Panorama Is Britain Broke (2nd June 2025)
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00:00in recent years i've seen our leaders call for one thing again and again change change change
00:12change it hasn't always gone to plan i want you to know how sad i am that i am resigning i would
00:20like to say first and foremost i am sorry but what if behind the political drama there's an even
00:28bigger story one we don't always want to talk about we're stuck in a doom loop we have taxes rising
00:38but public services are not satisfying people's demands
00:44from bin strikes to nhs waiting lists this is the story of the gap between the public services we
00:51want and what we're getting it reveals why fixing our problems is so hard what we're going through
00:59now is like an illness that hasn't been addressed for a long time there's certainly a crisis in the
01:06brewing you might be thinking how did we get here well that's the story i want to tell you
01:25to understand why today we're struggling to pay for the public services we expect we first need to
01:36understand how we once used to manage it it's a story that starts 80 years ago when those gathered
01:43here for the anniversary of ve day returned from the war the veterans gathered here were witnesses to a
01:50radical social reform in the years that followed the war the modern welfare state was created it
01:57offered everything from a basic pension to health care for all to income support if you were out of
02:03work the contract between the state and the people had been completely reimagined
02:10everything from the newly founded nhs the doctor you have chosen can look after you to free
02:21secondary school education was now paid for by taxation places in schools have been found for them all
02:28so how did we afford it a large part of the answer is that we came close to abolishing defense
02:33spending that came down dramatically with the period between 1950 and 2020 from something like 10 percent
02:41of national income to two percent of national income and all of that money effectively went into
02:46the welfare state and this peace dividend wasn't the only thing paying for our new public services
02:54the figures of the men and women who are working today have continued to rise we had significant
02:59economic growth all the way from the end of the second world war to about 2007 2008 the economy
03:05growing at two and a half percent a year on average over that period for decades the sums that have paid
03:13for public services have more or less added up but there's a fear that's changing now
03:23a more aggressive russia and a more isolationist america mean the prime minister says we need
03:29to spend much more on our own defense it's a new more dangerous era of history and that's why
03:37we're boosting defensemen with the largest sustained increase since the cold war
03:44kia starmer has promised to increase defense spending to two and a half percent of gdp
03:50he has said that he thinks in the next parliament it would need to go to three percent of gdp
03:56that would cost another 15 16 billion so these are big numbers and big choices so if more money's
04:02going on defense less of it is going elsewhere yes the major changes to the international order
04:11are real no doubts but if we think they alone explain the pressure on public finances we'd be mistaken
04:18some of the biggest reasons may not be what you expect
04:32this is forest hill golf club in leicestershire it's a beautiful course and like lots of golf clubs a good
04:39number of the members here are in their later years and if you're thinking what's that got to do with our
04:45public finances well the experiences of the golfers here connect to something far broader just a few
04:53generations ago the idea that you'd enjoy a retirement lasting decades would have seemed unlikely
05:02when you think back to how your parents live their lives do you think that their expectations of what
05:08would happen after they stopped working are different to to your generations i don't think they
05:16had a long life expectancy i mean i'm 77 now my father died at 70 mother died not long after that
05:27back in 1948 the life expectancy for a man was just under 66
05:32today it's 79 and for women it's 83. the huge rise in life expectancy is of course
05:43something to celebrate but it's bringing challenges that we've hardly begun to address
05:50in 1948 the percentage of people over the age of 65 was around 11 percent today that percentage has
05:59almost doubled an aging population does have certain consequences for the public finances it means
06:05that we have more older people to support and older people tend to demand more public services and a
06:11smaller working population means fewer employees trying to support an older population meeting the
06:18challenges of an aging population is going to cost a lot it's estimated that within 30 years the state
06:25will require an additional 140 billion pounds a year but if an aging population is one major factor
06:35putting a strain on public finances there's more to this story than that in some cases we don't just
06:43want the state to improve existing services we also want it to provide new services in areas such as
06:51health care those rising expectations create pressure to spend more in the 1940s 1950s basically the health
07:01service confined to providing antibiotics and some emergency surgery now we do an awful lot more than that
07:08there's a whole range of areas are often involved in quite expensive technological kit which we can do
07:16and people increasingly expect the nhs to provide and to deal with today only one in five of us say we're
07:25satisfied with the way the nhs runs but less than half of us say we should increase taxes and spend more on it
07:35mr hunt how does it feel to be demolishing the nhs to understand the political challenges this can create
07:42just ask former conservative health secretary jeremy hunt a man who's been in the firing line during
07:48repeated nhs crises all those people dying because of your actions how do you feel about that well i i
07:55lived and breathed that for nearly six years how does it feel and there are impossible human
08:03dilemmas that you have when you do a job by being health secretary
08:06in the noughties pressure was building to expand the range of cancer drugs available on the nhs and
08:17in 2010 the coalition government set up a fund to pay for drugs initially considered too expensive
08:25a world-class health service demands these advances but it wasn't long before the scheme hit trouble
08:31when i became health secretary in 2012 we were already spending more than that 200 million it went
08:40up to 280 million and it went over 300 million a year the cancer drugs fund is cutting more than a dozen
08:48treatments from its approved list after overspending my officials came to me and they said look you do
08:54realize that we are now having to cut other services in the nhs to fund this explosion
09:01in funding for the cancer drugs fund so we removed some drugs to try and get the budget back under
09:07control that decision was controversial not least with those benefiting from the new drugs
09:15do you imagine given the state of public finances and the progress that medicine's making and the cost of
09:21that progress that the kind of decisions that you had to take are going to become more common
09:26quite possibly you know it is an example of the intense pressure you're under where deciding what
09:34drugs are value for money you very reasonably say for the benefit it gives you this drug is too expensive
09:42and we're not going to recommend it but if you're the person with cancer that's the thing that's going
09:47to give you six months longer to be with your family why does health become more expensive well
09:53if we can cure things then we expect to be cured of those things so the better you are at health the
09:59more you end up spending on it because you save people and when you save people they come back and
10:04get more expensive alongside our rising expectations and an aging population there's a third factor
10:16that's crucial to why we're struggling to pay for our public services it's the economy
10:22even if the uk economy was booming public services might struggle to meet rising demand but there
10:30hasn't been a boom in 2008 the uk's financial system based here in london received a shock
10:37from which it's never fully recovered nothing like this has ever happened in the history of british
10:44banking death it's like a massive earthquake what happened in september 2008 is what economists
10:50called the sudden stop back then economist mohammed el aryan was ceo of one of the world's largest
10:57investment firms the minute the financial system froze the real economy froze the waves of disruption
11:07and malfunction and damage started spreading throughout the world faced with the collapse of the financial
11:14system the uk government borrowed money to bail out the banks and keep the economy afloat
11:20must in an uncertain and unstable world be the rock of stability upon which british people can depend
11:28the fiscal cost to the uk was enormous we're talking about not just billions but hundreds of billions
11:35just over a decade later we were hit with a second global shock you must stay at home and more
11:42borrowing for things like furlough suddenly you have another urgent fiscal needs that has to be met at a time
11:49when tax revenue has collapsed and then you get another shock we're live in ukraine and the country at war
11:58russia's invasion of ukraine also had massive implications in the economy the cost of energy
12:05energy went up from april fuel bills will rocket jeremy hunt now chancellor supported another massive
12:14intervention this time to help with our energy bills we introduced a cap of two and a half thousand
12:20pounds for that winter and then three thousand pounds for the following year at the time it was
12:25projected to cost just under a hundred billion pounds about four thousand pounds a household it was a huge
12:31amount these three crises within 15 years have left a legacy we're still paying for every time you
12:41have a big external shock the government stepped in to support the system over time you accumulate more
12:48and more debt and here's why that matters for almost 30 years from the early 1980s government debt remained
12:58under 40 percent of gdp that's a measure of the size of the economy but look what happens after the
13:05financial crash of 2008 in just five years debt doubles to around 80 percent of gdp during the pandemic
13:14borrowing rose again this time to 85 percent of gdp today it stands at around 96 percent and this rise
13:24brings huge costs the uk's debt interest payments are now almost 105 billion pounds a year that's almost
13:35double the defense budget so the higher the debt the higher the cost of this debt the more
13:44you divert from other things to pay it so put simply the more money this country has to pay on
13:50servicing its debt the less money it has to put into public services that's absolutely correct
13:57but debt isn't the only consequence of these three crises
14:03if you look at all of the measures of growth um they just stop basically at around about 2008 and i
14:11think we're still experiencing the aftermath of that financial crisis so wages today earnings
14:18today are barely any higher than they were nearly 20 years ago i mean it's totally extraordinary
14:26as the economy has struggled in real terms wages have stagnated that means less tax revenue for services
14:34and wage levels also contribute to a fourth pressure on public finances the expansion of the benefit system
14:44can you pass me the eggs please they're just in there meet pippa she and her daughter live near
14:50birmingham and when it comes to someone on welfare she may not be who first comes to mind
14:56well i've recently started a new job as a legal assistant for a law firm working in residential
15:03conveyancing as i'm a single parent i only work part-time but it is a reasonably good job
15:14despite her job at a law firm pippa says she struggles to make ends meet
15:19the cost of living just keeps going up and up and up and everything gets more expensive
15:27the rent's just gone up again and obviously the council tax has recently increased by seven and a
15:32half percent so i've had to increase all of my diary debits to cover that
15:38so yeah i think things are quite tight financially
15:41pippa earns 10 to 12 000 pounds a year in her part-time job that's supplemented with a range of
15:50benefits roughly the benefits i receive i would say just over 400 pounds universal credit but that
15:57included the rent by the housing benefit and then it's about 120 pound child benefit so probably
16:04550 pounds a month on benefits that i receive pippa isn't alone 37 percent of people claiming universal
16:13credit are in employment the first time i walked into a food bank i was so ashamed um
16:24but i think you just need that extra help
16:26i've always worked um apart from a short period when i was a stay at home when amy was a baby
16:40never relied on benefits um but if the benefit system didn't help me i couldn't i couldn't live
16:47the rise in the cost of living means many more people are finding themselves in the same shoes
17:01through time the earnings that families can expect has simply not been sufficient to cover the living
17:07standards that that we want to provide as a country particularly increase in things like housing costs
17:13which has meant um that people need extra support for those things so the welfare state's being used to
17:20cover broader deeper problems with the economy it's certainly the case that um we don't live in a
17:26country where simply being in work is enough to ensure that you can provide for your family
17:36welfare has expanded to offer a much broader range of benefits for example
17:42more support on mental health and demand is going up before the pandemic spending on health related
17:50benefits for working age people was 37.3 billion pounds in five years it's increased by 47 percent to 55 billion
18:04overall providing benefits has become much more expensive
18:08when the modern welfare state was created in the 1940s the amount we spent on welfare for people
18:16under pension age was relatively low just over two percent of gdp today it's more than double that
18:26for all the reasons we've explored we're struggling to fund the services we've come to expect
18:32and you may well be thinking so what do we do about it
18:36in relatively simple terms what are the core choices that our country has to make about
18:43what we do about the fact this isn't adding up so if we take the rate of economic growth as a given
18:49then the balancing act is basically between how much we tax how much we spend and how much we borrow
18:57so let's consider those three options first the government could borrow more but the prime minister may
19:04not want to do that not least because he won't want to turn into one of these
19:11a 60p lettuce has beaten liz truss in a newspaper stunt to see which would last the longest
19:20in 2022 liz truss tried to increase borrowing at the same time as cutting tax
19:26the value of the pound plunged to an all-time low against the us dollar this morning and the amount it
19:31cost the government to borrow money has risen sharply the response from the markets was unforgiving
19:38borrowing costs went shooting up and next thing we knew the pension system was about to collapse
19:45that was a wake-up call markets unconvinced by the government's approach to borrowing
19:51borrowing a lot more now risks a similar response we've already tested the patience of creditors
19:57the liz truss moment will not go away in the memories of the financial markets
20:05we will always have a willingness to borrow the question is at what cost
20:13so if borrowing more carries risks what about taxing more some labor backbenchers say we do need to talk
20:22about tax we i think need to have a national conversation about who shoulders the burden
20:28of taxation in this in this country i think many families feel like not all of us were equal during
20:35the pandemic there are many sectors of the economy where there were really high profits so i think from
20:41the perspective of families i speak to they want to see that there's accountability for companies
20:47that made profit often at the expense of ordinary families the problem is you can't get vast amounts
20:55more by squeezing even further high earners and companies and so on who have already been squeezed
21:01really pretty hard over the last 15 years so if we're looking to increase spending on health and
21:07pensions and welfare and all those sorts of things we have to bite one very clear bullet we'd have to
21:12start taxing people on average kinds of earnings more and there's no getting around that that may
21:19not be popular the tax burden is already forecast to reach its highest point since the second world war
21:27you can increase taxation but if you see where our level of taxation is already
21:33there is a limit beyond which you do not want to go because at that point increasing taxes becomes
21:40anti-growth and i cannot stress enough how important growth is growth is the only answer
21:47to a problem of over indebtedness every other answer has massive collateral damage and unintended
21:53consequences the government has said that growth is the only way to deliver its plan for change and
22:01no doubt it would help a lot but given the last two decades we can't rely on it so what about cuts
22:10the chancellor has defended her decision to scrap winter fuel payments for millions of pensioners
22:18last year the government increased spending in areas such as public sector pay but saying it had
22:24inherited a black hole in the public finances it also announced a high profile cut
22:31those not in receipt of pension credit will no longer receive the winter fuel payments from this year
22:36onwards if we cannot afford it we cannot do it
22:46i won't shy away from making unpopular decisions now if it's the right thing for the country in the long
22:53term what about winter fuel allowance cuts fast forward to last month and there has been some
22:59shying away more pensioners will receive the winter fuel payment after a u-turn by the government
23:05we want to ensure that as we go forward more pensioners are eligible for winter fuel payments
23:13the cuts to winter fuel allowance would have saved around one and a half billion pounds
23:18a year to put that in context that's less than half a percent of the total annual welfare bill
23:28in the face of sustained opposition the government backed down
23:32i'm really glad the government is looking at the threshold for winter fuel payments now this
23:36government's been really clear about its mission to improve living standards and that's how we'll
23:42be judged by the end of this parliament the trouble is that once a benefit exists or one of benefit is
23:50established taking it away is almost impossible politically we're not going to see some kind of
23:55massive rollback of the welfare state it's politically impossible the winter fuel climb down shows the
24:05high political cost of making cuts to services we've got used to it's also placed a question mark
24:12over other planned benefits cuts we are seeing a lot of trouble over the massive increase in the rise of
24:19disability benefits with the government again trying to rein that back and facing enormous political costs
24:30if reducing welfare is proving controversial are there other cuts that might prove more popular
24:38one man certainly thinks so we need some pretty big cuts in the administrative state in this country
24:46which has grown out of all proportion reform uk made big gains in the recent local elections reform uk
24:56boasting win after win it says it would scrap both the winter fuel allowance cut and a cap on
25:03benefits for families with more than two children it also says it would cut 91 billion pounds a year
25:11in government waste so could cutting waste fix our finances i mean we know that the state could be
25:20and should be more efficient productivity for example in the health service is still well below where it was
25:26pre-covid i think everyone's always in favor of efficiency savings and i'm sure we all are but i think
25:33the question is can you find big money there and what we've seen in the uk in recent history
25:39is that um a lot of money has been taken out um of all areas apart from health care and in particular
25:47on departments that are known as unprotected that basically means not health education or defense
25:53those departments are um now at levels of spending that are about 20 percent lower than they were in 2010
26:00unprotected departments include local government where some councils are struggling to provide
26:06basic services like bin collections and justice where there's currently a crown court backlog of
26:13almost 75 000 cases so the recent strategy through the 2010s of protecting health spending while other
26:22departments bear the brunt looks like it might have run out of road and we don't yet know what the
26:27government's new strategy is for making it add up so what was working isn't working anymore yeah those
26:34strategies of the past have have run out and i think we're stuck in a doom loop um with low growth and
26:40high costs of borrowing we asked the treasury for an interview it declined but whether we borrow more
26:51tax more or cut more there's no easy way out of this at the last election labor said it wouldn't raise
27:00taxes for working people and promised better public services as the government prepares to unveil its
27:08spending plans that promise is being put to the test one of my huge frustrations about last year's
27:16election campaign is that neither of the major parties were being honest about the trade-offs they were
27:23claiming that they wouldn't have to have significant tax rises or spending cuts we saw very quickly in the
27:28budget but that wasn't clear it sounds like we could all do whether we're a politician or everyone
27:34else could do with a reality check on this we do need to look at this in realistically
27:44reporting on the last 10 years i've seen politicians tell us stories that are too good to be true
27:51but if our political leaders tell us straight that our public finances can't carry on like this
27:57are we willing to listen the state is struggling to provide services that meet our expectations and
28:05whatever some politicians may say whatever we may hope for or even demand this is not easily resolved
28:13because the equation has changed it's not adding up anymore and our expectations may need to change too
28:26so
28:48so