Burnham Discovers Cheapest Way to Create New Entitlement Is to Make Old Entitlement Slightly Worse
Prime Minister unveils revolutionary fiscal principle: save money on pensions, spend the savings before lunch, call both decisions responsibility
LONDON — Prime Minister Andy Burnham has produced a solution to Britain's public finance problems so elegant that economists have been seen sitting in car parks afterwards, just staring. The plan is this: make one enormous government promise a bit stingier, then take the money you've saved and use it to build a different enormous government promise next door.
Treasury insiders have already named the technique the Westminster Conservation of Spending Principle, under which public money can be neither created nor destroyed, only moved into a department with a fresher logo and a lanyard budget.
The Wall Street Journal's editorial board points out that Burnham's pension reforms arrive hand in hand with plans for a hefty new National Care Service, at a moment when the gilt market is already twitching like a dog that has heard the word "vet." Everyone involved has described this as a coincidence, which is what you call a coincidence you planned.
For decades, economists held that a government carrying a lot of debt would eventually have to spend less. Burnham has gone a gentler route. He's proposing to rename it.
- Andy Burnham has discovered fiscal restraint: take money away from one government promise and immediately promise it somewhere else.
- The triple lock is apparently too expensive, so the savings will fund a National Care Service, because nothing says austerity like founding another national service.
- Bond traders heard "new entitlement" and responded with the traditional City ritual of screaming quietly into a Bloomberg terminal.
- Government accounting differs from household accounting. If your family cancels Netflix and immediately leases a Range Rover, nobody calls it "reform."
- Burnham wants pensions to grow more slowly so a different programme can grow much faster. It's gardening, Westminster style: prune one hedge, plant Heathrow.
Why the Triple Lock Change Cuts Pension Spending by Spending the Cut
Quick recap for anyone who skipped the last four budgets. The state pension triple lock raises payments each year by whichever is highest out of inflation, average earnings growth or 2.5%. Burnham wants to swap it, from 2030, for a version that tracks inflation or 2.5% and quietly drops the earnings bit. On paper, that saves money.
On paper is where it all goes wrong, because the minute the money is saved somebody in Whitehall finds out about it.
A normal person who saves £500 ends up with £500 sitting in a building society being boring. When Whitehall saves £500, seventeen civil servants form a ring around it like children around a dropped ice cream and start asking whether it could be a pilot. By Thursday it's a department. By Christmas it has a minister, a logo and a regrettable hashtag. Eighteen months in, there's a £4.2 billion funding gap and a review of the review.
The proposal is for the pension savings to help prop up a National Care Service for the elderly, which is a bit like cancelling the family gym membership to fund a municipal swimming pool. Dad stands by the digger in a hi-vis vest, beaming at the savings. Mum is on the phone to someone called Gary about the cost of the water.
How Bond Markets Wrecked Westminster's Mood by Doing Sums
Gilt traders, being heartless, have been asking questions again. How much? Who pays? Has anyone here met compound interest? It has caused real hurt in Westminster, where nobody has been asked "who pays" since 2008 and several MPs assumed it was a type of owl.
Borrowing costs in Britain are already high. Investors have been saying, repeatedly and in the tone of a man reading out a parking fine, that more slippage or heavier borrowing could push yields up further. PIMCO said earlier this year that markets wanted a believable plan for shrinking the deficit, and Burnham responded by stressing that his government would stay inside its fiscal rules. The rules have since been seen wearing a very large hat.
The trouble with the bond market is that it has no feelings whatsoever. You can't accuse a thirty-year gilt of lacking compassion. It just sits there, yielding, in the manner of a Victorian headmaster. A minister can spend twenty minutes on social justice, historical inequality, national renewal and fairness between the generations, and the market answers with a single percentage. Try debating that on Newsnight.
Government Investment Explained: £10 Goes In, £7 Comes Out, Everyone Claps
Downing Street's economic philosophy has reached a purity that would make a monk weep. The state takes £10. The £10 goes into Whitehall, where about a pound becomes administration, another pound becomes a consultation, a third pound becomes a website about the consultation, and a fourth pound is lost behind a radiator on the second floor of the Department for Departments. Around £7 eventually crawls back out, blinking.
The Prime Minister then travels to Manchester and tells a room of hard-working people that the government is investing £7 in their community. Nobody mentions the tenner. It would be rude, and bad for the mood.
Under the newest school of political economy, anything frightening in a focus group is relabelled "investment." Railway subsidy? Investment. A new government office with a water feature? Investment. Consultants studying whether another set of consultants should carry out an assessment? That's capacity building. A £38 million computer system that can't recognise February? Digital transformation.
By the same logic, a man who loses £200 at Ascot can walk in the door and tell his wife he's established an equine growth portfolio. She'll want to see the prospectus. Government never has to produce one.
The National Care Service Plan: Building NHS II Before NHS I Is Finished
Let's be fair, because the problem is real. Social care in England is fragmented, the workers are often badly paid, and a great many families are shouldering a frightening burden looking after elderly relatives. Supporters of the National Care Service idea argue that a coherent national system could knit care together with the NHS far better than the current arrangement, which resembles a car boot sale run by a committee.
All of which sounds entirely sensible until you remember that Britain already owns an NHS, and it's currently being held together with tape and a woman called Pauline. Starting a second giant national service before repairing the first has a distinctly British charm. It's like finding the downstairs toilet overflowing and responding by fitting another bathroom upstairs. Both ceilings come down eventually, but everybody gets a nice brochure.
The state may soon be running the National Health Service, the National Care Service, National Rail, National Energy and National Water. At this rate Britain will nationalise Greggs and write a statutory sausage roll entitlement into law. Citizens will receive one pastry a year, uprated by inflation, average earnings or whichever measure produces the largest sausage roll. Then a later Chancellor will scrap the triple pastry lock to pay for universal custard, and the cycle begins again with a slice.
Why Labour's Economics Seems to Run on More Government for Every Problem
Burnham has been openly critical of the Thatcher-era economic settlement and says Britain needs a more active state. The WSJ editorial reads this as a belief that the country's long economic sulk comes partly from a shortage of government.
Government programmes have a marvellous property here. When they fail, it proves they need more money. When they succeed, it also proves they need more money. Picture a restaurant working that way.
"How was dinner?"
"Awful. The soup was cold and I found a button."
"Excellent. This shows we need a bigger restaurant."
The British state has spent decades expanding, regulating, subsidising, borrowing and taxing, and every time growth disappoints, somebody in Labour peers over the rubble and concludes that what it needs is government. It is roughly like putting out a chip-pan fire with premium unleaded and then asking why nobody is grateful.
The Pensioner-Taxpayer-Pensioner Loop Nobody Wants to Explain
The awkward thing about moving money between generations is that generations keep ageing. Today's taxpayer is tomorrow's pensioner, and the day after that she's a social care recipient wondering where her handbag went. So the government moves money from your left pocket into your right pocket and charges an admin fee for the trousers. This is called social insurance.
Ordinary insurance means you pay a premium and a company takes on a defined risk. Political insurance often means paying in for forty years and finding out that Parliament has changed the definition of "benefit" while you were in the loo. Imagine an insurer allowed to rewrite your policy mid-claim, with a majority, and a Latin motto.
How Gilt Investors Became Britain's Accidental Fiscal Conservatives
The funniest development of all is that Britain may no longer need a fiscally conservative party. It has gilt investors. Every time Westminster announces twelve bold programmes at once, the financial markets carry out the ancient capitalist ritual of asking whether the country can actually afford them, and Westminster takes it like a cat being bathed.
Politicians love to say Britain is "in hock" to the bond market, as if a gang of lenders had turned up outside Downing Street demanding tribute and a bag of Haribo. But Britain borrows voluntarily, via the UK Debt Management Office, on a schedule, with a website. The government resents lenders poking around in policy. The lenders resent the faint possibility of not being repaid. Each side thinks the other is being unreasonable, so the whole arrangement feels like a marriage conducted exclusively through Bloomberg.
A Practical Guide to Surviving the New Economics
Taxpayers who want to understand modern public finance should stop thinking in pounds and start thinking in announcements. A billion pounds is about three ministerial announcements. Ten billion is a national mission. Twenty billion is "transformational investment." Anything above £50 billion is moved to somewhere beyond 2030, where economists can't get at it without planning permission.
Whenever the government says a reform will "save" money, ask the question you'd ask a teenager coming home from the shopping centre. Where is the money now? If the answer is "in another programme," nothing has been saved. It has just changed costumes and walked back in through the side door with a moustache.
Is Britain Building the World's First Fiscal Perpetual-Motion Machine?
Burnham deserves a little credit for admitting that the triple lock can't keep growing forever without consequences. Economists and commentators of every stripe, including those at the Institute for Fiscal Studies, have said Britain has to face up to pension and welfare costs as the population ages.
But reform stops looking like fiscal discipline once every pound saved has already been invited round to another spending programme for tea. Britain can't solve a costly commitment by swapping it for a different costly commitment. At some stage somebody has to make something. Goods, services, exports, productivity, growth, all those quaint activities that go on outside government departments, usually in the rain.
Otherwise the country is about to perfect the world's first fiscal perpetual-motion machine. Taxes pay for spending. Spending justifies the taxes. The taxes slow growth. Slow growth needs stimulus, stimulus needs borrowing, borrowing raises interest costs, and interest costs need taxes. Meanwhile, somewhere in Whitehall, a civil servant is handed an award for sustainability and a small ceramic owl.
That may turn out to be Burnham's real achievement. Physicists spent centuries insisting perpetual motion was impossible. It turns out British politics just needed a bigger state and a stronger lanyard.
10 Humorous Observations on Britain's Pension-Shaped Spending Spree
- Britain's bond market has become the country's unofficial opposition party, being the only institution still permitted to vote against spending.
- Politicians call bond traders shadowy speculators right up until they need them to lend £100 billion.
- The National Care Service promises to resemble the NHS, which is reassuring if your retirement plans include becoming expert in the phrase "your call is important to us."
- Britain has invented perpetual-motion economics: taxes fund spending, spending needs borrowing, borrowing raises interest, interest needs taxes, and everybody gets a leaflet.
- Labour's bold new theory is that earlier governments failed because government hadn't yet been government enough.
- Burnham tackles the cost of ageing by moving the bill from pensioners to taxpayers, who, rudely, then turn into pensioners.
- Every government programme is called an "investment," which raises the question of why taxpayers never get dividends and can't sell their shares.
- Westminster promises pension reform will make public finances sustainable while also explaining where the freshly available money will go on Tuesday.
- The bond market is cruel because it insists money lent to governments should eventually be repaid, an extremist position formerly known as banking.
- Socialism's perfect recycling scheme: the government takes £10 from you, spends £13 on your behalf, borrows the other £3, and announces you've received £13 worth of compassion.
Disclaimer
This is satire based on current political and economic reporting concerning Andy Burnham, pension reform, the proposed National Care Service and Britain's public finances. Real policy proposals provide the scaffolding. The screaming Bloomberg terminals, the statutory sausage roll entitlement, the administrative trousers, the Department for Departments, Pauline, and several deeply suspicious economic principles are there because reality sometimes needs professional help.
This story is entirely a human collaboration between two sentient beings: the world's oldest tenured professor and a philosophy major turned dairy farmer. Neither has been authorised by the Treasury to operate heavy economic machinery. https://prat.uk/cheapest-way-to-create-new-entitlement/
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