A formula for national ruin

Giving in to the compassion industry and lifting the public sector pay cap would be grossly irresponsible warns MAX HASTINGS

THE morning after the General Election, Michael Heseltine told me: ‘ Whatever sanctimonious things ministers say about the national interest, from here on politics is going to be solely about hanging on to power.’

Everything that has happened in the past month suggests that the former Tory deputy prime minister was right. For anybody who cares about the future of this country, the battle currently being waged within the Cabinet about lifting the cap on public sector pay is cringeworthy to behold.

Britain has a colossal budget deficit which, for all George Osborne’s stern rhetoric, rose rather than fell on his watch as Chancellor.

We are told that voters are sick of austerity; yet there has never been any austerity.

It is true that public sector workers’ real incomes have been falling — but from an unjustifiably high base.

Every analysis shows that the State’s 5.4 million employees earn more than their private sector counterparts who have comparable skills, especially when generous State pension rights are considered. Many people working in business today think themselves fortunate to have any company pension entitlement at all.

Panic

There are special problems about recruiting NHS staff, partly relating to a fall in overseas recruitment of nurses (blamed somewhat on English language tests designed to restrict immigration); partly to the fact that many young Britons recoil from jobs that involve intimate personal services such as emptying bed pans; and partly because the NHS needs radical reform, resisted by unions — including the doctors’ union.

The demand from some ministers to lift the 1 per cent public sector pay cap is rooted in panic — a belief that if the Tories do not give state workers cash, they will lose their precarious hold on power.

Such panting aspirants for the premiership as Boris Johnson, arrayed in the cap and bells that have become his Foreign Secretary’s uniform of state, would give every voter free holidays on Mustique if they thought this would improve their chances of inheriting 10 Downing Street.

Chancellor Philip Hammond, to his great credit, is so far keeping his nerve and insisting that there must be no giveaway.

Every 1 per cent increase in state workers’ pay adds £2 billion to the £179 billion annual public wage bill. Funding this requires an extra 2p on the basic rate of income tax, 5p on a litre of fuel — or more reckless borrowing.

Hammond recognises that the Tories’ claim to govern must rest upon a reputation for fiscal prudence.

Few state employees will ever vote for the Conservatives, regardless of how much largesse the Treasury distributes. In any case, if the Tories join Jeremy Corbyn’s auction of promises of dosh for all, the Labour leader will always outbid them.

Yet if I were working for modest rewards in Sunderland or Southampton, I would find it hard to believe the Government’s claim that it has no ‘money tree’ to shake on their behalf.

Prestige projects such as HS2 and the Hinkley Point nuclear plant continue, when common sense provides every justification for cancelling them.

Everywhere in Britain, consumers are granted credit facilities — especially to buy cars — far beyond their rational ability to pay for them.

Many people have lost all sense of a causal link between what they can afford and what they can have, because lending institutions and credit card companies allow them to do so. Why should government be any different?

The stench of the Government’s electoral deal with the Democratic Unionist Party drifts down every street in the land. A province that already gets more state aid per head than any other in the UK has been given a billion-pound bung in exchange for ten Commons votes.

How can people in the rest of the country be blamed if they now clamour to be given their bungs, too?

No senior Government politi- cian, with the exception of Hammond, is making a serious attempt to explain to the British people that, unless we can stabilise the public finances over the next decade or so, the pound will crash and we shall all be turning out empty pockets.

Anyway, the vast giveaway to Ulster makes a mockery of the pitch for ‘responsible behaviour’ down the food chain.

After the General Election, the question was asked — and remains unanswered — whether any political party can again secure office by offering voters a responsible manifesto about the nation’s finances.

The Tories have bolted in terror from means- testing benefits for the elderly or making National Insurance contributions for the self-employed more equitable — both sensible and necessary policies.

The pension ‘ triple lock’ (which guarantees that state pensions rise in line with whichever is higher, average earnings, price rises or 2.5 per cent) remains, though there is no moral or economic case for it.

Deficit

Labour’s promise to abolish university tuition fees is one of the most shameful and irresponsible ever advanced by a political party, and that is not even the worst of Corbyn’s pledges. The notion that they can be funded by making companies and the rich pay more tax represents discredited Marxist economics.

But we are all going to have to pay somewhat more tax, if there is to be any hope of reducing the deficit before our children are dead, never mind ourselves.

The days, and indeed decades, are over in which living standards rise, come rain or shine.

That is a privilege which seems likely to belong only to Singaporeans, who run their small country better and work harder than we do, or the Chinese and Indians.

The only legitimate arguments for removing the cap on anybody’s pay — in the public or private sector — are increased productivity or a booming economy.

Yet the political battle to hold the line when neither of these factors prevails is made much harder because those at the front of the trough — notably FTSE chief executives — continue to pour money down their own throats in a fashion that would choke a dinosaur.

Examples matter: that being given by the top of British business is enough to make riots explicable, if not excusable, at the bottom. Perceived unfairness about the distribution of rewards is a problem for all Western political parties that will not go away.

Though the older generation hate hearing it said, most of us are today in a much better economic place than most of the young, if only because we have homes.

Stagnation

For the Tories to deserve to win another election, they need to offer the new generation some vision of the future that looks less bleak than they see today and still behave responsibly with the country’s money.

A few weeks ago in New York I met its brilliant ex-mayor, the billionaire Mike Bloomberg. He observed that the career future of the average plumber looks brighter than that of the average college graduate, as a result of the relentless erosion of jobs to technology, and the corresponding stagnation of wages.

This is obviously true. Yet how often do politicians articulate such issues, or indeed think about anything beyond next Tuesday?

If the Government abandons the public sector pay cap, the last shreds of its fiscal authority will be gone. No senior Tory who demands such action is fit to be prime minister. We face a real danger of waking up one morning to find Jeremy Corbyn and his gang of Stalinists installed in Downing Street.

Nobody is anyway likely to be impressed by the efforts of Boris Johnson, Michael Gove and Jeremy Hunt to rebrand themselves as ‘caring’ politicians. Governing in accordance with the demands of the compassion industry is a formula for national ruin.

Most of us instead want competence, prudence and a vision for the future. Which often means saying ‘no’.