In her speech at Conservative Party Conference at the start of the month, the Prime Minister announced “an end to austerity”. In policy terms, this message has been the main focus of the post-conference talk for the commentariat. With polls suggesting that the public are increasingly weary of constraints on public spending, that rhetoric may make a great deal of political sense. If, however, it means the government moving towards a policy of active complacency over the public finances, then the consequences could be severe.

A report published yesterday by the International Monetary Fund highlights just how precarious our fiscal position is compared to other advanced economies. The latest edition of the Fund’s Fiscal Monitor estimates that the total net worth of the UK’s public sector (i.e. the balance of public assets and liabilities) is close to the bottom of the international league tables, with only Portugal coming lower in a list of 31 countries. A significant contributing factor to this is the UK’s substantial pension commitments, a measure on which we are outdone only by Portugal and Finland as a proportion of GDP.

The Office for Budget Responsibility’s Fiscal Sustainability Report, published in July, set out the scale of the problems the UK faces in managing its public finances over the coming decades (with the key parts handily summed up at the time by the CPS’s Robert Colvile). The OBR did not mince their words when it came to making conclusions from their report: “the main lesson of our analysis is that future governments are likely to have to undertake some additional tightening beyond the fiscal plans in place for the next five years in order to address the fiscal costs of an ageing population and upward pressures on health spending.” The scope for splurging on public services in the upcoming spending review is extremely limited.