The Budget: Britain needs spending cuts not tax hikes

Matt Sinclair

In tomorrow’s Emergency Budget, the Tax Payers’ Alliance is convinced that Government must take serious action to cut spending. Addressing the crisis in the public finances cannot be delayed any longer. The mountain of public sector debt continues to grow; tomorrow it will be illustrated by the return of our giant Debt Clock, which has reached more than £808bn – and that’s not including off-balance sheet debts like PFI, the huge pension deficit and the bank bailout.  Pretty soon we’ll be spending more on paying the interest on that debt than we are now on household mortgage interest, as we demonstrate here.

Tax hikes, though, aren’t the answer. The structural deficit in today’s public finances exists after a decade of tax increases, not cuts. New taxes will come either in the form of politically satisfying but economically disastrous attempts to bash the rich, such as the 50p tax rate that independent experts don’t expect to raise revenue; or they will hit the incomes of ordinary families already struggling through the recession.

For example, a rise in VAT is widely touted, despite the fact that neither coalition party has the mandate to push any hike through. The Lib Dems even had an attack poster during the Election attacking what they called a looming Tory ‘VAT bombshell’. The Conservatives for their part denied it was coming.

VAT hits the poor twice as hard as the rich, and it would be hard to see where an increase would leave David Cameron’s pledge to “make sure the system always considers the effect of any policy response on the position of the poorest in society.”

Our new video highlights those issues:

Instead, we believe spending cuts are what’s needed.

At the TPA, we recently produced a summary of our plans for up to $50bn in potential spending cuts, which we go into in greater detail in our book How to Cut Public Spending.

Of course, plenty of people will disagree with some of the proposals on the list. But we make it clear that there are hefty cuts to be found, even if it was tough to work out the numbers for many of these potential cuts, what with the very limited data then available outside Government.

The Government has taken some action on spending, but in too many areas they aren’t making the cuts that are needed to avoid unnecessary sacrifices elsewhere.

The Regional Development Agencies, for example, should not just be cut back but scrapped entirely.  A new TPA report out today shows that the majority of their grant money doesn’t go to support struggling businesses but is instead churned into projects in an unproductive grey area between the public and private sectors.  That model of taking businesses’ money in taxes and then paying some of it back in grants after the bureaucracy has taken its cut has never been a good idea, and it is now completely unaffordable.

So that’s what we’ll be looking for in the Budget: robust action to cut spending in order to avoid socially and economically disastrous tax hikes.

Matthew Sinclair is the Research Director at the TaxPayers’ Alliance.

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  • Mike Carey

    The TaxDodgers Alliance! There we have it- yet another new lowest-point for the Independent.

  • TheRedMage

    The Indie: all the pro-ConDem propaganda that is fit to print.

  • Pingback: The Budget: The VAT hike was a mistake | Matt Sinclair | Independent Eagle Eye Blogs

  • John

    Where goes
    the border between corporat
    tax planning and tax fraud, or is it constantly moving as laws are

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