Why George Osborne has no alternative but to cut taxes
22:14 GMT, 30 November 2012
Chancellor George Osborne faces a most unenviable task on Wednesday. With Britain’s economy in such a dire condition, he must secretly wish he didn’t have to go to the Commons to deliver his annual Autumn Statement.
His enemies will remind him again that his predictions of economic growth have proved to be wildly over-optimistic.
Indeed, according to the Organisation for Economic Co-operation and Development, UK growth will be only 0.9 per cent next year compared with its original expectation of 1.9 per cent.
Too much: One of the main reasons the British economy is doing so badly is that taxes are too high, thus discouraging consumption. Raising VAT would be disastrous
An ever graver outlook was offered by experts at the Institute for Fiscal Studies who say that austerity could last another six years. They also said the Government’s failure to control borrowing — it is currently 13bn more this year than Mr Osborne predicted — could necessitate serious spending cuts and, possibly, a rise in VAT from 20 per cent to 25 per cent.
That last option would be suicidal. One of the main reasons the British economy is doing so badly is that taxes are too high, thus discouraging consumption. Raising VAT and thus making most consumer goods 5p in the pound more expensive would be disastrous. If anything, Mr Osborne should cut VAT to help kickstart the economy.
The terrible truth is that Britain is still living way beyond its means and we are borrowing much too much. This has been compounded by a reduction in the tax-take — something starkly highlighted this week by figures from HM Revenue and Customs which revealed that almost two–thirds of the country’s million–pound earners disappeared from Britain after the introduction of the 50p top rate of tax.
This, incidentally, proves that Labour introduced the top rate primarily to punish wealth creators, and their commitment to restore it smacks of prejudice rather than economic sense.
It has been suggested that the Government lost 7billion in tax revenue as a result of the 50p rate.
Promises: Mr Osborne has already said he'll reduce administrative costs in the NHS by 33 per cent by the end of the parliament
The time has come — whether Mr Osborne likes it or not — to take radical steps to tackle our economic plight. This is something he should have done on assuming office two and a half years ago, when it would have been politically much easier.
Projected spending this year is 684bn. There is little that can be done about the main component, the pensions bill, which is 138bn — though policies are needed to help shift some of that burden off the state and onto private individuals over the next few decades.
Mr Osborne has already targeted the 117bn-a-year social security bill but there is much more scope to cut it further — principally by getting more people off benefits and into work.
This can be achieved by reducing payroll taxes so as to encourage businesses to hire more staff, by raising tax thresholds for the low-paid, and by reviewing the minimum wage so it does not prevent employers taking on staff.
However, the second-largest item of Government spending — 126bn on the NHS — has been ring-fenced since the Coalition came to power.
This has become unsustainable, not least because of the waste of money within the NHS.
Labour created vastly more NHS jobs as part of a cynical attempt to buy votes by setting up a huge client state. Official figures show that last year there were 1,148,844 ‘full-time equivalent’ staff in the NHS — an increase of 237,902 (or 26.1 per cent) since 2001. Non-clinically qualified staff accounted for more than 100,000 of that increase.
Mr Osborne has already promised to reduce administrative costs in the NHS by 33 per cent by the end of the parliament, reinvesting the savings. However, that may not be enough.
How many of the non-administrative, non-clinical jobs in the NHS are absolutely necessary It would also be cheaper to get private healthcare companies (who are not in hock to the trade unions and professional medical bodies) to manage some hospitals more efficiently, on condition that the service remains free at the point of use.
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Acknowledgement: The public and the financial markets are crying out for a sign from George Osborne that he realises the gravity of Britain's situation
For example, why does most of England have two tiers of local government (county and district councils) Their responsibilities could easily be merged into unitary authorities, with massive savings in bureaucracy and councillors’ expenses.
There are other major savings the Chancellor could make.
Why, 13 years after devolution, do we still have a Scotland Office and a Wales Office And, for that matter, why is there a Northern Ireland Office, when there is a properly functioning Assembly in Belfast
Do we really need a Department of Energy and Climate Change Energy policy should be run by the Department for Environment, Food and Rural Affairs.
Why is there a Department for Culture, Media and Sport Media regulation could he given back to the Home Office, while arts and sport are really none of the Government’s business and could be dealt with in the Education Department.
And why is there a Department for International Development That wicked waste of 9bn a year should have been stopped years ago.
It is possible to find radical spending cuts. The public and the financial markets are crying out for a sign from George Osborne that he realises the gravity of Britain’s situation.
Trying to muddle through and continuing to borrow huge amounts of money simply won’t do.
It’s enough to make me vote Communist!
Two weeks ago I reflected, as an Essex ratepayer, on the 287,000 that former Tory county council leader Lord Hanningfield spent on his council credit card on a host of luxury items that seemed to bear no relation to his local government responsibilities.
This shocking old crook, jailed for fiddling his Lords expenses, isn’t being prosecuted. However the Lib Dem group on the council is trying to start civil proceedings to recover the money. If the ruling Conservative group obstructs them, many of us in Essex would rather vote Communist than trust the Tories again. I am appalled the Tories haven’t instigated such a move themselves. What do they have to hide
Pushing his luck: Patten's appointment of George Entwistle as director-general was disastrous
Had Lord Patten of Barnes any integrity, he would have resigned as Chairman of the BBC Trust after his disastrous appointment of George Entwistle as director-general and the controversy involving Newsnight wrongly implicating former Tory treasurer Lord McAlpine in a child abuse scandal.
Instead, he turned up at a Commons select committee this week radiating arrogance. He’s meant to work three or four days a week for the BBC — which is a bit of a squeeze since he has about a dozen others jobs. Not surprisingly, one MP, Philip Davies, asked this preposterous panjandrum how he divides up his time. Lord Patten rudely rebuked him for impertinence. Lord Patten should stop pushing his luck.
Death of democracy
European Commission president Jose Manuel Barroso has announced that in order to save the euro, the 17 eurozone countries would have to form a single government, with a single treasury imposing a single economic policy. This is entirely logical — some of us have argued for years that a currency with 17 different economies would never work. However, such a proposition would signal the end of democracy in those 17 countries. For it would mean that their citizens would only be able to change policy by rioting. The euro is doomed. Why not save time and money, and kill it now
Ukip’s rise continues, winning second place in two of Thursday’s by-elections and coming third in the other. For the two coalition parties, the results were a horror.
The BNP and Respect beat the Tories into fifth place in Rotherham. This is yet more proof of how urgently the Tories need to build support in urban England. As for the Lib Dems, coming eighth in Rotherham, behind various fringe and extremist parties, suggests it’s time to ring for the undertakers.
I know by-elections are not like general elections, but those who think the Lib Dems don’t face meltdown in the next general election are deluding themselves.