They say that the UK is being subjected to the greatest and most prolonged public spending cuts since the immediate post-war austerity program. In fact, public spending is still planned to rise with inflation until the end of this 4-year period, and all in all the true measure of the cuts is only undoing some of the profligacy of the past 5 years.
I think the most important feature of the cuts is the philosophy behind them and the nudge it will give to people to alter their behavior. For myself, I will be little affected by the two budgets and one spending review that we have seen this year. I will not creep into to 50% tax band, nor will I pay the extra 2% on national insurance. My old-age pension will not be affected and I have no child benefit to lose. My occupational pension will be frozen, but the Chancellor has kindly allowed me to keep my free bus pass (which has saved me £12 over the past 7 years) and my winter fuel payments. I would not have been miffed had he taken them away. My mother's TV licence is another thing. I would have paid it for her had she not had it free, but not everyone is in a position to do that for a relative who is over 75. The BBC has had to accept a lower settlement, which must be a good thing if they can afford to pay there Chief Executive over a million dollars a year.
I do not receive any means tested benefits; so there are none of those to lose. I will be hit by a 2.5% increase in VAT, but I buy very little that attracts VAT.
The message that no-one should receive more in benefits than the average family earns by working seems to me to be a valid one, and the cap on housing benefit is only right. The people who profit from huge housing subsidies are buy-to-let landlords who can make 10% income from property investment when the banks are only paying 2%. Again, arranging that you are always better off working than receiving benefits is only right.
Higher rate tax-payers will lose child benefit and probably the group earning between £40,000 and £70,000 a year will feel the pinch most as many will also lose child tax credits. There will be a greater incentive for parents and grandparents to help out and this may be a good thing. Money passed on to the next generation more than seven years before the final death will escape inheritance tax. For grandparents who start stakeholder pension funds for little children the government will give them their tax back for the fund. This will help those who under the new arrangements will find it harder to accumulate a large pension pot and will also again escape inheritance tax.
Raising the retirement age is a democratic necessity and we should be looking at ways of allowing people in work to slow down rather than stopping abruptly. Most people spend a much shorter proportion of their lives working than their parents did.
I suspect that there will be a lot of arrangements made to make the best of the new regime. The loss of public sector jobs will nudge people into being more entrepreneurial and risk-taking. New businesses will start and more private sector employment arise. Doing away with the idea that someone owes you a living can only help society. Shutting prisons for all except the dangerous and career criminals would make them a more sensible place and reforming Universities and the Health Service would have a lot of public support.
Removing the shackles that the last government placed around funding and strengthening localism seems to be sensible. I think that the 'Big Society' idea of involving communities in decision making, encouraging volunteerism and supporting local charities is a great one.
I am not so sure about increasing foreign aid. The trouble is that much of it feeds corruption abroad. Some of it is self-serving - a way of subsidising jobs at home. Some of it is actually military. And some of it just feeds the bureaucracy of large charities like OXFAM.
I have seen aid in third world countries succeed, but usually when it is applied by small charities who have people on the ground using the money in rural communities.
The relative sparing of the military is interesting. We must decide what role we really want for ourselves. The UK still spends more of its GPD on defence than most European countries. Is there an end-of-cold war dividend? The greatest danger to our country is not tanks, rockets or nuclear weapons, but unconventional warfare such as the recrudescent Irish question or Muslim extremism. Tanks are not useful here, nor Trident missiles. Are the Russians or Chinese likely to attack us? Which of the following are our nuclear missiles targeted at? India? Pakistan? Israel? North Korea? Iran? France? I know some who are certain it is the last.
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