‘Fiscal Nimbyism Makes It Far Harder to Fix Public Services’

One of the factors which brought Labour to power was the widespread sense under the last Conservative Government that ‘nothing works any more’, especially when it comes to public services. It carried the implication not just that government spending needed to increase, but also that it needed to be better targeted.

It’s possible, of course, to argue that Labour’s entire framing of fiscal policy is wrong and that Keir Starmer’s Government should substantially raise general taxation and also borrow more freely. But there is little public appetite for the former, while bond market reactions to the new ‘fiscal rules’ announced in October’s Budget suggest the latter has already been stretched to the limit. Even in a much freer fiscal environment there would still be decisions about where to raise taxes and focus spending.

That is the background to two of the most contentious fiscal decisions the Government has taken so far – limiting winter fuel payments, and reducing the inheritance tax exemptions on farms. 

There is a rational case for both. 

Why should people who really don’t need the winter fuel payment get it when there are such pressing needs for money for public services? And why should farming land be used as a device to avoid inheritance tax by the super-wealthy? In those terms, these are small but sensible ways of reallocating public expenditure to higher priorities. 

It is also true that those just above the cut-off point for winter fuel payments will genuinely suffer. And that, although the numbers involved are disputed, some family farms will suffer, and even disappear, caught in the net of inheritance tax changes. 

The point, however, is not the merits of these particular changes – it is that they illustrate how any re-targeting of resources adversely affects some while benefitting others, with the losers far more vocal than the beneficiaries.

But if every attempted change faces a huge backlash of protest, then the danger is that no change is possible or, perhaps worse, that those who can most loudly and effectively protest become untouchable. 

Conversely, the weakest or most unpopular groups suffer. For example, it is widely known that prisons are in a disgraceful state. But it is much harder to mobilise public anger about that than it is for groups who can be sympathetically presented, such as freezing pensioners or hard-pressed farmers. Who will blockade the streets for criminals?

The result is a kind of ‘fiscal nimbyism’. 

Just as people may agree that new houses need building but baulk at them being built near them, they want government spending targeted at where it is most needed – so long as they don’t lose out in the process. 

If the consequence isn’t simply inertia, then one approach is to ‘spread the pain’ by making a large number of relatively small changes to how public money is used. The danger – and it seems to be happening now – is that the Government faces so many disparate challenges that it becomes seen as embroiled in a rolling crisis.

The even greater danger is that governmental willingness to tackle big, important problems disappears. For example, almost everyone recognises that the council tax system is broken. Based on property valuations from 1991, it is irrational and unfair. Similarly, most recognise that the social care system is broken, with knock-on damage to the NHS and, actually – far more than inheritance tax – reduces what many people end up being able to pass on to their children.

These and similar problems, and their solutions, are well-documented in endless reports and reviews. They are things which, from outside government, are subject to repeated calls for root-and-branch overhaul. Yet no government is willing to tackle them, and they are repeatedly parked as ‘too difficult’. 

That is hardly surprising, because if even quite small changes to the tax and benefit systems produce anguished and implacable opposition, then how much more would that be true for these bigger issues? 

Fixing the council tax system, for instance, would certainly mean many people in London and the south-east, where house prices have risen disproportionately compared to the rest of the country, paying much more.

All of this can be seen as a kind of political immaturity, much of it fed by an irresponsible media, in which neither voters nor political leaders are willing to accept the trade-offs inherent in fiscal choices. 

Each of those two groups bears some responsibility.

Politicians who say, or act as if, it is possible to ‘have your cake and eat it’, or who promise magical solutions, are partly to blame. But so, too, are voters who, while insisting that they just want politicians to ‘tell the truth’, punish such politicians if the truth turns out to be to their disadvantage.

Just as literal nimbyism means that nothing gets built, the effect of fiscal nimbyism is to make it far harder to fix public services. So it continues to be the case that ‘nothing works any more’.

At best, that leads to constant governmental churn, as incumbents are kicked out for ‘not delivering’. At worst, it leads to a society which ceases to believe that democratic politics can solve any of its problems.

Chris Grey is Emeritus Professor of Business and Management Studies at Royal Holloway, University of London. He writes the Brexit & Beyond blog and is the author of Brexit Unfolded