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The government needs a buoyant private sector to improve public services and fix the NHS
6 February 2024, 17:24
- David Buik is LBC's Markets Commentator and a Consultant to Aquis Exchange
Most people in the UK will be very surprised if a Labour administration is not returned at the next General Election, whenever it is held.
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Even if inflation dissipates dramatically, with interest rates starting to fall in the early summer, the die is almost certainly cast.
Mitigating circumstances such as the Covid-19 pandemic and geopolitical crises in Ukraine and in the Middle East cut no ice with frustrated voters, who have been hammered with a ‘cost of living’ calamity.
Also, this government has failed to deliver on other issues it was elected on – mainly Brexit, controlling immigration and sorting out the NHS waiting list.
The public is also totally disenchanted by the hopeless infighting within the Conservative party, resulting in four changes in leadership since David Cameron surprisingly resigned in 2016, after the Brexit vote went against him.
The litany of problems that will confront an incoming Labour government are endless, expensive, and unaffordable, unless there are dramatic growth expansion or increases in taxation, as well as borrowing requirements.
It seems unlikely that Labour will deviate to start with from their pledge to be mindful of fiscal discipline and being prudent over public expenditure.
Just look at the country’s priorities! They are eye-watering. The NHS system, which in many peoples’ opinion cannot be run on a 'one-party' political basis, is at breaking point.
It employs 1.5 million and it needs to be run as a joint venture by Parliament with help from the private sector. The health service provided is excellent, though the length of the queues in need of treatment are unacceptably long. Its management leaves much to be desired.
The detailed investigations into the health service, solicited by the Ggvernment, undertaken first by Lord Stuart Rose and more recently by General Sir Gordon Messenger and Dame Linda Pollard have hardly seen the light of day, never mind any of the recommendations being adopted.
If a future government is going to throw any more money at the NHS, then there must be better accountability. Also, the welfare/care system is moribund; short of money and in need of a management overhaul. Universal Credit and other benefits are messy and in need of some streamlining and yet again, more money.
Neither does the UK seem to have an industrial strategy. There have been huge debates about the £28 billion that Labour may be prepared to throw at their green energy policy, now likely to be watered down for cost, if not changed altogether.
The education system is creaking at the seams – short of staff and money. Sadly, I have not finished with my ‘to do list!’ Crime is on the rise at a terrifyingly alarming rate – huge shortage of coppers!
Both Conservatives and Labour have allowed the defence of the realm and our help to the free world to drop at an alarming rate. The army only has 76,000 soldiers. This is ludicrously short-sighted, as the world has never appeared to be in a more perilous place since the Bay of Pigs in 1961.
NATO is just about to start its global manoeuvres and our flagship aircraft carrier – Queen Elizabeth - costing £6.2 billion - is out of commission and we only have six destroyers in our entire navy. The level of vulnerability seems to me to be of mind-blowing proportions. Conservative or Labour – sharpen up! Technology plays a massive role in terms of arms, but the UK’S expenditure on defence strikes me as parsimonious in the extreme.
Readers will notice that I have not used any figures to illustrate the magnitude of the problems facing public services and therefore Labour. Fiscal disciplines are in place, and they are already very unpopular. So, on the face of it, no government is going to be able to throw substantial funds at a wilting public sector, unless growth starts to expand dramatically. That is hard to see, despite the fact the UK is doing better than the EU at present.
The government will be in receipt of a mountain of advice from the CBI, economists galore and every think tank imaginable. Labour have reiterated that there will be no reckless spending. However, their ambitious plans to create growth and build the economy have yet to be properly costed. It is unreasonable to suggest that is possible currently and that is fair enough. However, clobbering public schools and ‘non-dom’ taxpayers will only provide a few metaphorical scraps from ‘Lazarus’s table'.
If the public sector financial requirements to improve the situation measurably were totted up, they would be so gargantuan, that the challenge facing an incoming government would seem insurmountable. On top of that the government needs to digest the fact that the population is growing every day. Since 2010 the population has grown from 62.7 million to 67.7 million, not of course counting those who have entered illegally.
These problems need dealing with. They are not going away. They are just going to become more acute. We must also hope that the civil service cooperates in a more positive manner with Labour than it has with the current government in processing its policies. It can start by getting back to work!
Let me end on a positive note. Both the Government and Labour acknowledge the value of the City of London to create wealth and jobs both at home and abroad. There is a dearth of risk appetite. This attitude needs to change. SMEs and investors alike to need to be given incentives to stimulate business.
To start with, stamp duty must be abolished at the Budget.
In the UK only about 10% of investment comes from retail, as opposed to 40% in the US. If pension funds are to be encouraged to invest in SMEs, fintech and life sciences, they require the same courtesies, as well as softer regulatory requirements.
I wish the current government and the next administration the best of good fortune in taking the UK forward!
Without a buoyant private sector, improved public services can whistle. There again, any improvements could no more than thin pickings!