Investing to break failure loops works; cutting your way out doesn’t

Why do we face such a brutal spring budget and what is the alternative? One aspect which hasn't been discussed enough is demand pull. There are many reasons the UK's finances are under strain but a crucial one is that we are less healthy, less mentally healthy, face more criminal behaviour, have greater disruption in schools and have an economic marked by high levels of inequality and endemic low pay.

You cannot address increased demand by cutting investment. If you could make demand go away without spending money to tackle the causes of the demand it would have been done long ago. It's like spending more and more on buckets to deal with a drip, then running out of money for more buckets and so claiming that being 'tough on drips' by cutting back on buckets will incentivise them to stop dripping.

This is the definition of magical thinking and this is the kind of magical thinking that will define the Chancellor’s statement today. There are two alternatives to this.

The first is to patch the system up as best as possible and then to gradually tackle demand through low-cost moves like public information campaigns and some regulations or guidance changes. More often than not the weight lies on the former (promoting and coercing individual action) and not on the latter (preventing largely commercial interests from causing the problem in the first place).

The second is to invest to break the cycle of failure by identifying interventions which can change patters of behaviour which require direct action but which, once taken, have ongoing effects. That means an integrated strategy of investing in services and provision while fully and properly regulating the causes of the problems and investing in alternatives.

The former approach is the one that is always taken in the UK and, unsurprisingly, it never works. You can't break patterns of behaviour which are generally the result of enormous corporate power (the food system, how we are treated at work, the impact of social media) by asking people not to follow the path being laid out in front of them through advertising and market dominance.

An example of the latter approach was taken in Finland in the 1980s where, in the course of not much more than a decade, the Finns went from having the highest rate of heart disease in Europe to one of the lowest because they invested in the food system, in infrastructure for activity (Finland has four times the number of sports facilities per head of the population than Scotland), in mandatory time off work for exercise and a package of other measures.

The point is that Finland didn't have to spend the extra money forever – once the facilities were built they were built and once the culture was changed it was changed. In little more than 10 years they cut heart disease by 60 per cent; costs to the health service became permanently lower, health and mental health became permanently better.

Britain is in a worse position; we are caught in an intersecting mess of failure loops – health, mental health, poverty and inequality, deteriorating infrastructure... The Starmer administration is trying to tackle this by cutting and being more punitive towards individuals. This won't work. Unless we invest to break the cycles we will be stuck in them forever.

If we get this right we don't need to spend extra money forever; once you break a failure loop you immediately have the ability to improve public services and infrastructure because demand is rapidly diminishing. If you remain in failure loop and try to cut your way out you will make things worse.

To find out more about how Common Weal would manage public finances to break failure loops, you can read our investment strategy here.