Does anyone remember 2002?
I certainly do. And I have to say that life wasn’t THAT different. I mean, I was revising for my GCSEs instead of a Masters, wore a school uniform every day and didn’t yet know how to drive, but overall, I’d be willing to wager that most people's lives aren’t that drastically different now than they were 10 years ago.
Crucially, the Government spent money on much the same things it does today – welfare, the NHS, defence, education, policing. It’s not like I am asking you to remember how things used to be in the 1920s when things were radically different.
Looking at Sam’s chart on Monday made me think of something.
In 2002, the UK Government was spending €442bn.
Last year, the government spent €739bn, and it seems likely that the figure in cash terms will be similar or higher in 2012.
It was conceded that the figures in that chart don’t account for inflation, so I have tried to do that myself below. I appreciate that this is a back-of-the-envelope way to do things, and I am not a trained economist, but I also think that my estimates of 4% annually and 3% annually are potentially on the high side, seeing as the Bank of England insist that inflation was kept under control for most of the last 10 years. (Even if quantitative easing may have left us in a situation where recent inflation is quite a bit higher than the “ideal” 2%)
Therefore I have a simple proposition: Return us to the level of spending we were at in 2002, adjusted for inflation and population growth.
Doing that would save, by my rough and ready calculation, between £68bn and £116bn. With that saving, we could abolish or drastically cut Employee Contributions to National Insurance, raise the Income Tax threshold to £12,500 (to correlate with a £6/hour minimum wage for a 40 hour week, so nobody on the minimum wage pays income tax), and abolish Inheritance Tax. If the inflation rate was at the lower end of my estimates, we’d still have a significant sum left over to reduce the deficit.
This would make it drastically cheaper to hire new staff, and would let people on low and middle incomes keep more of their own money, creating big incentives to work. It would also abolish one of the least popular taxes.
Most reasonable people intuitively know that life wasn’t that much worse in 2002, if it was worse at all. If we could have 2002 levels of government spending, along with all the benefits above, I reckon most people would vote for it.
