Spending Review: The Myth of Small State Britain

Decades of big government and state overreach have meant that spending reviews on the present scale are now the equivalent of scrubbing the decks on the Titanic as the ship is already sinking.

With the Spending Review on 11 June due to set departmental budgets for the next three to four years, newspapers, journalists, and social media have been awash with briefings, counter-briefings and speculation. Will there be major cuts? Which Departments will have protected budgets? How much will the Government prioritise capital investment versus public spending?

We must understand that none of this actually matters for the UK’s long-term economic and social development, and as usual, the debate over the spending review misses this point. None of what is announced on 11 June will significantly alter the UK's trajectory. Decades of big government and state overreach have meant that spending reviews on the present scale are now the equivalent of scrubbing the decks on the Titanic as the ship is already sinking.

Public sector spending as a share of national income between 1956-57 and 2023-24, IFS

UK tax burden as a percentage of GDP as of March 2025, OBR via the Standard

Pay More, Get Less

The UK is in an interesting situation: for years, opinion polls have shown that the public is willing to pay higher taxes for better public services¹. But now the UK is trialing a new experiment: testing out the theory of what happens when the public pays more for worse services. As senior Labour MPs call for higher taxes and/or wealth taxes² to fund greater public spending, one would have thought the UK has had low taxes for years and that public sector spending has declined over the past decade. Even worse, many have been misled into thinking that public sector spending has declined over the past decade. In reality, the last ten years have seen a historically high tax burden and the never-ending expansion of the state. I suspect that the result of this test will be the electoral success of Reform and Nigel Farage.

There are some key questions missing from the debate and coverage of the spending review. Why have historic levels of taxation not produced an efficient and productive public sector? Why have public services worsened as spending has risen? Why is the NHS in such visible decline despite record levels of funding? I would love for these questions to be put to any Minister. I suspect that they either would not be able to provide an answer or their answer would be something along the lines of “austerity, austerity, Liz Truss, Liz Truss”. Needless to say, they would be categorically wrong.