The Rest Is Money 188. How Politics is Bankrupting Britain
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Jul 9, 2025 Paul Johnson, the outgoing head of the Institute for Fiscal Studies, shares his insights on the UK's looming fiscal crisis. He discusses the Office for Budget Responsibility's warnings and critiques the effectiveness of current fiscal rules amid major historical challenges like Brexit and COVID-19. The conversation dives into Britain's rising national debt, unfunded defense spending, and the complexities of the UK’s taxation system. Johnson emphasizes the urgent need for tax reform and the potential consequences for economic growth as the government navigates these turbulent waters.
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Shifting Fiscal Rules Limit Impact
- The UK's fiscal rules focus on five-year targets that continuously shift, never fully realized.
- Extraordinary shocks like the financial crisis and COVID have disrupted fiscal discipline repeatedly.
Germany's Stronger Fiscal Position
- Germany maintains stronger constitutional borrowing rules and started with less financial damage from crises.
- Lower borrowing costs give Germany financial power we currently lack for economic regeneration.
Long-Term Liabilities Inflate Debt
- UK's long-term liabilities like pensions and defence commitments vastly increase fiscal challenges.
- Politicians rarely tackle these growing costs, worsening future financial stability.