Thursday, 14 July 2011

"high tax, high spending" economy. YES!

Excellent editorial in The Guardian today:

Check out the section on public sector pensions to counteract the shrill nonsense emanating from the right-wing Tax Payers Alliance:

Big numbers, big worries? There were certainly plenty of the former in the report from the Office for Budget Responsibility. Public sector pensions liabilities now over £1tn. The total amount of government debt on course to rise to more than the entire national income by the middle of this century. The value of PFI contracts pegged at around £40bn, rather than the £5bn usually reported.
Such sums are almost incomprehensibly large, which makes them especially worrying. Yet in presenting this first long-term outlook for public finances, the OBR's head Robert Chote made it clear there was no need to panic. Indeed, on the particular issue of public-sector pensions, the government's budget watchdog actually served not only to take some heat out of the debate – but to show up government ministers. Coalition frontbenchers may bang on about pensions for public-sector workers being unaffordable, but table 3.4 of the fiscal sustainability report shows they are no such thing. Public-sector pensions will cost 2% of national income in 2015, it projects – before falling steadily to 1.4% in 2060. In other words, the unions are right on this one, and ministers wrong: our public-sector pensions bill is not going to balloon. If David Cameron, George Osborne and Francis Maude wish to cut government contributions to public sector pensions they will need to make another, and more honest argument.
Indeed, the need for honest debate is the recurrent theme of the OBR's survey. Pick through the book's tables and graphs, and the message is a simple one: as Britons live longer they will cost more, in health and long-term care. And the burden this will put on the public purse, without more money coming in through tax revenues, is "unsustainable".
This will undoubtedly lead to calls from the right to slash public spending, but that is not the only conclusion that might be drawn from the OBR report. As Mr Chote pointed out, the UK could choose instead to become a "high tax, high spending" economy. And there are plenty of options in between: health care might be rationed; or ministers try (again) to boost productivity in the NHS. Strip out the numbers and set aside the scare-mongering, and discussions of public finances are really debates about what kind of society we want to be: how we want to look after our old and sick and how we plan to pay for that.
Without a proper debate about these issues, Westminster might well end up following the US path of having shrill debates about budgets and debt ceilings, complete with nonsense being talked about defaults. The OBR report gives MPs no excuses to mimic the Tea Partiers.

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