UK public finances: It has been said before, but it needs saying again. The UK is going to be a bad place to live after the next election. Rising taxes and deteriorating public services and infrastructure are racing certainties. A very large tab for past bad policies is about to land.
This week brought two unsettling examples of the UK’s problems. The government renationalised what is supposedly one of the country’s most attractive rail franchises, the East Coast main line. The operator, National Express, was able to walk away from commitments rendered loss-making by the downturn. Rail privatisation, once hailed as a great idea in public policy, has proven shambolic.
On the same day, the government conceded that financial market conditions were unfavourable to a partial sale of the Royal Mail. But the nation’s postal service was in such bad shape that it could probably have only been sold to investors filled with irrational exuberance – and government promises to meet pension obligations.
The UK has to contend with the loss of substantial income from a financial services sector much of whose profits were no more than the product of leverage. At the same time, the obligation to provide decent infrastructure, which was supposed to be shunted into the private sector, is now hurtling back onto the national balance sheet.
With elections due next year, a new government will inherit a terrible mess. UK citizens can expect to pay significantly higher taxes, and not get much in return.