Bishop of Chester speaks about national debt and expenditure pressures in Budget debate

Chester1On 14th March 2017, the Commercial Secretary to the Treasury, Baroness Neville-Rolfe, moved that this House takes note of the economy in the light of the Budget Statement. The Bishop of Chester, the Rt Revd Peter Forster, spoke in the debate, focusing on national debt and expenditure pressures.

The Lord Bishop of Chester My Lords, it is not only the last spring Budget, it is the last Budget in Lent. If we had any doubts, then the early speeches in this debate brought that Lenten theme home rather well.

I do not want to get into the details of the Budget, which are very political, but to talk about two broader, longer-term issues to which the Chancellor referred in his speech. The first, which has already been alluded to, is our national debt. Its rate of growth is forecast to slow in this decade, but that is stabilisation at a very high level, representing nearly £62,000 for every household in the country. Even at the current very low interest rates, servicing that debt costs £50 billion a year—more than the combined costs of defence and police services in this country.

I do not know what level of national debt is sustainable, because I am not an economist, although the economists do not seem too sure either and take different views. I believe, however, that the current level, which grew greatly through the financial crisis that broke about 10 years ago, is much too high for our long-term good, not least if a further, serious long-term crisis were to hit us, for whatever reason. The blame lies in the years before the crisis, when, amid favourable economic conditions—not least the bonanza years of North Sea oil reserves—the national debt was allowed to rise so much. This reflected a national mood that is summed up in the iconic advertisement for an early credit card: that we should “take the waiting out of wanting”. Whether for individuals or for our nation as a whole, I question whether it is right and healthy to prioritise taking the waiting out of wanting. Getting our national finances genuinely into a better state will be a very difficult challenge amid all the political pressures which arise in a consumerist society so resistant to increased taxation.

That leads me to the second area upon which I would like to comment. The upward pressures on national expenditure are greatest, as has again been referred to, in the National Health Service and social care. It is difficult to keep track of all the reports and analyses on the delivery and financing of the NHS and social care. The absolute plethora of those in recent years simply illustrates why the underlying situation is so difficult. Indeed, the Chancellor has announced a new Green Paper this autumn on the future financing and delivery of social care. In the meantime, we await quite shortly the report from our own Select Committee special inquiry into the long-term sustainability of supporting and funding the NHS and social care.

Current plans from the NHS settlement at the 2015 spending review include a commitment to achieve 2% net efficiency gains through the remainder of this decade. Those are well ahead of the customary efficiency gains and will be demanding to achieve. Even if those challenging efficiency targets are met, the inexorable rise in demand will still prove immensely challenging. The underlying escalation in cost is estimated by the chief executive of NHS Providers at about 4% a year, driven by an ageing population and increasingly sophisticated medical treatment. The cost of social care rises in parallel. So what is to be done?

It seems unavoidable that we will need to devote a higher proportion of our GDP to health and social care. You can slice it and dice it but it seems to me that you would come to that conclusion. We are already significantly behind France and Germany in this respect, and well behind the United States, but will it be achieved while the whole area is such a political battlefield? We need to try to reduce the element of political controversy as far as possible in the basic decision-making processes, because once something becomes a political football, things tend simply not to happen because of the developing stalemate and the associated emotions.

I know that Governments are generally opposed to ring-fencing taxes but I have come to think that due to the inexorably increasing costs and unique political pressures involved, the future challenges to funding health and social care will best be represented by some form of hypothecation of tax revenues. There is something of a distinct anomaly here, which can be addressed separately. While individual Governments will have to take overall responsibility for what happens when they are in charge, the recommended Budgets and tax-raising plans would best be proposed by an independent and cross-party body—a bit like the OBR. That may not be politically palatable but, frankly, paying for what we need to pay for will be unpalatable in one form or another. We simply have to face up to that, and to a degree of austerity which seems simply unavoidable in the decades to come.


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