We often hear reference to ‘underfunding’ when discussing public services. It suggests that everything would be rosy if only the stingy old Government would just give out a bit more money. If only life were that simple.
Every pound that the Government spends has to be raised from taxpayers. So when we award pay rises, that money has to be found from existing budgets. So it means that capital budgets get cut or there are fewer jobs available to be paid for. There is an opportunity cost to every decision Government makes. And if we fund it by increasing borrowing, we are simply putting our costs on future generations of taxpayers and that isn’t fair.
That’s okay I hear you cry, we will just tax the rich more. Well in truth we have never been so dependent on the rich. The richest 10% of taxpayers pay 60% of the nation’s taxes. Anyone earning a salary of more than £80,000 is amongst the richest 5% of earners. I recall advising a headteacher who demanded higher taxes to fund bigger school budgets that her taxes would rise. She was most surprised to hear she was amongst the highest earners in the country.
We have reached a situation where we are demanding more and more from Government, but we are not generating enough revenue to meet those expectations. As it is, our tax system is becoming a barrier to growth and the ability to raise more money. Those who work in our docks are thinking twice about doing overtime as so much goes to the taxman.
We need to spend wisely. We need to get the basics right before we add on the fancy stuff. We need to invest in making our country more productive and we need to learn that we can't keep living beyond our means.