Alphen, Netherlands. 3 April. Britain has created a monster. One in every three pounds the British state spends is on welfare. This week London embarked on the greatest reform of the once great Welfare State since its inception in 1947. The welfare budget has doubled over the past decade. In Brussels yesterday a senior economist told me that given the changing demographics Britain will need to grow at least 5-6% per annum simply to sustain the current Welfare State. This is compared with a post-1945 mean average of between 2-5%. Indeed, a leading think-tank recently suggested that if London continues to protect spending on health, education and international aid then in the absence of growth by 2018 other big departmental spenders could see their budgets cut by up to 30%. Quite simply, funding welfare has become the single biggest factor in Britain’s international decline and if nothing is done Britain will be bankrupted by it.
The welfare divide has also created a political class no longer able to conceive of Britain’s true national interest. Indeed, be it on the Left or Right the ‘national interest’ has become a metaphor for whatever policy can afford Britain’s welfare dependency. As such this very narrow view of the ‘national interest’ has fundamentally undermined the making of national strategy and critically weakened London’s ability to wield influence in either Europe or beyond.
The welfare divide has also made bipartisan politics virtually impossible. The 2008 banking crash was by any stretch of the political imagination a national disaster. It was the kind of disaster that a responsible political class would have put aside their differences to come together in the true national interest. Indeed, the national debt (the year-on-year accumulation of the annual gap between state spending and income) is due to peak at 85% of GDP by 2018. Therefore, the state re-capitalising of failed banks will take a strategic economic cycle to fix not the electoral cycle London’s political class obsess over.
Instead, both Labour and Conservatives (temporarily allied with the rent-seeking Liberal Democrats) have chosen to play politics with this crisis thus making it both worse and longer. The Labour Party compounded the banking crisis by gross and irresponsible over-spending when in office (Gordon Brown called it ‘investment’). They also placed all of Britain’s future economic eggs on relying on a sclerotic EU obsessed with protecting failing industries and thus guaranteeing Europe’s relative decline.
Once in sort-of-power the Conservative Party decided the only way to get re-elected was to drive the debt down through a programme of austerity at the bottom of the worst economic cycle in over a century…and hope for growth. For all the rhetoric an increasingly desperate government is making increasingly warped policy decisions much of it to feed the welfare monster in the hope it can get re-elected in 2015. The Government now admits all it can do is control the rise of welfare spending.
The effect of warped policy is nowhere more apparent than the country’s defence. The 2010 Strategic Defence and Security Review (SDSR) was meant to be the baseline for a radically-reformed force. Costs were to be driven down and a new force created that would balance efficiency and effectiveness, capability and value. However, the money-driven and hastily-contrived SDSR really had to be THE bottom-line. Britain’s armed forces could be cut no further without really putting the military itself in danger. Still, the mantra went if London held its nerve and given a return to growth a new force would emerge over time that could be afforded. To that end London created a $200bn military equipment budget.
Sadly, the forthcoming Comprehensive Spending Review will likely see further cuts to a defence budget already stretched beyond breaking point. Critically, cuts could well be made to the vital $200bn military equipment budget without which the British armed forces will simply be unable to recover from over a decade of continuous operations.
The impact of further cuts will go way beyond defence. With Scotland about to decide its future one of the last unifying British institutions - the British armed forces - will to all intents and purpose have been emasculated compounding the sense of British decline that is fuelling separatism. Influence institutions vital to Britain such as NATO will be weakened. Worst of all, politicians will simply transfer yet further unacceptable risk onto Britain’s young men and women in uniform as they try to mask decline on their watch with over-stretched action.
Unless the British state for once begins to think creatively about the balance to be struck between welfare and influence then another disaster beckons. That means a truly radical re-organisation of state power with aid, diplomacy and force combined into a new, tight and real national strategy (rather than the current PR stunts). Why? Because national influence and national wealth are two-sides of the same devalued British coin.
Britain is standing on the edge of precipitous national decline. Somehow Britain’s political class must be shaken out of their welfare-driven Little Britain complacency. If nothing else Little Britain will mean more Europe. Perhaps that is the plan?