilst private finance providers reaped the returns. This was a limited form of dodgy accounting which hid the true debt but now the even more reckless Reeves plans to do the same on a much larger scale.
Labour outriders such as the Institute for Public Policy Research have been conjuring up figures of between £52 and £57 billion extra borrowing by changing the definition of debt or including for the first-time public-sector assets such as student loans to offset it. The bias of this is shown by the absence of any symmetrical suggestion to include the many liabilities which are not recorded on the government’s balance sheet – the largest of which are unfunded public sector pensions estimated at a staggering £1.3 trillion.
Even if there was a case to look again at the fiscal rules, the time to do so is not in the rushed heat of a budget and the process should never be unilaterally led by any chancellor. Indeed, the IMF Chief Economist said this week that the UK needs to “bring debt levels down” and that public finances could “quickly slip out of control” if the government didn’t take action.
This debt fuelled spending matters to Conservatives for three reasons.
First, adding to the national debt is desperately unfair to younger people. Groups like the Next Gen Tories have done excellent work to highlight the generational unfairness of a high marginal tax rates, the costs of childcare and the housing market.
I would argue handing down this scale of debt burden is even worse as it is done without choice or consent. It is, quite literally, a negative inheritance: spend money today and leave your heirs to repay the debt. At the end of 2023/24 public sector net debt was £2,690 billion (i.e. £2.6 trillion), or 98 per cent of GDP. In the absence of a plan to materially reduce this debt over the coming decades, it will be borne by the 33.5 million population of the UK currently under the age of 40. That’s equivalent to around £80,000 each – including those who are currently children. For a young family of four, that’s £320,000. I acknowledge it does not have to be repaid all at once but shrinking demographics and low growth mean it is a real generational burden.
Second, this debt is not interest free.
In 2023/24, government’s net debt interest spending was £102 billion, which the Taxpayers’ Alliance correctly observes was getting on for double the budget for the Ministry of Defence. No one has yet pioneered a legal way of spending the same money twice, so a growing interest bill means more taxes each year to achieve the same level of public services. Just as when we took office in 2010, it will fall to the next Conservative government to restore the public finances.
The greater Labour’s spending spree now, the more herculean that task will be.
The final reason is that philosophically, we Conservatives understand that the private sector is likely to make better investment decisions than the state. Whilst there is a balance to be struck, in many domains public spending crowds out private or – as we now see in publicly funded science – obliges an orthodoxy of thinking that imperils freedom of speech.
For too long, Conservative ministers have tried to win an unwinnable ‘arms race’ with socialists over who can increase public spending the most. One of the big opportunities of renewal in opposition is the ability to reframe how we think, talk, and decide where and what to spend on.
As with rulers before Henry VII’s yardstick, supine Labour majority may indulge Rachel Reeves fiddling the books on debt now, but history will be less kind.
