Comment: Ten ways to cut the deficit
The director of the TaxPayers’ Alliance gives his ideas on how to cut the deficit.
By Matthew Sinclair
The government have already announced some measures to cut the deficit, like a two-year public sector pay freeze. But they need to do a lot more. Here are ten steps they can take to improve the public finances that they haven’t put in place yet:
1. Increase employee contributions to all unfunded public sector pension schemes by a third. This kind of measure was recommended by the Hutton Commission and would mean public sector workers pay more of the cost of their gold-plated pensions, saving £2.5 billion. Over time it needs to be combined with deeper reforms.
2. Freeze the International Development budget for a year. It is simply unfair for hard-pressed British families to face higher taxes at home but see rapid rises in the amount of money the government sends abroad. A one-year freeze is a moderate position between the current policy of rapid rises and the strong case for sharp cuts and would save £862 million a year.
3. Just abolish the Regional Development Agencies, don’t replace them. The RDA model of taking businesses money in taxes and then giving it back to a small number of favoured firms is fundamentally wasteful and distorting. Replacing them with Local Enterprise Partnerships is a mistake.
4. Scrap the 50p rate. Independent forecasters like the IFS and the CEBR think that the 50p rate will lose revenue. Do we really want ordinary people to face great tax hikes or spending cuts just for the satisfaction of bashing the rich?
5. Reduce non-frontline staff in health and schools by ten per cent. The number of managers in the NHS, in particular, has increased much faster than the number of clinical staff. This is definitely an area where proportionate cuts can be made.
6. Abolish the Carbon Trust and the Equality and Human Rights Commission. The coalition have made a good start scrapping useless quangos, but there are two big spending candidates that are still, as far as we are aware, under review. They should be abolished.
7. Transfer funding of free TV licences to the BBC. The BBC needs to cut its spending but that normally won’t help cut the deficit, though it will mean a welcome break for licence fee payers. By transferring the responsibility for funding free TV licences to the corporation, the government can ensure they do their bit to contribute to necessary cuts in spending.
8. Reduce gross annual pay by 15% for the richest 10 per cent in the public sector. As they have in Ireland, senior staff in the public sector need to show leadership so they can deliver pay restraint needed from ordinary workers.
9. Abolish the bus service operators’ grant. This scheme is widely acknowledged to be in need of reform at least. The economic case for it is weak and the grant should be scrapped instead saving £451 million.
10. Sharper cuts in corporate taxes. Countries with lower corporate tax rates tend to see faster corporate tax revenue growth. Lower rates attract more international investment which means a bigger tax base and more opportunities for ordinary Britons.
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Matthew Sinclair is director of the TaxPayers’ Alliance and the editor of ‘How to Cut Public Spending (and Still Win an Election)’
