Wednesday, 19 March 2014

Budget 2014

I agree with the IEA - Budgets should be scrapped.  They are awful political exercises in running a lolly scramble, whereby the Chancellor of the Exchequer gets to exercise wholly inappropriate powers to dish out other people's money.
He seeks glory and gratitude from the various preferred parties who either get some of their money back (a tax cut, or even tax freezes are meant to gain applause) or get to spend other people's money.

There are two things I want from the Budget in principle, as for the detail, I have suggestions on those too, but here goes.

1.  Stop overspending: After Labour bleating on about how the deficit was being cut "too far and too fast" (it has not been cut by half yet), now it is claiming it can balance the budget faster.  Don't put up with that. Balance the budget faster by cutting the vast range of unnecessary spending, which will reduce the inevitable pressure on interest rates coming from inflation.  It will have a short-term slow down effect on the economy, but the dynamic benefits of reducing the size of the state in the longer term will more than compensate for that.  For after you balance the budget, a portion of surpluses can be dedicated to ever lower taxes.  

You can scrap free bus travel and the winter fuel allowance, the former being a transfer to bus companies and the latter able to be offset by scrapping the social/environmental levies in energy bills and scrapping VAT on energy (the EC will say it is breaching the law, but tell them where to go, or find a way to get around it). Start cutting the foreign aid budget, scrapping the nonsensical 0.7% of GDP UN target which ignores the sizeable contribution of private donations and favours state aid over private charity.  Run a scythe through future taxpayer funded spending plans on railways and inefficient local transport projects that demand ongoing subsidies.  That includes admitting that HS2 will exacerbate the "north-south divide" and saying the project will wind down unless the private sector wants to finance, build, own and operate it.  Announce that child benefit for new children will be scrapped in one year, so that over time this ridiculous subsidy for having children you can't afford comes to an end.  Change pension indexation to match inflation not wages.  Scrap government house building programmes in favour of replacing the Stalinist planning legislation with a property rights based approach that lets property owners build what they want, as long as they respect the property rights of others and negotiate compensation when infringing upon such rights.

Let's be clear, despite the regular misuse of language from the Prime Minister, the Government has not "tackled our debts".  It has increased them.  State spending must be cut until surpluses are being generated.  It is hardly radical, it only needs a cut in state spending to 40% of GDP.

2. Reduce punitive, distorting taxes:  As the IEA has suggested, there should be annual indexation of thresholds for taxes, this should include income tax, stamp duty and inheritance tax.   However, more should be done.  Stamp duty should be immediately reformed into a graduated tax, and the entry threshold for the tax lifted to the second tier.  This will do much more to help people seeking to buy a home over time, and boost spending in the construction and associated sector than sub-prime mortgage backing.  Air passenger duty should be reduced to the domestic flight level at all airports, both to boost tourism and reduce business travel costs.  Of course the 45p tax rate should go, but that's politically too toxic before the election, so the income tax allowance should have the above £100,000 clawback lifted.  It's either a taxable allowance or it isn't. Meanwhile, lifting it up to the minimum wage level should also be a priority. Scrap employer National Insurance (a tax on jobs if ever there was one), and restructure fuel duty by (much to Treasury's chagrin) hypothecating a suitable proportion for transport funding (about half of fuel duty would cover road and rail subsidies if you include vehicle excise duty) and that the government will cut fuel duty by 1p per annum every year until it gets to those levels.  Announce the end to the TV licence and that the BBC will have transitional fixed taxpayer funding for the next settlement period, but will need to seek other ways of funding itself over that period.

In short, don't give away more of other people's money to "help" those who are better off helping themselves if they got their own money back.

Labour's response will always be spend more, pretend you can take it from the hated "rich" (whoever they are).  Your response should be "we're giving people their money back" and every pound we spend is a pound someone else can't spend.

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