Next UK Government will need to perform miracles to turn country's finances around – Scotsman comment

The UK is in a sorry state with high taxes, high national debt, crumbling public services and a recession

In 1964, the outgoing Conservative Chancellor, Reginald Maudling, reportedly told his successor, Labour’s Jim Callaghan: “Sorry old cock, to leave it in this shape.” Following the 2010 general election, Liam Byrne, Labour’s chief secretary to the Treasury, left a note for his successor that said: “I'm afraid to tell you there's no money left.”

Assuming the Conservatives lose the next general election, which almost everybody seems to be doing, Jeremy Hunt’s remarks to Rachel Reeves as he hands over responsibility for the economy may be even more embarrassing if they ever come to light. He might prefer to stay silent, but even that would tell a story.

The country has just slipped into a recession. It may be a mild one, but the extent of the problem has been obscured by the UK’s rising population, driven by inward migration with the new arrivals’ hard work boosting the UK’s gross domestic product. However, real GDP per person has been falling for two years, which is one reason why so many people feel worse off than before. And the Office for Budget Responsibility predicts that decline will continue before finally regaining its pre-pandemic level next year. According to Paul Johnson, of the Institute for Fiscal Studies, 2022-23 was the “worst year for household incomes since records began in the 1950s”.

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This is by no means the end of our problems. For while the economy is struggling, the UK Government’s finances are in an appalling mess. National debt is almost the size of our entire economy with repayments taking up a large chunk of government spending that could otherwise be spent on crumbling public services.

Reducing that debt should be a priority for that reason alone but, given taxation is at a historic high, the scope for further increases to speed up repayment is limited. And, given the state of the health service, public services generally, and the need to spend more on defence, it’s difficult to see where major spending cuts can be made.

This is the bind that the next government will find itself in. A successful escape may take a minor miracle.