Talking ‘tax cuts’ amid Britain’s social stagnation

The social recession of the 2010s risks becoming a slump in the 2020s

The letters from my kid’s school asking for voluntary contributions to help meet rising running costs are getting ever more desperate. It’s just a straw in the wind but speaks to the wider condition of the UK’s public services which, after a long era of austerity followed by Covid and now a surge in inflation, are increasingly struggling to cope.

For some public services getting back to levels of funding they received in 2010 is the most that can be hoped for over the next few years. For others, even that isn’t on the cards. All of which makes it a curious time to be talking up tax cuts.

Evidence of back-sliding surrounds us. Funding for the NHS, which has been protected relative to other public services and recently increased by the Johnson government, has still sunk far below historic growth rates since 2010. It shows. Performance against key targets — treatment within 18 weeks and four hour waits in A&E — slumped over the decade before Covid. The enormous strains and back-logs facing the NHS as it emerges from the pandemic have resulted in public satisfaction plummeting to 37% down from a high of 70% in 2010.

When it comes to schools pupil funding fell by 9% in real terms in the decade before 2020 and, despite a recent increase, it will be the mid-2020s before it recovers to where it was in 2010. According to the IFS, experienced teachers are on course for a 14% real terms pay cut between 2010 and 2023 — some will be looking elsewhere for work. The gap between state and private school resourcing has more than doubled over the last decade.

Schools, though, have fared better than Further Education where real spending per pupil is on course to be 10% lower in 2025 than it was 15 years earlier. The recent Levelling Up White Paper rightly gave prominence to a 2030 target for adult skills but, even if it is met, it would reverse just one quarter of the fall in numbers since 2010.

The list goes on. Levels of child poverty are projected to be heading back to levels last seen in the mid-1990s. Prisons are creaking: assaults on prisoners more than doubled between 2010 and the pandemic. The courts system is under huge pressure with resources 22% lower than in 2010. Councils have been bit particularly hard hit with budgets for the likes of libraries and neighbourhood services decimated. In so many vital but ‘non-protected’ parts of our public services there is little prospect of funding returning to the level it was at when David Cameron came to office.

It would, of course, be wrong to suggest there have been no policy-driven social advances over the last decade. The state pension has risen while auto-enrolment has been rolled out, access to free childcare has been boosted, the minimum wage has climbed and devolution to cities advanced. All bright spots. But they appear on a dark canvass.

The wider point is that, just as economies can experience long-down turns so, too, can public services and welfare states. There is no guarantee of steady progress, no Whiggish arc of history to reassure us of inevitable advances to come. The social recession of the 2010s risks becoming a slump in the 2020s as low-growth and the scarring impact of the pandemic compound the legacy of austerity.

It is against this backdrop that the Chancellor has pledged that ‘every marginal pound should go to tax cuts’ despite, or more likely because, the overall tax burden is steadily rising. If nothing else Rishi Sunak has sent an early signal about the terms of the 2024 election. Unlike all Conservative manifestos since 1997 the next one seems likely to feature a commitment to cut the rate of income tax. Indeed, don’t be too surprised if there are echoes of the 1992 manifesto with its promise to incrementally reduce the basic rate to an aspirationally low number (in Major’s case it was the 20p rate).

The juxtaposition of ‘tax cuts’ alongside social stagnation could make for a riskier electoral gambit than some suppose. True, after nearly two decades of flat wages voters will certainly be in the market for ideas that might lift living standards. But the public may be growing tired of the ruse of cutting one tax rate at the same time as increasing another while overall tax bills increase as fiscal drag bites. It’s also the case that underlying popular sentiment has travelled a long way since the 2010s — and it is in the direction of favouring higher spending and taxes.

It is no secret among the main political parties that whoever wins the next election is very likely to have to spend more to keep the NHS, schools, police and the armed forces afloat, while meeting the costs of ageing and net zero.

The real question is whether that spending is sufficient, properly planned and funded through a reasonably coherent tax system that doesn’t unduly penalise work. Or whether it takes the form of crisis-driven sporadic spending spurts paid for by stealthy and generationally-skewed revenue raids that leave Britain with an ever more distorted tax system unfit for the 21st century.

Social stagnation, as much as economic, defines today’s Britain. An agenda for reversing it should involve a plan for sustained growth combined with candour about the scale of future spending pressures and the tax-base needed to fund them. Don’t hold your breath.

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Gavin Kelly

Gavin Kelly

Gavin is chair of the Resolution Foundation and chair of the Living Wage Commission. He writes here in a personal capacity.