Fiscal events in 2024 threaten to be at best a meaningless distraction and at worst undermine trust in economic and fiscal policymaking.

With Prime Minister Sunak playing the waiting game for a dramatic turnaround in polling fortunes, a winter General Election has become the odds-on favourite. Sadly this means there is the slight possibility of two fiscal events before the General Election. The first is a nailed on certainty – taking place on the 6^th of March. And already the rumour mill is in overdrive with speculation that Chancellor Hunt will use the Spring Statement to announce more tax cuts in an attempt to woo voters. But if, as expected, the Spring Statement offers implausible tax giveaways, then this “event” would be better described as a farce.

There are few clear cut certainties in public policymaking over the medium to longer term, but one thing I am sure of is that public spending will be significantly higher at the end of the next parliament than it will be at the end of this one. And with interest rates no longer at the zero lower bound, this means higher taxation. At Centre for Progressive Policy we have written at length about why spending needs to rise driven in part by the current dire state of public services and by population ageing but let me focus on one aspect of public spending which doesn’t get as much attention as it deserves in economic debates – defence.

I was born in 1985 – it was the final years of the Soviet Union. At that time, UK defence spending was 5.3% of GDP while across the OECD as a whole it was 4.2%. As the Cold War ended, the apparent need for developed countries to spend as much waned and so by 2019, the UK spent just 2% on defence and the OECD 2.3%.[1] In response to the war in Ukraine, defence spending ticked up a notch but it remains nowhere near the levels of the late 1980s or early 1990s. Yet the developed world now finds itself in the most hostile situation since the fall of communism and at a time when one of the main political parties in the United States seems less willing than ever to commit to the principles of collective security through NATO.

Spending an extra 1% of GDP on defence would cost approximately £27bn per annum while to go back to late 1980s would cost double that.[2] But this could be the future facing the UK and other European countries seeking to ensure our security in an increasingly dangerous world. No future government would presumably be prepared to skimp on our safety even if it means higher taxes or breaking the fiscal rules as we have done in the face of other existential crises such as the pandemic or financial crisis.

And so here we are in Westminster in February 2024 in a world devoid of reality. The Chancellor looking to find a few billion quid down the back of the sofa to provide a pre-election giveaway which will be impossible to sustain. If elected, an incoming Labour government would be best to tear up whatever tax cuts are announced in the vein of fiscal responsibility and in the knowledge that the public actively desire more spending increases over reduced taxation.

Note too here the dangers of spending pledges and costings for manifestos later this year. Political parties never fully stick to these pledges – nor should they have to in an ever changing world – but the level of uncertainty over how much they will be able to spend on their stated preferences feels greater now than it has ever done. As ever, better to use these documents to signal credible intent and prioritization rather than iron-clad plans.

Here's to hoping the next fiscal event of 2024 is as low key as possible and politics moves on to debating how we are realistically going to face up to the big challenges of the next decade rather than focusing on damaging sleight of hand.