Back into the black
Patrick Nolan 10:28am
George Osborne has an historic opportunity to begin to turn the UK's public finances
back into the black. As Reform noted in an alternative budget released last
week, while this will require making the toughest spending choices for a generation, history will smile on him if he does this in the right way. What the right way is will largely reflect three key
things.
First, George Osborne's Budget needs to be ambitious in its timeframe for reducing the deficit. Setting out to, say, simply "eliminate the bulk of the structural deficit in the term of this Parliament" will not be enough. Delay will make fiscal consolidation harder as interest payments on debt and the costs of unreformed programmes and entitlements will continue to rise. The target should be to eliminate the deficit within a term.
Second, the Budget needs to avoid ringfencing spending. It is not credible to claim to be restoring the public finances while refusing to cut large spending areas, such as the NHS, the universal Child Benefit, free TV licenses for the over 75s and the Winter Fuel Allowance. Spending cuts should occur over as broad a base as possible. Nothing should be off limits.
Third, the Budget should set out to reduce costs and raise taxes through structural reform, rather than introducing politically expedient short-term measures. The Budget needs to go beyond easy options, such as cutting consultancy budgets or gimmicks such as free swimming for pensioners, and reform public services like health and education. To avoid compromising growth and the recovery, tax increases need to be based on principle and emphasise a broad-based and low rate approach, and the large bulk of the consolidation (around seven-eighths) should come from spending cuts.
Patrick Nolan is chief economist at Reform
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John Steed
June 22nd, 2010 10:48am Report this commentWhat a pointless document the Reform report is. Just a bog-standard right-wing wish-list, with no original thinking or insight and not a jot of real analysis.
And they have the gall to lecture us all about wasteful non-productive jobs...
Nickle
June 22nd, 2010 10:51am Report this commentWho cares about the weazel words 'stuctural deficit'.
A deficit is a deficit, stuctural or otherwise. It's an increase in debts.
Abolish the deficit, pay off the debts. All of them.
Stop accumulating debts and liabilities.
Start a proper set of accounts, including all the off balance sheet liabilities.
Introduce a debt tax to pay for the mess. Call it a labour tax to pin the blame.
Nick
Chris Cook
June 22nd, 2010 11:33am Report this commentThe entire tenor of the this post and Reform's report is essentially an attack on the middle class to the benefit of the few at the top of the tree.
90% of the UK population is now in debt to the other 10%, and 0.3% of the UK population owns 69% of the land, which would embarrass a banana republic.
In Hong Kong, 35% of government income has long come from a tax on land rental value (actually from a land rental on Crown leases) and their entrepreneurial population benefited from not having BOTH the State and rentier landlord monkeys on their shoulders.
There is no chance of such a radical liberal policy (the pedigree is from Adam Smith through J S Mill to Lloyd George) in the UK - ie the taxation of unearned income from privilege, rather than earned income from hard work, skill and creativity - when it is the privileged managerial and asset owning classes who actually own the government.
The policies proposed by Reform would have the effect of reducing the earned income due to productive individuals - in public and private sectors - still further and increasing the unearned returns to unproductive finance capital.
This will serve only to make an already unsustainable inequality in wealth distribution even worse.
alexsandr
June 22nd, 2010 11:37am Report this commentWill the Rt Hon Dr James Gordon Brown MP, member for Kirkcaldy and Cowdenbeath show his face today or will he sit up in the Kingdom of Fife drawing an MP's salary and doing F-all
Ian Walker
June 22nd, 2010 12:23pm Report this commentNickle, if you call it a Labour tax, it sounds like you're taxing either workers or pregnant women.
Call it the Brown tax, since he was either Chancellor or Darling's puppeteer for the whole 13 years.
The way I'd do it would be as a 5% surcharge on top of all other taxes, targetted solely at paying off debts. The Brown Levy.
Verity
June 22nd, 2010 1:55pm Report this commentAlexsandr has a point. What justification does Gordon Brown have for awarding himself a long holiday while being paid to work by the taxpayers? His salary should be stopped, backdated to the day Parliament began its current session, until he returns to work. This is ridiculous. Does he have a doctor's note?
Joe Mc
June 22nd, 2010 3:00pm Report this commentWhat dangerous fantasy land policies. Are you really proposing to not have a deficit in 5 years in the depth of a severe recession when there has not been a period in modern history without one????!
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