Ten tough choices for 2010

2010 is not only (hopefully) going to be the Year for Change we so desperately need in this country but it is inevitable going to be the year of cuts. Even the Labour Party are now reconciled to the fact that we need drastic cuts in public spending (although you wouldn't think it from the Pre-Budget Report). Today I outline ten cuts I would make to public spending in the next year.

1. Increase VAT to 20%
This is something that has been floated around in the media a lot recently and we know that the government considered raising VAT in the last budget. Although a regressive tax that will affect everyone, it is guaranteed to generate extra government revenue and will make up for the cost of the VAT cut. If announced in this year’s budget but not introduced until 2011, spending on the high-street will increase in the next twelve months as people try to avoid the extra costs, thus helping the recovery.
2. Keep the 50p tax rate for the duration of the next Parliament
The creation of the 50p tax rate is a tax on aspiration and shows just how much Labour is in the process of retreating to its old ways but it is here to stay (for the moment at least). The revenue it will raise will be needed to cut public spending and cut the deficit so the 50p tax rate should remain for the duration of the next Parliament when it should be at the top of the list for tax cuts.
3. Freeze public sector pay
I have already written about the need for the public sector to share the burden of post-recession cuts and there should therefore be a public sector pay freeze for the next two years – causing a real-term cut in pay.
4. Cut the pay of all public sector employees earning over £100,000
Freezing public pay doesn’t go far enough is kerbing the excessively high pay of some people in the public sector. Local authority Chief Executives and those in the higher echelons of the civil service must not simply accept a pay freeze but must accept a 10% cut in pay in the next financial year and a pay freeze the year after. This does not simply extend to civil servants, executives in Royal Mail (which is a publicly owned company), senior NHS Doctors (some of whom are earning in excess of £150,000) and the heads of quangos should also be included in any pay cuts/freezes.
5. Politician’s must show leadership in accepting more modest salaries
Politicians cannot talk about cutting public sector pay whilst enjoying salary increases themselves. Like the pay of those in the higher pay grades, MPs and ministers should all suffer a 10% fall in pay in the 2010-2011 financial year and a freeze the year after. This would cause an MP’s salary to fall from £64,766 a year to £58,289. The same applies to the additional salaries some MPs get for being ministers. Politicians are not the highest paid individuals in the public sector but we should be able to expect our politicians to show leadership in these difficult times.
6. Freeze all forms of state welfare
I suggest below some benefits that should be abolished but those that remain should be frozen just like public sector pay. This should apply to benefits such as Job Seeker’s Allowance, Disability Benefit and Incapacity Benefit and the State Pension. With inflation currently at 1.9%, this would mean a £7 fall in Job Seeker’s Allowance and an £11 fall in the weekly state pension.
7. Abolish Child Trust Funds and Child Benefit
Universal benefits such as the Child Trust Fund and Child Benefit are indefensible in times of economic hardship. Setting up a Trust Fund of £250 for every child when they are born and a second £250 when each child is 7 is completely unnecessary. Additionally, the £20 a week Child Benefit is made regardless of income so a single mother struggling to bring up a family gets the same Child Benefit as a millionaire – that is unfair. Both should be abolished. The shortfalls for the poorest families can be made up in Child Tax Credits which are based on income.
8. Means test winter fuel payments, free bus passes and free television licences
Older people have done very well out of the boom years and Labour’s public spending splurge but many have received benefits they do not need or deserve. Like the Child Trust Funds and Child Benefit, winter fuel payments, free bus passes and the free TV license are blind to the recipient’s financial circumstances. I am not convinced that abolishing these payments completely would be a good thing, ‘fuel poverty’ (the government’s name for people being cold in their houses) is a big problem for those with the lowest incomes. But many older people don’t spend their fuel payment on fuel and others could afford to pay a concessionary fare on the buses – so only those on the lowest incomes should receive these benefits.
9. Cut the cost of politics by reducing the number of MPs and ending government funding of politics
It costs us £500 million each year to run Parliament and much more for the wider cost of running politics in the UK. Many people don’t realise but the government spends millions of pounds a year on funding the Trade Unions and other charities and organisations which exist for purely political purposes. The state should not fund any sort of political activity – whether they are Trade Unions or pressure groups and all funding for these sorts of bodies should end; if such organisations cannot find the cash to run themselves then they obviously don’t have enough support and should consider their future. We should also cut the cost of politics by cutting the number of MPs by 10%, the House of Commons is far too big, and also cutting the number of ministers by a third.
10. Departmental spending cuts of at least 10% in ALL Departments
I have explained some specific projects I would scrap altogether but the government itself has already proposed 7% cuts across the board in Departmental budgets and to ensure we reduce the deficit these need to be at 10%. At the moment there can be no sacred cows, the Tories may have said they’ll protect the Health and International Aid budgets but these too must face the butcher’s knife. Cuts should start with wasteful bureaucracy, cutting unnecessary jobs and administration costs, but then we will have to turn to frontline services at some point. We can only avoid cutting frontline services if we hike up taxes to ridiculous levels – something we should avoid at all costs. This should include the grants to the devolved legislatures in Holyrood, Cardiff Bay and Stormont.

Some of these proposals were outlined in a report by the Tax Payer's Alliance in September 2009 entitled 'How to save £50 billion'.