Crisis? What crisis?

The Tories are playing on unfounded fears about the Budget deficit

Yesterday the Conservatives marked the launch of their election campaign by plastering locations around Britain with huge pictures of David Cameron's head. In the posters, the head appears concerned but resolute; next to it floats the legend, "We can't go on like this. I'll cut the deficit, not the NHS", as if in some way these two things were direct alternatives to one another.

Meanwhile, the Financial Times asked 79 economists what they considered to be the three biggest risks to the economy. Thirty-seven of them warned that the Budget deficit puts the UK at risk of a fiscal crisis.

So, for the other 42 economists, the risk of fiscal crisis didn't even make it into their top three. But even when its use is unjustified, the word "crisis" has a headline-generating resonance that "slow recovery in world trade" or "risk of an inexperienced new chancellor" (both worries that also came up in the FT's poll) just can't match. Robert Skidelsky made the point in an interview with the NS's culture editor, Jonathan Derbyshire, back in November:

Has the bailout shifted the problem from a banking crisis to a fiscal crisis?
I don't think there is a fiscal crisis. I think it's an invention.

By politicians?
Yes. Someone like George Osborne gets away with leaving out assumptions behind his arguments because he's not confronted with them. He's interviewed a lot, but people haven't really nailed him. There hasn't been enough debate about the stimulus and national debt.

Asked about the FT's poll in an email exchange this morning, Lord Skidelsky made the same point again: "Talk of a looming fiscal crisis is greatly exaggerated. There is no risk to government solvency in the short run."

There's no question that £178bn, the current deficit, is a very big number. But that doesn't mean that reducing it should be the government's top priority. Part of it "will disappear automatically as the economy starts to grow, and extra revenues come in" -- something that whoever is in charge next year will no doubt take credit for anyway. As for the rest, action will have to be taken in the long run. As Lord Skidelsky says: "No one wants a sick patient to stay on antibiotics too long. But to withdraw the treatment too soon risks a serious relapse."

 

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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.