The Spending Plan, courage, and politicians

A ring-fenced National Health Service, a bill poised to commit future governments to spend 0.7% of GNI on international aid, a triple lock on pensions, senior military figures pushing for commitments to higher defence spending: these are inauspicious times in which to contemplate cutting the UK’s £77 billion structural budget deficit, but contemplate we must. Aside from the velleities and equivocations of the political parties when it comes to their respective deficit reduction plans (and most other things besides), the Taxpayers’ Alliance has today released their Spending Plan, which comes as a substantial contribution to the debate. The Spending Plan’s first goal is modest: to lay out a menu of cuts which would take public spending to 35.2% of GDP by 2019-20 – the level forecast by the Office for Budget Responsibility – its second more radical, to outline further measures which would cut spending to 31.7% of GDP, a level at which a single income tax of 30% could be implemented.

Despite the reasonableness of its first end point, or perhaps because of it, the Plan makes for sobering reading. An implementation of the first, less stringent, programme would, among other things, see the abolition of no less than three government departments (the Department for Business, Innovation and Skills; for Culture, Media and Sport; and of Energy and Climate Change), an end to national pay bargaining in the public sector, and a sizeable cut to Scotland’s grant from the UK government.

While the numbers add up, the issue is likely to arise in finding a politician willing to implement the proposals. As the TPA’s Chief Executive, Jonathan Isaby, puts it:

Our Spending Plan honestly sets out the savings that need to be made by whichever party or parties take power after the election. Today we challenge our political leaders to accept our plan or to produce a similarly rigorous set of proposals of their own which explain where it is that they would reduce spending instead.

The report recognises that reduced spending and deregulation are of no importance if they don't lead to people being better off in the long run, and makes the welcome case that making the state leaner is desirable for reasons other than deficit reduction. David B. Smith sets out the case that market economies grow faster, while the ASI's Director, Dr. Eamonn Butler, makes the ethical argument for lower taxes.

Despite the size of the challenge that future governments face, that markets have confidence in the UK’s ability to get its debt under control might serve as good evidence that all is, in fact, not lost. However, politicians would do well to come to the realisation that, whether those set out in The Spending Plan or not, radical decisions about the role of the state must be made; we can only hope this research helps them do that.

The UK just isn't as unequal as people seem to think

We've often said around here that the national inequality figures overstate the actual amount of inequality that there is in the UK. Yes, there's very definitely regional inequality in incomes. But there's also significant regional inequality in the cost of living. Not all that surprisingly (with the exception of parts of the SW) the higher living costs (most especially housing) are also where the higher incomes are. The UK is very much more unequal in such regional terms than most other countries simply as a consequence of London's domination of the economy. What that in turn means is that consumption inequality, the only form of inequality that we could possibly really worry about, is a lot smaller than the income inequality that we all normally measure.

And from the Taxpayers' Alliance recent report, this little snippet:

The analysis showed a geographical divide in taxpayers and benefits recipients. Households in the East Midlands and London, as well as the south east, east and south west of England paid more in taxes than they received in benefits. All the other regions received more in benefits than they paid in taxes.

Households in the North East of England received an average of £3,175 more in benefits and benefits in kind than they paid in taxes, whereas in London households paid £4,119 more in taxes than they received.

The tax and benefit system also reduces that regional inequality even further.

We're really not as unequal as everyone likes to say that we are.