The British have a curious tendency, at least as seen from France: They vote for political parties that pledge to cut budget spending. This was the case in 2010 when David Cameron’s Conservative government was elected on an austerity pledge, then re-elected in 2015 in the same way.
History seems to be repeating itself with the parliamentary elections on July 4, although to a lesser extent. If the polls are to be believed, which predict a 20-point lead, Labour is poised to return to power after 14 years in opposition. In a bid to refocus their political strategy, their leader, Keir Starmer, has gone all out to promise fiscal prudence in his turn.
While stating that he would improve public services, he has pledged to respect the fiscal framework put in place by the Conservatives, namely a reduction in public debt within five years. He is also promising not to raise income tax, VAT or social security contributions. On the other hand, the Conservatives have vowed to cut taxes by around £16 billion (€19 billion).
Successive shocks
Behind this prudence lies a worsened fiscal situation, eerily comparable to that of France. Despite the austerity policies undertaken from 2010 to 2016, British public debt has jumped dramatically from 64% of gross domestic product (GDP) in 2008 to 101% in 2023 (France is at 110%). Its deficit in 2023 was 6% of GDP (France is at 5.5%).
“Regardless of who takes office following the general election, they will – unless they get lucky – soon face a stark choice. Raise taxes by more than they have told us in their manifesto. Or implement cuts to some areas of spending. Or borrow more and be content for debt to rise for longer. That is the trilemma,” said Paul Johnson, director of the Institute for Fiscal Studies, a think tank specializing in British public accounts. “Of the advanced economies, only Italy has similarly poor debt dynamics,” added Andrew Goodwin of Oxford Economics.
As elsewhere, the UK’s public finances have suffered the successive shocks of the pandemic and energy prices. But Johnson adds other explanatory factors: a sharp rise in debt servicing (a large proportion of the country’s bonds are indexed to inflation and have therefore been very expensive in recent years), increased social spending, particularly on the elderly, and lastly weak growth.
A very ‘European’ economic trajectory
The UK is essentially in long-term economic stagnation. Between the fourth quarter of 2019, before the pandemic, and the first quarter of 2024, the economy grew by 1.7%. France did little better (2.2%), and Germany did worse (0.3%), but Italy (4.6%) and the US (8.7%) are in a different league. The impact of Brexit is difficult to calculate precisely but British government departments themselves estimate the loss of GDP at 4% compared with what growth would have been without leaving the European Union.
You have 46.83% of this article left to read. The rest is for subscribers only.
