Britain’s deficit is cultural before it is fiscal

Budgets are treated as technical exercises, but the incentives they create shape whether people work, save and plan ahead.

Joseph Eve is a parliamentary researcher.

There can be a temptation to view Budgets as purely economic events: a technocratic divvying up of the pie as best as possible, as if the ideal chancellor could find a utilitarian formula to answer the questions of the day.

There has been a trend in recent times to separate the economic and the cultural, describing parties and individuals as fiscally X and socially Y. But this is a false distinction. Economics, like politics, is downstream of culture.

How we engage in deals, honour contracts and trade, much like our other democratic “norms”, is not the natural inheritance of all humankind. It has developed over centuries. In fact, our historic commercial success as a nation is a product of our shared moral and cultural outlook.

And what did the 28 October Budget tell us about the culture of our current Government? That it puts off tough decisions, delaying, again, a date for meeting its defence spending target. That it prefers one-off £100 payments to structural reform – more willing to provide a fish than a net – and that the problems of today are being left for another day. It’s this cultural malaise that precedes the economic one.

This is perhaps most clear in the Government’s approach to the national debt. Not only are there no real plans to cut the £3tn debt pile, but taxes and spending continue to rise even though long-term gilt yields are at their highest since 1998. The effect is to saddle future generations with ever-increasing liabilities in exchange for avoiding a backlash now.

That is a short-sighted approach.

This filters down to society at large, weakening the link between effort and reward. The health and disability benefits bill, which the Office for Budget Responsibility (OBR) now expects to pass £100bn in 2028–29, is one sign of a system that does too little to help people back into work.

It is also a culture in which fewer than a quarter of recorded shoplifting offences lead to a charge. In that climate, the individualism that comes naturally to the British people has come to mean selfishness rather than resourcefulness.

Photo by Herman Mahal on Unsplash

After the Conservative Party conference, some claimed the party had tacked back to its home turf of the “Waitrose woman” by pledging to abolish the £100,000 childcare cliff edge and inheritance tax on family homes. The charge was that these were targeted tax breaks for a group of voters the party hopes to win back.

But there is another way to read policies like these: as attempts to change the culture, rather than simply the tax code. A tax expert like Dan Neidle will pick apart the specific economic pros and cons, giving less weight to the moral implications than the fiscal.

Whatever the politics, the logic of such policies is cultural. They reward someone who works, saves, plans ahead and wants to leave something for her children. That is a cultural attitude, and economic prosperity is a fortunate by-product of it.

If any future government can change this culture, it will go a long way towards rebuilding the social contract and a shared sense of nationhood. After all, why would you care about a country you have no stake in, where any spare cash you build up is taxed away and redistributed? Settlement rules matter here too: indefinite leave to remain opens the door to the benefits system, so the terms on which it is granted should reward contribution.

The economic culture that has made us so historically prosperous depends on a shared sense of belonging, which is why migration, both legal and illegal, and integration matter to economic policy too.

Some commentators have concluded that it is no longer “the economy, stupid”, that cultural concerns around nationhood, immigration and culture have eclipsed fiscal concerns. But the reality is that the two are not separate: if you fix the economic X-axis by creating sensible incentives, you can go a long way to fixing the social Y.

Chancellor John Healey’s Budget was a fiscal event, but it is worth seeing it as a cultural one too. Yes, there are myriad economic symptoms, but the underlying problem is cultural, and our politics too often makes it worse.