Who will pay for this spending bonanza?
Just a few months ago, Labour lost a general election for the third time in succession. Yet the party increased its share of the vote under Jeremy Corbyn when it was widely expected to be destroyed. The Left has taken this as an endorsement of their policies to tax the better-off and increase public spending.
What is perturbing is that other parties are taking their lead from Labour. Theresa May is planning to remove the limit on public sector pay rises and Tory ministers rarely make the case any longer for living within our means. In Scotland, Nicola Sturgeon has taken this to a new level. Outlining the Scottish government’s programme for the year, the First Minister proposed both ending the public sector pay cap and extending free personal care to some under-65s. In addition, she is considering introducing a basic citizen’s income. It is hard to understand where the money is going to come from for these promises, apart from the taxpayers of a United Kingdom from which the SNP wants to extricate itself.
The idea of a basic income is not new. It has been tested on a small scale in Canada and Finland. The Swiss rejected it in a referendum last year. Fifty years ago, Milton Friedman, the economist, championed a similar proposal, the negative income tax, targeted at the poor.
“The idea of a negative income tax is to treat people who are poor in the same way we treat people who are rich,” Friedman said. “Both groups would have to file tax returns and both groups would be treated in a parallel way.” But the aim would be to replace welfare benefits, not supplement them. Is that what Miss Sturgeon has in mind?
In 2015/16, the budget deficit in Scotland – the difference between total revenue and public spending – was around £15 billion, or about 10 per cent of the country’s GDP. By comparison, the deficit in the whole of the UK was 3.8 per cent. Miss Sturgeon has evidently given up on the idea of an independent Scotland, since it could not afford any of the policies she proposed yesterday. Moreover, the SNP calculates that it needs to embrace a Left-wing programme to counter any resurgence from Labour after the resignation of its Scottish leader, Kezia Dugdale.
Yet if all the parties now take the outcome of the election as a signal to spend money we don’t have then bankruptcy is not far away.
Any thoughts?