The Shortfall

I try to work out how much money would be needed to restore a functioning state.

By George Monbiot, published in the Guardian 22nd November 2023

Many names have been proposed for our pathology: Thatcherism, Reaganism, austerity, Trussonomics. But they are all synonyms for the same ideology, a doctrine hardly anyone in public life can bring themselves to name: neoliberalism. It has dominated decision-making in the UK for 44 years. One result is that the cumulative underfunding of public services is now approaching crisis point, possibly threatening state failure. Wednesday’s autumn statement will do nothing to address it.

Every week, we see another neglected liability emerging: collapsing classrooms, crumbling flood defences, failing tower blocks, overwhelmed hospitals, understaffed social care, spouting sewers, lethal housing. What would it cost to put the country right, to restore general prosperity and a functioning state?

This article is a very rough and provisional attempt to tot up the deficits and create an account of what, over 20 years, the UK would need to spend to create a viable, safe and inclusive public realm. Some of the following figures are for England only, some are UK-wide, so further work would be needed to resolve them properly. I hope others will improve it.

Some estimates are well-established. The NHS funding deficit – the cumulative difference between the 4% annual increase a modern health system needs to cope with ageing populations and technological change, and what it has received since 2010 – is £200bn. The current annual increase is 0.1%. Reversing the funding shortfall would cost £7bn a year, while addressing the historic shortfall would need another £10bn per year.

The government’s estimate for the price of a modern sewerage system, in England alone, is £350-£600bn. Of course, it proposes no such thing. Currently the privatised water companies are spending just £1.4bn a year getting their shit together.

We also need a massive overhaul of water supply. The water companies say they’ll spend £96bn in total between 2025 and 2030 (believe it when you see it), but at current rates of repair, they’ll replace our leaky pipes in a mere 2,000 years. Scarcely any new reservoir capacity has been commissioned since privatisation. Fixing the water network might cost an additional £100bn,but in the absence of useful figures from the industry, this can only be a guess. With the lower estimate for sewer replacement, we could face, across 20 years, a further £22bn in annual spending.

The government could save some money on flood control by investing in natural flood management, but there’s little doubt that the budget needs to rise faster than our rising seas and rivers, from the current £5.2bn across six years. Flooding is one of 34 climate risks listed by the government’s Climate Change Committee as “requiring urgent attention”. But addressing our climate deficiencies might not require an overall budget increase, as so much money is currently wasted. For example, if the government were to spend £8bn making 3m homes more energy efficient, it would save much of the £78bn across two years used to subsidise our energy bills. But, in deference to the fossil fuel industry, it refuses to invest.

In 2019, Shelter calculated that building the 3.1m council homes required to meet housing need would cost a gross £10.7bn a year. As this would save money on housing benefit and generate tax, the estimated net cost across 20 years would be £3.8bn a year.

In 2021, a construction industry estimate suggested that the true cost of removing combustible cladding from housing blocks would be £50bn. But the government has budgeted only £5bn. The failure to fix structural flaws in 575 large panel system tower blocks has also hit home with the evacuation of Barton House in Bristol after it was deemed unsound. Enfield council in London estimated that refurbishing two such blocks would cost £53m. If this is average, we’re looking at £15bn. Set aside £3bn a year to address these two crises.

Labour’s Building Schools for the Future programme, which the Conservatives scrapped in 2010, peaked at £8bn a year. The repair bill alone was estimated in 2021 at £11bn. That was before building costs inflation, the aerated concrete scandal and the discovery that 700,000 pupils now study in dilapidated buildings. Current total spending is £1.8bn a year. Restoring the old funding formula and addressing the backlog might cost an annual £10bn.

Other public buildings are in a similar state. Parliament alone, using the cheapest option, would cost £7-13bn to refurbish. Across the government estate, we’d be lucky to see an additional repair and upgrade bill of less than £2bn a year,perhaps much more – I can find no total figures.

So much public money is wasted on transport that a modern, efficient network would cost much less than our antiquated, failing version. The government has earmarked £27.4bn until 2025 for road building and upgrades. By comparison, electrifying every kilometre of railway would cost around £15bn in total. Subtract a saving of £5bn a year once road-building programmes have been scrapped.

Shortfalls in social security are ruining the lives of millions. The £20 universal credit uplift cost £9bn across 18 months. Restoring it would need £6bn a year. I don’t yet have a single figure for the total benefits lost by people with disabilities, but it’s unlikely to be less than £2bn a year.

Local authorities are facing an annual deficit of £3.5 bn. In central government, there’s a massive backlog processing everything from asylum claims to grants of probate. The policing of fraud and other white-collar crime has all but evaporated. Throw in another £2bn a year.

While this catalogue isn’t comprehensive, it amounts to a conservative £65bn a year. This, very roughly, is the difference between continued, predatory chaos and a functional, inclusive country. Once items such as shortfalls in NHS grants to the devolved parliaments are added, and other gaps and errors are corrected, it could rise. We could be looking at £100bn.

Either way, it’s a ton of money, but is it impossible? No. The current budget is £1.2tn. During the bank bailout, the government issued £124bn in loans and share purchases. It spent between £310bn and £410bn across two years on the pandemic. Tens of billions were squandered on corrupt contracts, fraudulent support claims and such failures as Nightingale hospitals and test and trace. The fact that this spending did not cause an economic crisis (though some elements were inflationary) is a partial vindication of modern monetary theory, which states that the government does not have to raise all the money it spends. And £100bn costs a lot less than state failure.

The obstacles are not economic, but political. We need a government that seeks to improve our lives rather than to save an abstraction called money. Throughout the neoliberal era, the people have served the money. Let the money serve the people.