Our government and politicians are hooked on spending and Rachel Reeves' review proves it

11 June 2025, 16:43

If you wanted to hear the details about what the Government's vision for getting the economy back on track is and where its priorities lie in spending taxpayers’ money, listening to the Chancellor’s speech today would have been a waste of your time.

What we got instead was a list of spending promises with a host of numbers that, without context, mean very little.

It's great for the fine people of Kirkaldy that there is some money for their high street, but why on Earth is that making it into what is one of the most significant speeches of the parliament?

The answer: because our government and our politicians are hooked on the spending drug.

The big opening scene-setter for the Chancellor’s speech today was to contrast the real terms increases in spending she was granting with the cuts that the coalition made in 2010 following the financial crash. The message was ‘we’re better because we spend more’. But it only takes a glance at the public finances – and state of the economy more broadly – to see that more spending does not necessarily equal better outcomes. In fact, it often means the opposite.

Today the size of the Government debt is almost equal to the economy’s entire annual output. This is twice the relative amount of debt that the UK had in the 1970s when we had to be bailed out by the IMF, a nadir in the economic history of our country. Not only that, but borrowing costs remain stubbornly high. The government spends over £100bn a year on debt interest alone - more than it does on the police or defence. Meanwhile the tax burden is at a generational high, the effects of which we have seen this week as employment has plummeted after the raising of Employers’ National Insurance.

The only route out of this doom-loop is to stop adding to the problem by cutting spending, and deliver real economic growth, so debt falls as a percentage of our overall economy. Unfortunately, a shopping list of central government spending commitments is no way to do this, regardless of how the Treasury hopes to spin.

There were some welcome commitments to spending on areas the government should absolutely be committed to, most clearly on defence, and some welcome spending restraint elsewhere. But without real reform, any cuts will not amount to much, and more tax increases are inevitable.

If the Chancellor cannot set out a vision of a state that truly does less, and instead tries to keep acting as if ever-more money is always the answer while trying to trim the fat with no impact on delivery, we will just see more of the same: growth falling, and taxes rising.

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Callum Price is the Director of Communications at the Institute of Economic Affairs.

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