Wednesday, 20 March 2013

Budget 2013 - a very modest wishlist

It wont happen, but it needs to.  George Osborne needs a budget that facilitates two goals, and will help deliver a third one if he is lucky.  Sadly he is expected to do very little to support both.

Those goals should be:
- Economic growth;
- Balancing the budget.

He has been pursuing a modest programme of spending cuts and freezes (and increase reductions) and tax rises to address the latter, but wont be in balance until 2017, if the economy picks up.  Meanwhile it is stagnant, and needs to be set free with measures that don't involve modest pieces of tinkering, or throwing cash at crowding out private investment in housing.

Below is a modest wishlist, modest because it keeps a lot of taxes intact, modest because it keeps a lot of spending intact, and state activities.  However, it will reduce the size of the state, it will kick start employment and investment, and it will pave the way for a transformative reduction in the regulatory burden on the economy.

Cut taxes

Corporation tax rates have been dropping incrementally, but it is time to make them the most competitive in Europe.  Lower Corporation Tax to 10% as of 1 April.  That will send a loud and clear message that Britain is open for business, it will slash the need to pursue the ill-motivated concern towards tax avoidance.   Treasury will wring its hands over the deficit, but the growth in business activity will erode the difference in a couple of years, and the effect on employment and investment will be dramatic.

Freeze business rates for the rest of the life of this Parliament. Perpetual increases in this tax affect business and are particularly hurting the retail sector.  

Abolish the punitive 45p tax rate, accelerate the lift in the income tax free threshold to the minimum wage and inflation adjust all income tax thresholds  The Government will continue to get flack from Labour from "cutting taxes for millionaires" which is a lie, but eliminating this punitive income tax rate and taking the poorest out of income tax will also help stimulate demand and assist those hurt by a stagnant economy.  Meanwhile, the threshold for the 40p rate should be inflation adjusted, so that all taxpayers benefit from the income tax free threshold.

Abolish the top rate of capital gains tax and increase the tax free threshold to match that of income tax.  Again, this taxes business and investment, and should be more closely aligned to a general lower tax approach across incomes.

Scrap employer national insurance and simplify the system, which is a hidden tax on employment.   It effectively adds a tax on employing people above paying their taxed salary.  Removing this will remove a considerable burden upon the cost of employment.

Abolish the planned fuel duty increase and declare that fuel duty will not rise for the rest of this Parliament, set aside 10p/l of fuel duty revenue to a new roads fund.

Abolish the beer duty escalator for this year and half beer duty for next year, declare that duties on alcohol and tobacco will not rise for the rest of this Parliament.  Beer duty in the UK is the second highest in Europe, it should be cut when the budget is balanced, and the other sin taxes simply tax people's pleasures.  

Scrap the TV licence fee.  The BBC should be funded at a capped level through till the end of this Parliament, and be required to develop proposals for self-funding by that time, including subscriptions, donations and commercial activities.  Meanwhile, the TV licence fee should be scrapped, and all pending prosecutions for non-payment to cease.

Cut Air Passenger Duty to the base £13 for all flight from all airports except Heathrow:  Air Passenger Duty should be scrapped altogether when the budget is in balance, but meanwhile cutting it to the lowest level for all airports except Heathrow will provide relief to the regions and encourage a modest transfer of demand between London airports.  It should also parallel an immediate withdrawal of the 

Cut spending

Abolish the ringfencing of health and aid.  It is ridiculous that DFID and the NHS shouldn't face the 1% reduction in spending that other departments are having to face.  The 0.7% GDP target is partly being met because of economic stagnation.  Aid should be voluntary, and the public should not be expected to fund ever increasing amounts of transfers to developing countries.  Freeze that budget for the life of this Parliament.  The NHS demands more money and the state provides it.  This is unsustainable.  It is time to freeze NHS spending in real terms for the life of this Parliament, and to look at reforms to make people more accountable for paying for their own healthcare through an insurance based model.   Meanwhile, introduce charges for home visits by GPs, except to pensioners, and for non-attendance at scheduled NHS appointments.  

Scrap new applications for child benefit.  It is time the state stopped paying people to breed, so should declare that one year from now, there will be no new child benefit provided for children born after 1 April 2014.  None. People wanting children after that point will have to rely on their own means, including whatever remaining benefits they may be on.

Reform pensioner benefits.  Abolish the exemption on prescription charges for those aged between 60 and 65 (and higher as the state pension increases), scrap winter fuel allowance for pensioners on the 40p income tax rate and for those.  Raise the age for free bus passes to 65 and for off peak travel only.

Abolish the legal obligation of local authorities to house all residents. Ceasing this legal obligation will mean local authorities will no longer be required to pay for hotels and other accommodation for people who turn up wanting housing.

Abolish income support for mortgage payments.  If people take out mortgages they should buy mortgage protection insurance, not rely on taxpayers, many of whom do not own a home, to pay for their mortgage.  No new applications for mortgage payment support should be accepted, and existing ones should have a one year transition period.

Scrap HS2 and subject all state spending on rail capital projects to financial sustainability tests.  Road users pay a fortune in net taxes, but rail users continue to get the majority of the costs of their preferred mode paid for by taxpayers.  There should be no more new capital support by the state in rail projects that wont pay for themselves, and Network Rail should increasingly be expected to borrow and fund rail capital projects from track access charges on train companies.

Announce the scrapping of the Departments for Culture, Media and Sport, and Business, Innovation and Skills as their functions will be wound down, abolished and residual ones transferred over the life of this Parliament to a single Department of Transitional State Affairs to manage low cost matters such as weights and measures, advise on company and business law reform, reform of competition and consumer law, liberalisation of media law, censorship, gambling and the arts.  

Revise the Barnett formula, by funding the devolved governments on an identical per head of population basis.

Increase spending as a transition

Ringfence revenue from vehicle excise duty and 10p/l of fuel duty for roads into a fund that can receive funding bids from local authorities, the Highways Agency and the Welsh, Scottish and NI governments.  This will be a net increase in spending on roads, which will match reforms to commercialise and privatise roads. This will be a transitional funding arrangement until privatised road companies charge motorists directly in what ever way they wish.

Privatise and restructure the state sector

Sell Channel 4 and the Royal Mail getting the state out of these two competitive sector and raising funds to retire public debt.

Announce a fundamental restructuring of energy policy on market grounds scrapping surcharges for green energy, subsidies for "sustainable electricity" and introducing a property rights framework for energy resource exploration including fracking.  

Repeal the Climate Change Act, as it is utterly absurd to have a law binding the state to a policy. 

Transform the Highways Agency into several regional companies and privatise, initially being funded from motoring taxes, but having the powers to introduce tolls with direct refunds of the fuel duty dedicated to road spending.

I'll be surprised if there is much more than a hint of any of these of course.

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