The received wisdom of our age tells us that Britain is suffering through an era of severe austerity, the truth is a mite more complex. The state is shrinking and spending has been cut from the previous astonishing highs, but last year the government still spent £90 billion more than its income. Deficit deniers need to wake up and face the cold, hard economic reality.
The United Kingdom is still running the second highest budget deficit of the OECD countries, behind only Japan. While the left moralise about the brutality of Conservative spending cuts, we are over spending by approximately £2 billion a week. The Chancellor will run a budget deficit of approximately £70 billion in 2015, after six years of “austerity”. Every minute of every day we are adding to the debt that future generations will have to pay. The only genuinely moral thing to do is to stop adding to this house of cards.
The dire state of our economy has never really dawned on the left, who have been saying that spending cuts are “unnecessary” for years. The reality of the situation is that Britain is bust; with a vast budget deficit, current account deficit and national debt. We have only able to avoid a state of literal bankruptcy by virtue of the fact that we have our own currency, otherwise the creditors would be making stringent demands of us.
Yes, the economy is recovering, progress is being made. But imagine for a moment the victim of a near fatal car crash lying in his hospital bed. Outside the doctor speaks to the loved ones in hushed tones, it’s good news! The patient is recovering, indeed, a full recovery can be envisioned now. However, life support remains necessary, the situation is still potentially perilous. For the British economy, life support comes in the form of interest rates kept at a historic low for years, high levels of borrowing, huge levels of debt and money printing.
As Guido points out here, ‘financially chastened Portugal, Italy, Greece and Spain are currently showing more fiscal discipline than the Chancellor’. Our economic recovery is built on an illusion concealed behind a facade of pure political propaganda. The responsible thing to do would be to cut deeper. When you examine the size and scope of the British state it’s clear there is plenty of room for significant savings.
On the Conservatives for Liberty Facebook page (please ‘like’ here) the following question was posed:
‘We think the government needs to be more ambitious with its cuts. Why don’t we give them a hand with a few suggestions… What’s on your cutting wishlist?’
The problem with discussing ideas about policy is that often a single idea only really works when viewed in the context of a wider manifesto of policy ideas. Nonetheless, I will outline a few key areas that I would cut (in addition to current policy) in order to slash spending and radically shrink the size of government.
Abolishing child benefit: with the dual aim of saving money and focussing welfare on where it is most needed, I would scrap child benefit, saving £11.7 billion. Of that, approximately £5 billion would be reissued through child tax credit for families on a low income, saving £6.7 billion.
Means testing: the winter fuel allowance and free bus passes to be means tested.
Eligibility for welfare: the welfare state will be reserved for British citizens or long term residents who have contributed to the system through taxation, thereby making significant savings and eliminating welfare as a “pull factor” for migrants. In order to be eligible for any social security or social housing claimants must have been residents in the United Kingdom for ten years.
The “triple lock” on pensions: this would be replaced with a commitment to link increases in the state pension only to increases in prices.
Raising the state pension age: by increasing the state pension age we would reduce the expected cost of future payments and shifts the distribution of ages at which people retire. It will rise to 70 for anyone retiring after 2045.
Privatisation of pension provision: For the long term I have a far more radical and controversial solution.
The whole concept of the state pension is an illusion. Most people imagine the state pension to work like a pot which we pay into, entrusting the state with the funds until we retire and it is distributed back to us. The reality is a little different, and should be imagined along these lines – the money is paid into a pot, and then the government spends it all.
Future pensions payments are not actually funded. If the state is paternal, it is like having a spendthrift father with severe gambling issues. Sorry kids I spent all your college fund, oh, and I lost mummy in a game of cards…
The state pension has become a pyramid scheme ready to collapse when the debt time bomb goes off. Thus, I would legislate to make the provision of private pensions compulsory. The opt-out for workplace pensions would be abolished and employer contributions increased. The aim is to defuse the debt time bomb and to prevent people irresponsibly failing to save for retirement, and expecting to be bailed out by fellow taxpayers who have saved.
This reform would make way for the abolition of the universal state pension for the under-25’s onwards. In essence, this is full privatisation of the state pension so that it is funded rather than being paid out of current government revenues.
* There would still be an essential safety net. A state pension would still be available to the disabled, for example.
Charging for medical services: More charging would be imposed on some aspects of healthcare to encourage responsible use (by patients and health care workers), to encourage more self-funding and to save money. This would include, for example, a £10 charge on GP appointments excluding the under-18s, the elderly, the long term sick and the disabled. The Financial Times projected that this alone would save £1.2 billion.
Increased outsourcing: I would increase the number of health service contracts outsourced to private and third sector organisations. Services such as addiction and sexual health should routinely be outsourced or privatised, but free at point of use.
Eligibility: Migrants must have health insurance to live and work in the UK for ten years of residency.
Department closures and mergers
International Development: The 0.7% foreign aid target would be abolished and £10 billion immediately cut from the budget, with £2 billion remaining for ongoing humanitarian projects with immediately tangible benefits, such as vaccinations.
I do not believe in having a fixed budget for international development, not only because it leads to scandalous waste, but because we should be flexible enough to respond to major humanitarian crises and thereby spending more when necessary. In line with this philosophy, there would be no budget floor, but neither would there be a fixed ceiling either.
Foreign aid can be mutually beneficial if a project with a clear purpose, set targets and adequate supervision is put in place. In which case money can then be allocated to meet those needs and aid becomes targeted and based on solid plans and results.
Generally however, the best thing we can do for developing economies is to help them develop their economy for the long term. We have expertise to offer developing economies to help them build the institutions necessary for a stable political system and prosperous economy. In developing countries we should offer expertise, services, security and trade, this is what they need, not money thrown in a begging bowl. State sponsored international development and aid would become the remit of the Foreign & Commonwealth Office and the Ministry of Defence.
Business Innovation and Skills: the education functions will be reassigned to the Department for Education (madness, I know). This department does little else that we couldn’t live without. To help business, cut regulations and get government out the way! Some of the savings could fund tax cuts for small business, thereby stimulating the economy.
Department of Energy and Climate Change: energy responsibilities would be merged with a renamed Department for Environment, Food and Rural Affairs, (suggestions on a postcard) with the nuclear security function moving to the Home Office.
Ministry of justice: the functions of this Orwellian sounding department – a New Labour brainchild if there was one – would be divided between the Office of the Lord Chancellor and the Home Office. The independence of the judiciary is essential, this department is specifically designed to contradict that principle. There would be no human rights remit, as there would be no act or ECHR jurisdiction. An independent judiciary would enforce the British Bill or Rights I have legislated for… I’m enjoying this fantasy now.
Department for Communities and Local Government: after it has been closed down, the responsibilities of this department would be devolved to local authorities.
Scotland, Wales and Northern Ireland office: These departments would be merged into one, the Office for the Union of England, Scotland and Wales.
The coalition implemented a review of public bodies with many closures and mergers. My own review would be stricter yet, and ongoing on an annual basis. The following bodies would be closed immediately:
- The Arts Council
- The Commitee on Climate Change
- The Equality and Human Rights Commission
- The Gambling commission
- Public Health England
- The Government Equalities Office
Drastic times call for drastic measures, what I have outlined is the kind of radicalism that brings back fiscal responsibility and ensures the state gets its priorities right.
The views expressed in this article are that of the author and do not necessarily reflect the views of Conservatives for Liberty