The Spending Review
Plus: An interview with New Zealand's Deputy PM
In today’s newsletter:
Does the NHS need more money?
The Spending Review
An interview with New Zealand’s Deputy PM
What is the European Commission smoking?
I knew they were going to say it. And they promptly did. Of course they did.
This week’s Spending Review announced “a 3.0% average annual real terms growth rate” in day-to-day spending on the NHS, plus “the largest ever health capital budget”. I knew exactly that the response from healthcare wonk land was going to be: not bad for a start, but still not enough.
And that was indeed their response.
The King’s Fund said that these spending increases were “lower than the historical average”, that “[i]t is hard to see how all the things she [Chancellor Rachel Reeves] mentions […] can be met by this settlement alone”, and that “while capital budgets are being shown to increase, they do so by nowhere near enough to […] deliver a modernised health service”.
Similarly, the Nuffield Trust said that “the NHS deal looks generous. But seen in the context of all the promises made by the government […], today’s settlement soon melts away. […] [I]t will be difficult for the NHS to invest in the technology and facility upgrades it needs”.
The British Medical Journal ran an article with the self-explanatory headline “NHS leaders say extra £29bn a year is not enough to cut waiting times and modernise services”.
The NHS Confederation added:
“The funding boost is welcome […] [b]ut […] this additional £29 billion won’t be enough to cover the increasing cost of new treatments, with staff pay likely to account for a large proportion of it. So on its own, this won’t guarantee that waiting time targets are met.”
Give it a few weeks, and the Guardian, the Independent and the New Statesman will be back to complaining about how the NHS is being “deliberately defunded”, probably alongside that obligatory Noam Chomsky quote. (“That’s the standard technique of privatization: defund, make sure things don’t work, people get angry, you hand it over to private capital.”)
There is no conceivable level of NHS funding at which healthcare wonks and left-wing commentators will reach the conclusion that this is enough.
My main issue with the Spending Review, though, is not the fact that the NHS budget is going up. It’s that there’s not much else going on in this area. Neither in the Spending Review itself, nor in other statements. The review only contains the usual platitudes about how prevention is better than cure, about “care in the community”, and about technology. These are things that politicians say when they don’t know what else to say.
I am glad the conversation on the NHS has shifted in recent years. Positions such as mine have been upgraded from “lunatic fringe” to “unpopular but arguable minority opinion”. That’s progress!
But we are still very far away from seeing actual policy changes.
Kristian Niemietz
Editorial Director
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IEA Podcast: Executive Director Tom Clougherty, Director of Communications Callum Price, and Editorial Director Kristian Niemietz discuss the spending review, IEA YouTube
Brace for Budget tax increases
Responding to the Spending Review, Tom Clougherty, Executive Director at the Institute of Economic Affairs, said:
"For all the preceding rhetoric, it is very clear that no 'zero-based' review of government spending actually took place for this Spending Review. Instead it was a familiar story – more money for the NHS and a squeeze on day-to-day spending elsewhere.
"It remains to be seen whether more health spending will produce better outcomes. Given the recent lack of productivity in the health service, this extra money could easily be wasted.
"As for the rest of government, spending restraint is welcome but it needs to be accompanied by public service reform. To spend less, government must do less – and employ fewer people. It isn't clear that message has got through.
"Defence is getting the lion's share of increased capital spending. Elsewhere, trying to shift capex from London and the south-east to other regions might be smart politics, but may also reduce the economic return such spending produces.
"Crucially, this Spending Review did nothing to address the supposed 'fiscal black hole' that exists against the Chancellor's fiscal rules. So we should brace ourselves for tax increases in the Autumn, and a Summer of speculation over exactly where they will fall."
Executive Director Tom Clougherty appeared on Sky News
Executive Director Tom Clougherty appeared on TalkTV
Tom was also quoted in Guido Fawkes, the Daily Mail, and the Lancashire Times.
Our government and politicians are hooked on spending and Rachel Reeves' review proves it, Director of Communications Callum Price, LBC
News and Views
New Zealand's Deputy PM David Seymour: "That's a Fight Worth Having", Director of Communications Callum Price interviews New Zealand’s Deputy PM David Seymour, IEA YouTube
UK economy on track for a dismal second quarter, Economics Fellow Julian Jessop, quoted in the Daily Mail, This Is Money, Daily Express.
“The 0.3% fall in UK GDP in April is another lesson in basic economics.
“The contraction was partly due to the unwinding of the temporary boost in the first quarter, when manufacturers had brought activity forward to beat US tariffs.
“There was a similar timing distortion in the data on legal services and real estate activities, as output fell back after a rush to complete purchases ahead of changes to stamp duty.
“But there was a large drag too from the increases in staffing costs and in many household bills, which hit business and consumer confidence hard.
“Some surveys suggest May might be less bad, especially with fears of a global trade war now receding. However, job losses appear to be accelerating, wage growth is slowing, and inflation has jumped, which will all continue to weigh on spending.
“The three-month on three-month growth rate still looks good at 0.6%. But this figure will fall sharply in May and June as the comparison rolls on.
“The recovery has clearly stalled. Growth in the second quarter as a whole is now likely to be close to zero, and government policies are at least partly to blame.”
What is the European Commission smoking?, Head of Lifestyle Economics Christopher Snowdon, The Critic
“A leaked report from the European Commission has revealed plans to tax the pants off e-cigarettes, nicotine pouches and other life-saving substitutes for cigarettes. It is in the process of reviewing its Tobacco Excise Directive which sets a minimum tax rate for cigarettes. It was last set in 2010 and its impact, which was never very significant, has been completely eroded by inflation. Every EU country taxes cigarettes at a higher rate than the EU minimum.”
The NHS Was NEVER The Best Healthcare System In The World, Communications Manager Reem Ibrahim interviews Editorial Director Kristian Niemietz, IEA YouTube
'Free' bus and train perks need to be axed urgently in one area says expert, Communications Manager Reem Ibrahim quoted in the Mirror, the Telegraph, the Daily Mail, GB News
“Reem Ibrahim, from the Institute of Economic Affairs, said: “It is difficult to justify a system where the wealthiest age group in the country is having their travel funded by taxpayers.”
“The 60+ Oyster card and Freedom Pass schemes are financially unsustainable, and are not targeted to those genuinely in need of support. We urgently need a more targeted approach, rather than entrenching an unfair and costly system.”
Director of Communications Callum Price appeared on TalkTV to discuss Government investment in nuclear energy.
Keir Starmer's absurd interference that will only benefit criminals, Communications Manager Reem Ibrahim, the Express
“Can the Government legislate our ‘bad’ behaviours away? The naive and possibly conceited have always believed the answer is yes. If the Government bans enough things and taxes the rest, we will simply do as the nanny state says.”
This is not the healthcare system taxpayers deserve, Strategic Partnerships Manager Matthew Bowles, CapX
“NHS pay structures need modernising, but offering pay rises without reforming services is merely an exercise in political avoidance. Until policymakers understand that NHS sustainability concerns systems as well as salaries, the pressures will continue, and so will the growing frustrations of the public.”
2025 Vinson Centre Conference in the Classical Liberal Tradition
Welcome to the 2025 Vinson Centre Annual Conference! Join us at the Vinson Centre for the Public Understanding of Economics and Entrepreneurship for a day filled with insightful discussions, networking opportunities, and engaging sessions.
Good observation Kristian. We are all underfunded…except the small minority of people, Companies or Countries who have the vast majority of our money! But that’s not just the end of it. They hang on to it for months, years, decades and Centuries keeping us who work on a monthly cycle, devoid of it! And in that one point we can see the problem. We the majority are devoid of the money needed in our monthly working pot of an economy to work with and so it’s inevitable we only can afford to generate the tax take and revenue we have. It’s insufficient for all our needs as a nation. Not just the NHS. In Housing, benefits, state pension, defence and education, indeed everywhere in the state we are underfunded. The working economy of public and private sectors are underperforming because of a lack of money being spent on a monthly basis to be able to produce the tax revenue required to properly fund all our nations needs. You can look at the NHS in particular but honestly, without tackling the main point we are just putting a finger in the Dyke. The NHS clearly wastes money. They duplicate everything and nowhere is their a joined up strategy. Surely, we can see that we are paying more and more on staff to manage the ever increasing conveyor belt of queues upon queues, whilst not actually curing anyone! There is no care in the community and no GPs to see us at the moment we need them. Why we have untrained staff as a first point of call is beyond me, we need proper doctors in the desk of a GP surgery. We don’t needs more Queues! We wait for the GP then a blood test, then X ray or scans, then a wait for a doctor then if that isn’t cancelled we wait for the treatment! For goodness sake we need a better system. Not to mention IT! OMG!!! We have Banks who manage to run bank accounts surely it’s the same! Just have records instead of transactions! It’s not impossible, we even bailed out the Banks! We had a chance to use the same accounts for everything! But I digress. It’s no good looking at the engine with the bonnet up scratching your head when there is a simple answer, it’s run out of fuel!… we need the fuel of an economy. Money! It’s that bloody simple! You can’t set up a business of the people haven’t enough money to spend! Austerity isn’t an economy! It’s a failure waiting to die! We firstly, are not short of money! People say, 95% of all money is held by just 5% of people! Well if that isn’t the glaring obvious then what is!???… that means 95% of all people are trying to make economies work with just 5% of money! Jesus Christ would understand that just isn’t right! But moreover it’s undemocratic!!!! If we can leave EU on a vote less than half of the voting public we can see democracy isn’t working either. But we know it can. And now we have the ability to change the system to adopt for the first time in centuries an economic model based on surety and not just hope! Hitherto we have relied on the hope that money will return once its been spent. But now we can ensure it does. As we have computers and bank cards! We no longer need money or hope. We need a system that works by taking away the money to be wealthy on. And replace it with digital transactions that can be recorded and accounts can be made for them to spend their earnings in a monthly cycle or get it taken if unspent into the coffers of the nations exchequer. Be wealthy on what we buy not the money itself. Making money move and be spent ensures it’s rotated to people thus producing the goods and work we all crave. Wages will increase, profits will rise and at last an economy that can pay for everything it needs through tax revenue that’s taken from a trickle to a tsunami of money by tax take. So much so I think we will only need one tax, VAT. Based only on spending. What we have now is a joke! Too much money held by individuals. No one should be richer than nations! Let them earn their money, but they must spend it back! They can still be wealthy but not with cash or money we all need to work with. Two caveats though. We need sufficient money to start with! That’s for mathematicians. And secondly, no money can go abroad. Money stays in the country. Goods and services can travel just not money. Those abroad must keep a uk account and spend it in the month too! Now, that may be my answer but, without answered to all your questions it’s just hot air. Start coming up with answers and to have them you need first to understand the problem! Our tax system is misunderstood. Tax is collected by spending. Take income tax? It’s paid by the employer not the employee! It’s calculated on wages but it’s based on money spent by the employer on the employee. So as tax is based on spending, we need to spend more and to spend more we need the use of all the money we have not a little bit of it!