Witnessing the British elections up close from the once-Tory, now Labour, area of Lancashire I was holed up in recently, I realised that a lack of money for services is a universal complaint not always reflected in reality.
The UK is wealthy, and yet I have seen it described in some places as a poor country that happens to have London. That’s an exaggeration, but the sense of anger at the outgoing government was palpable, and while South Africans might regard what the British regard as deprivation with some surprise, the fact is that one’s measure of wealth or poverty will always be local, not global.
The British electoral system is pretty brutal. Because it is a constitutional monarchy and all power is theoretically exercised at the king’s pleasure, MPs and ministers are appointed and removed in elections like lowly staff. Without any kind of symbolic duties that would burden a head of state, Rishi Sunak went off to see the king to resign and Sir Kier Starmer was prime minister a little later in the day.
And so, a rather stunned Starmer has a stonking majority made up of a broad church of MPs. It is, for a host of reasons, vulnerable to big swings at the next election. That means he will need to reckon quickly with the reasons he was elected. It won’t be easy, because much of what the party has promised will require the kind of cash he seems to have ruled out any method of raising — a dissonance that will be familiar to anyone who has listed carefully to our own fiscally prudent finance minister and the promises of our president.
Specifically, the Labour manifesto ruled out higher debt, increasing tax on working people (not increasing income tax rates, National Insurance or VAT) and hiking corporation tax. However, Rachel Reeves has already completed the first order of business for a new chancellor of the exchequer who plans to break their promises, delivering a pantomime performance of shock at the “mess” in the UK’s public finances.
It’s a trick as old as the Thames, but these days rings hollow as the UK’s Office for Budget Responsibility publishes the country’s finances twice a year. There are no real surprises, and Reeve’s protestations are an act of cynical public relations that foretell something, even if it’s not clear what.
This raises the question of how the announcements of pay hikes for nurses and teachers, and an expensive “green prosperity plan” will be funded. To use an unforgettable phrase from my learned colleague Hilary Joffe — taxpayers are all “Laffered out” both here and there.
If there are limited ways to raise more cash other solutions are needed, and seem to offer more scope here than in the UK. Value for money is the first and probably the hardest to get right in the short term of an administration. It is practically taboo to criticise the National Health Service in the UK, but it eats almost a quarter of a trillion pounds a year and delivers some decidedly middling outcomes.
That kind of budget in rand is unimaginable, so it’s best to understand it as a proportion of GDP — about 11% in the UK and 8% in SA, acknowledging the demographic burden of an older population in the UK, and suggests again that our health minister and his colleagues should look to improve a reasonably well-funded public health service instead of trashing the private sector hospitals and practices with National Health Insurance.
Educationists around the world are watching on in astonishment as the UK plans to levy a tax on private schools. The concept of taxing education is impossible to explain rationally or morally, and it will force the children of wealthier parents out of private schools and burden the state with their education, usually in the nicer areas in which they are zoned, for better state schools, forcing out the poorer kids.
Further, it will hurt the striving middle-class families and smaller private schools. The rich families and the big famous schools that churn out Tory prime ministers, such as Eton, won’t feel it much. Income from fees is only a small factor in their finances.
As such it will deepen inequality, but in the context of UK society the plan is appealing to those who like the idea that they’re striking a blow against an imaginary aristocratic enemy, as opposed to hurting children, and it is likely to go ahead.
Here in SA, state education is also comparatively well funded (6.6% of GDP in 2023) but delivers world-beating woeful outcomes, with 80% of grade 4s unable to read for meaning. Sadly though, because there is cash it is also now contested ground. The new minister of basic education, Siviwe Gwarube, is a senior member of the DA, and Jacob Zuma’s MK party has seen a great opportunity in this appointment and is hurriedly establishing a parallel labour structure through the Teachers & Education Workers Union of SA.
It will be aligned to the MK and not with the ANC, as the dominant SA Democratic Teachers Union has always been. As usual, the unionists seem to care little for the children. Throwing more cash into this toxic mess seems like throwing bad money after good, when what is required is leadership and organisational cultural change.
The new administration in SA does have one quite significant advantage over its UK counterpart. Economic growth has the potential to untangle many of these fiscal knots, and while some serious growth in the UK is certainly possible, here in SA we’ve really got the lowest-hanging fruit imaginable. Keep the lights on, mend the railways, diminish corruption, teach the children, reduce the cost of debt by conducting our foreign policy intelligently, and get off the greylist.
There are bits and pieces of this happening, and if the great rumoured Chinese infrastructure drive designed to counter the incoming Trump trade war actually materialises, and we can get our logistics functioning, there’s hope on the horizon that two things can happen at once: more cash, and more being done with what we already have.
Reeves would love such an opportunity.
• Parker is Business Day editor-in-chief.
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