Why is funding linked to growth?
This first part looks at the often repeated claim that the only way we can spend more on our public services is for us all to work harder to grow the economy.
To mark the 75th anniversary of the National Health Service the press were trumpeting the views of former prime ministers and leading politicians with claims that the current funding model is unsustainable and needs to be reformed. At the BBC Laura Kuenssberg talked about “the National Health Service, love it or hate it”. But who are the haters? Was she meaning the elite who are being denied the opportunity to extract rentier income from the NHS, as they are allowed to do from housing, education, power, transport, water etc.?
A controlling elite
Over the past 40 years neo-liberalism has enabled wealth to be concentrated into fewer and fewer hands. A wealthy elite has emerged who don’t really want the rest of us to know who they are, how much they have accumulated, or how they use their wealth. The drive by the EU progressively to introduce legislation to make beneficial ownership more transparent became a factor driving for Brexit. The UK and the US have now become centres of excellence in enabling the wealthy to hide their assets.
Here, as in the US, the media and the major political parties are funded by this neo-liberal elite. They use the media to misrepresent policies that may disrupt their control, encouraging many to believe that:
- Using fossil fuels is not causing climate change,
- The privatisation of our public services has improved them,
- To pay public sector workers more we must grow our economy.
They fund party figures to buy influence, embed their agents to develop policies and laws that meet their needs, and influence the selection of candidates to implement them. Regulatory capture is sustained by backing both horses in a two horse race.
Just as alarmingly it seems that the Civil Service is being politicised. Vital know how and experience is, it seems, being lost by the civil service, as consultants from various companies and think tanks, some with opaque funding, are being drafted in to roles that should be undertaken by Civil Servants. The PwC tax scandal in Australia showed how information collected by their consultants developing Tax policy was used by other PwC consultants to advise corporations on how to avoid tax.
The veil though is starting to slip as a result of the escalating cost of food, energy, transport, rent and mortgages, and the huge profits made by banks and privatised utilities. People are starting to realise who is benefiting, and the extent to which the public has been misled by successive governments and the media that supports them.
The current thinking on funding public services
In her report “A New Business Model for Britain” Shadow Chancellor Rachel Reeves shows how closely the main parties are aligned on how public services should be funded. She starts by setting out her credentials as a former economist at the Bank of England, an institution that exists to support the interests of business owners, not of the people. It contains rhetoric such as:
Building relationships between the public and private sector. This is just code for maintaining the status quo. The private sector is awash with funds; banks and institutions have so much cash that they do not know where to invest it. Our economy is now dominated by Finance Capitalism (often referred to as FIRE: Finance, Insurance and Real Estate). With opportunities to invest in manufacturing and industry few and far between, the main sectors being targeted are public services such as energy, water, health care and housing; services that we simply cannot live without. The relationship sought is one where money is invested/lent so that interest/dividends can be paid, or where government outsources the delivery of services from which the elite extract income. The result is that we are effectively being taxed to live.
We read about “the hard working British people” as though that is a good thing. The neo-liberal economy has reduced many to wage slaves, working all hours, doing two or three jobs just to afford somewhere to live, stay warm, eat, drink, and travel. Work shouldn’t be hard, it should be a joy to contribute to a society that everyone can enjoy and feel secure in; but even being a teacher or a doctor has become a slog, because of working conditions (poorly maintained buildings, lack of facilities), atrocious hours and the pressure to strive for unachievable targets. People are leaving jobs in the public sector that used to give them real satisfaction.
Then there are the Fiscal rules that constrain how much governments can spend and borrow, designed to reinforce the neo-liberal doctrine of allowing an elite to borrow on our behalf to provide essential services at a higher cost to the user. In his book Private Island James Meek explains that when we pay to use public services, revenue is extracted and transferred to distant pension funds, oligarchs and foreign states. Fiscal Rules are used to justify more private investment such as contracting out the recently announced Diagnostic Services in the NHS.
The political class has quickly forgotten how vital our public services are, and how underfunding hampered their response during the pandemic. Now faced with an economic crisis along with the looming climate crises the cuts continue to deepen. Government and opposition have both fallen back on “we can only spend more when the economy grows”. What happens when, as appears likely, the economy doesn’t grow? There needs to be an alternative proposal for the people to consider.
Next: Part 2: Other funding options are available.
Editor’s note: The views expressed here are the author’s own.