Britain has become the literal sick man of Europe again – here’s how I’d fix it

Welfare state was always meant to be a safety net, not a way of life

In the Office for Budget Responsibility report, released on Thursday, there’s a shocking graph.
It shows government spending running away from revenue over the next 50 years, like some sort of freight train that has lost its brakes.
Labour commentators were quick to jump on the OBR report as evidence of the need for more tax rises. They say this as if there is no other possible path.
But there is. As a country, we need to get ourselves out of this Hobson’s choice politics where the only answer to every problem is more taxation to fund more government spending.
Throughout my leadership campaign, I have been banging the drum for smaller government. Smaller government, with supply side reforms and less red tape, so we can boost growth and reduce taxes. If we don’t reduce the amount we spend, we can’t reduce the amount we tax.
This is not an unfamiliar prescription, but I’m afraid we need to remake the economic argument to a new generation in the face of Sir Keir Starmer and Rachel Reeves, who are forgetting all the lessons of the 1970s.
The reality is we are going to have to reduce the size of the state and be honest about the need to limit government spending. The welfare budget, for example, has spiralled out of control so that we are an international outlier.
Since Covid-19, the number of working-age people economically inactive due to long-term sickness has increased by 700,000 to more than 2.8 million people, equivalent to one in every 15 working age person.
This hasn’t happened in the rest of Europe, so we have quite literally become the sick man of Europe again. We need to do far more to get these people back into work — and paying tax to boost the economy.
The welfare state was always meant to be a safety net, not a way of life. But over the past 30 years, total health expenditure in the UK has risen from below 6 per cent to over 11 per cent of GDP and is set to rise further.
With the baby boom generation now getting older, putting greater pressure on the state, we face a demographic time bomb that needs to be carefully diffused.
It is not hard to see why the Treasury would want to boost the working age population with immigration, often seen as a quick fix. But high immigration also comes with costs, especially if it is low skilled.
What the OBR has also shown us this week is low-skilled migrants cost the UK between £150,000 and £500,000 each over their lifetime.
It’s why the reforms I put in place as home secretary were so important, to cut low skilled migration, cut dependants, and increase the salary threshold needed to come to the UK.
We need a system based on control and contribution, and to break the low-growth, high immigration cycle. It’s one of the reasons I am so keen for governments to talk more about GDP per capita when it comes to the health of the economy.
It’s no good to increase the overall size of the economy if everyone feels poorer. On the flip side, we need to enable families to have more children, which means recognising children in the tax system and cutting the cost of childcare so that it is not double the cost of France and triple that of Germany.
As I have been setting out in recent weeks, we must resell Conservatism to a new generation if we are to win back power, and if we are to get the chance to fix the generational problems that the country faces. That’s what I plan to do.