In yesterday's Times, Daniel Finkelstein wrote:
Welcome to the era of no money. The central fact of British politics in the next ten years, and perhaps longer, is not hard to spot. British politics isn't going to be dominated by interesting debates on the future of capitalism. It isn't going to be the stage for a revival of interest in democratic socialism. It isn't going to play host to the interplay of competing ambitious projects. No. We're in for a hard slog. Because what British politics is going to be about in the next ten years is living with the consequences of the State being broke, of the Government running out of money.
I think he's right about that, and I also think he's correct when he points out that the politicians (of all three parties) haven't yet realized how drastically things have changed. By and large, they're all going on as merrily as before, proposing more spending here, a new government programme or two there, and so on.
It's just not realistic. As Finkelstein points out, the IFS says it'll be at least 2030 before the official national debt returns to below 40% of GDP. Of course, that assumes the Treasury's predictions are correct, and many analysts would take a more pessimistic view.
There's one point on which I would strongly disagree with Finkelstein, however, and that's his assertion that the government already has "very difficult, tough plans" to cut spending. They don't. All they are talking about doing is reducing the rate of public spending to 1.1% a year from 2011/12 to 2013/14. It's a pathetic effort.
What you have to realize is that public spending has doubled since 1997, to more well in excess of £600bn. And for what? It's not like government has become twice as effective. In reality, I guarantee you could easily cut 15-20 percent of public spending (that's about £100bn a year) without it having any discernable impact on frontline services. All that's required is the political will to do it.