UK "Chancellor Must Reform Public Sector, Not Tax Economy Into Oblivion,"

Former Chancellor Jeremy Hunt has urged the current government to prioritize public sector reform over increasing taxes, arguing that such changes are essential for Britain's economic health. In a commentary, Hunt stated that "Reform the public sector or tax the life out of the economy? It's not difficult to work out which is best for Britain."

Much of the speculation surrounding the upcoming Budget has centered on potential tax increases, leaving families and businesses apprehensive. Hunt noted that economists estimate over half of the £22 billion budget headroom inherited by the current Chancellor has been eroded by rising borrowing costs. This leaves little room for new spending initiatives without resorting to either tax hikes or spending cuts.

Hunt expressed concern that tax rises would inflict significant harm, citing the impact of previous tax increases on businesses. He argued that many family-run businesses are now considering selling rather than passing them to the next generation due to these pressures. Furthermore, he asserted that an increase in employers' National Insurance contributions has contributed to fewer job opportunities for young people, pushing the number of individuals not in education, employment, or training (NEET) to around one million.

He contended that there is no necessity to raise taxes if the government examines the £1.4 trillion spent by the British state more imaginatively. Hunt suggested that a focused plan to tackle waste could fund necessary expenditures, such as defense needs, without additional taxation.

"Let's start with the Civil Service, which has gone on a hiring spree in recent years," Hunt wrote, referencing an expansion of the Civil Service by a third in the last decade. He stated that as Chancellor under Rishi Sunak, he had a plan to reduce the Civil Service headcount to 2019 levels, which would have saved £2.9 billion annually, a plan he claims was abandoned by the current administration.

Hunt also pointed to the welfare budget, suggesting significant savings could be achieved by reforming the working-age benefit bill. He criticized the current approach of approving an additional 1,000 people per day as not needing to look for work, suggesting that many with mental health issues could be better supported through NHS treatment rather than long-term benefits. He estimated that returning the benefit bill to 2019 levels (in today's prices) could save £58 billion a year within five years. He also advocated for banning telephone benefit assessments to combat fraud and error, which he noted amounted to £9.3 billion annually.

Cracking down on abuse of the student finance system, particularly the post-Brexit scheme being exploited by non-UK nationals, could also yield billions in savings, according to Hunt. He cited a Conservative colleague's findings that the government could be losing up to £2 billion a year on student loans offered to non-UK nationals.

However, Hunt emphasized that the most significant opportunity lies in improving the efficiency of the public sector, which accounts for 20% of the UK's economic output. He questioned why ministers were not addressing the productivity problem within the sector they directly control. He criticized the government's decision to award public sector pay rises without productivity improvements and suggested that above-inflation increases should only be granted if funded by equivalent efficiency gains.

He also proposed smarter state procurement, recalling his experience as Health Secretary where centralizing NHS purchasing led to savings of around £300 million annually on items like syringes and toilet rolls. Hunt also pointed to substantial losses from cancelled government projects, citing £6.6 billion in losses according to the Public Accounts Committee, including a £1.6 billion loss from cancelled Ministry of Defence projects and £472 million from cancelled road projects.

Reforming the public sector, Hunt acknowledged, is not easy, but he asserted that the alternative of taxing the economy heavily is worse. He concluded by stating that making the public sector just one percent more efficient annually could save £6 billion, a significant portion needed to increase defense spending to 3% of GDP.