By Max Hastings
As the British prepare for the Christmas season, many of us anticipate less the festive treat of turkey and more the almost certain pain of being in its place, plucked. On November 26, Labour's finance minister, Rachel Reeves, will present a budget that, she admits, will attack our wallets. There is speculation about potential income tax increases, big implications for the more affluent, new property taxes, and even a potential capital asset tax.
This is made necessary by the black hole in Britain's finances, which is so deep that the Economist recently claimed that the government is on the verge of bankruptcy. Interest on debt consumes a larger portion of government revenues than defence, infrastructure or education. More than half of Britons receive more money from the state than they pay in taxes.
Britain is not alone in this predicament. In August, German Chancellor Friedrich Merz had the courage to acknowledge that the cost of his country's social welfare has become unsustainable: "We simply can no longer afford the system we have today," he said. "This will mean painful decisions. That will mean cuts."
France is the country with the highest social spending in Europe, but its citizens are demonstrating, and even revolting, in protest at President Emmanuel Macron's efforts to raise the retirement age from an absurdly low 62 to 64. Prime Minister Sebastián Lecorny, facing fierce resistance from both the radical left and the far right, is now proposing to suspend the implementation of this modest measure until the next presidential election, to be held in 2027.
A year ago, the president of the European Central Bank, Christine Lagarde, warned that the social programs of all major European countries were at risk. Since then, the situation has worsened, but there is no evidence that weak political leaders can convince voters of the necessity to settle for less.
In large sections of the electorate there is a feeling of discontent, the belief that people are being punished for crimes they have not committed. Far-right parties are taking advantage of this climate, accusing migrants of extracting resources that, they argue, rightfully belong to local citizens.
Similar issues are found in the US, but America's public finances are protected by its role as a supplier of the world's reserve currency and by its huge economy, which remains resilient even under pressure from the current administration. US tech giants are creating new wealth on a scale beyond imagination.
At the same time, on our continent, Europe, there are no signs that the competitors of America's "Magnificent Seven" will emerge, even though the sum of our economies is comparable.
Meanwhile, the German car industry, which for decades has been a driver of the country's prosperity, is trying to cope with high labour costs and expensive energy, the latter as a consequence of former Chancellor Angela Merkel's disastrous decisions to abandon nuclear power and bet everything on Russian oil and gas. European companies pay on average twice as much for energy as American companies. Most British companies pay four times as much as American companies due to excessive green policies.
Italy is the only major European country that seems to be resisting the trend towards government paralysis. Prime Minister Giorgia Meloni, once seen as an instigator of the far right, has just completed her third year in office, having achieved a remarkable degree of stability. Italy's borrowing costs have fallen, unemployment has fallen and tax revenues have increased. The country's budget deficit has been halved.
It would be a mistake to exaggerate Italy's success, however, it is no longer considered a burnt paper. Meloni's approval rating, which stands at 45%, is much higher than that of her counterparts in Germany, France and Britain. A columnist for the Italian newspaper Il Tempo proudly declares that "there is, in essence, a new perception of our country, both at home and abroad."
As far as Britain is concerned, many people are deeply disappointed by the prospect of raising taxes, not only because it will hurt our wallets and — worse — the prospects of our children and grandchildren, but also because much of the money raised will evaporate either from interest on debt or from reckless social benefits.
A staggering percentage of the population — almost 9.4 million — is economically inactive, in addition to 1.6 million. unemployed, a total of one fifth of the working-age population. They are paid by the state not to work. Clearly, some are people with disabilities or care for disabled or elderly members of their family.
However, many of the younger people who are not working, simply withdraw from what we would call life, career, as members of society who contribute financially to it. Some supposedly suffer from stress that makes them unable to work daily — more than 800,000 people are unemployed compared to 2019 due to these alleged health problems.
The apparent inability of any British government to deal with these crazy numbers, to reduce government benefits for inaction, to improve stagnant national productivity, worries all those who think about our economic future. Successive Conservative prime ministers did nothing effective between 2010 and 2024. Labour is worse off. Prime Minister Keir Starmer's deputies in parliament vote against all cuts in social benefits or cancel them by threatening to do so.
Many of these lawmakers, leftists who seem to know no simple mathematical concepts, are demanding that the government continue to rock the money tree to support the less well-off by imposing punitive taxes on those they call "rich," including much of Britain's middle class. To the extent that it surprises those of us who thought that the Labour Party abandoned its heavy socialist past forever when Tony Blair became prime minister in 1997, the class war returned.
It is a catastrophic mistake to treat government welfare and health care as absolute, unlimited rights, which impose no responsibility on the individual to contribute, even if only through daily work and paying taxes. However, leaders across Europe seem incapable of explaining this honestly, as taxation has come to discourage work.
Merz was right when he told Germans that their economic output can no longer support their social spending, and so can most of the rest of Europe. The challenge for our leaders is to tell these truths to voters who refuse to hear them.
Former European Commission chief Jean-Claude Juncker said some time ago that all the major politicians in Europe knew what needs to be done to restore correctness to public finances, but no one knew how he could be re-elected afterwards. This is still true. Few of us in Britain believe that the budget to be presented this month will make a substantial commitment to reduce the amount of public coffers given to tens of millions of people.
On the contrary, a weak finance minister in a weak government will choose the easy solution. He will take more money from us who work, to satisfy those who do not work. And Britain, like much of Europe, will continue to walk an economic path that ultimately leads to disaster.
