Lots of charities condemn government spending cuts. The list of things that charities say are threatened by spending cuts is almost endless and in many cases they are right. While charities are doing that, many politicians call for, or promote, tax cuts. If both of these wishes were granted, the government would spend more and earn less. However, spending more and taxing less is no way to plug the hole in the nation’s finances. The government already spends far more than it earns and that’s why we have a deficit.
And the deficit is serious. Anybody who doubts this only needs to look at the figures. The predicted deficit for 2015 is £83 billion, around 13% of government income. In case you are interested, the UK government’s predicted income for 2015 is £648 billion (all figures from http://www.ukpublicspending.co.uk) and expenditure is estimated at £731 billion.
And for those people who think that the Coalition has been brutally cutting spending to keep national debt under control since 2010 should think again. Despite all these spending cuts, it seems debt has still increased by 80% during the lifetime of this government. The national debt was £760 billion in 2010 and by the end of 2015 it is predicted to be £1360 billion (£1.36 trillion).
Stopping environmental destruction has been a passion of mine since I was a teenager, not least because I cared about the kind of world that future generations would inherit. And the more I think about it, the more the deficit is the same kind of problem. How can I justify a government spending more than it earns and building up debt and interest payments that will be a burden, an economic ball and chain, for future generations?
In just five years, our interest payments on national debt have gone from £30 billion in 2010 to a predicted £50 billion in 2015. If we were a family, we would be the client of a debt advice charity. If we were a company, we would be close to bankruptcy or the target of a takeover.
So my problem is this. I think it’s just unacceptable to condemn spending cutbacks without having some idea of how we balance our books as a nation. If we want the government to spend more, or not cutback in an area, I think we need to say where they should spend less instead. Charities should have solutions as well as identifying problems.
The tackling of the deficit has been made even more difficult by politicians telling voters what they think they want to hear. By some accounts, at least half of government expenditure is all but immune to spending cuts under current policies (e.g. the NHS, welfare payments, interest payments and so on). This only means that the rest of government spending needs to be cut even further.
So how should we cut the deficit? Here are my suggestions:
- We should end universal benefits such as pensions, child benefit, free TV licences and so on. The first two in particular cost the government a huge amount and go to many people who don’t need them. Benefits should be a safety net, not a universal hand-out
- We should end universal tax cuts. The rise in the personal tax-free allowance to over £10,000 per annum has taken many out of the income tax bracket altogether. This is good for people on low wages, but it is very poor targeting when every other taxpayer also gets the same benefit, irrespective of their wealth. Millionaires don’t need tax cuts
- We should stop ring-fencing government expenditure. It is absurd that the NHS is increasing its budget while social care and a host of other areas of government expenditure are cut. The NHS will only ever make us healthy as individuals, never wealthy as a nation. Indeed, people are being conned if they think we can just go on getting all types of healthcare for free without the ‘cost’ of that care being felt elsewhere
As a principle, we need to look at any situations where wealthy people get a government benefit and ask how we can target it more effectively. It’s absurd to claim that we cannot target government expenditure or taxation effectively. The solution is not to ‘spray and pray’ with the increasingly precious resources of government. I am well aware that these are the very people that many charities depend on for their donated income.
I am sure there is an argument against every single suggestion I have made. Indeed, whatever we do to raise more tax or spend less money there will be somebody who does not like it. However, for me the reality is that if we don’t make these difficult choices now, in 20 years’ time we could hand over a debt to the next generation that is five or 10 times bigger than today’s, with interest payments to match.
Nobody that cares about the world our children will inherit can be proud of what we have done if a mountain of crippling debt is the economic world we leave them.
Got much in Commons with this? Or are you voting with your feet? We'd appreciate all of your comments, whether you agree with this piece or not. Please leave us one below.
refreshing view Joe. we need
refreshing view Joe. we need some radiacl new ideas since we can't keep throwing money at these problems. It doesnt work! with the NHS although the budget has doubled [I understand] over the last 15 years the problems are greater than ever. Let people pay for their own health care if they wish and remove some of the burden from the State . let this be a tax allowable cost, since the saving made by the State should be substantially more than the loss of Tax, as an example.
we are only sticking our heads in the ground and deluding ourselves- or being deceived by politicians - if we think throwing more money is the answer!
To be honest, despite what
To be honest, despite what George Osborne and co would have us believe, the size of the national debt, per se, is not the most important thing. In economic terms, what is important is our indebtedness relative to other countries - or rather money-market perceptions of our indebtedness compared to other countries. A country can never afford to be perceived as a basket-case a la Greece because those that are perceived to carry a high risk of default, relative to other nations, will find that their governments can only borrow new funds in the money markets at prohibitive (interest) rates. So the question is not really "what will our national debt be in x or y years if we stay on our current course," but rather how will our potential for default relative to others be perceived in x or y years time. Most of the larger European economies will probably cut government expenditure at a slower rate than the UK apparently plans to. So it's unlikely that we really need to make cuts at the rate that the Tories claim is needed anyway. Nevertheles it should also be obvious that the NHS is unsustainable in its current form, given increasing life expectancies and the health burdens (particularly dementia) that accompany longer lives.
My two-pennyworth for it's
My two-pennyworth for it's worth...
- We should be fighting for better pay and for more homes to built.
As I understand the figures, £23.8bn annually is spent on housing benefit and £27.2bn spent on tax credits. So surely doing something sensible to address poverty pay (living wage etc) and rising rents (build more affordable homes) would go a long way towards reducing the benefits bill?
- We need changes to the financial structures of the NHS rather than the amount by which we fund it
The NHS is one of the best health care systems in the world. But yes it does have some major challenges to address. However, nothing will improve until they sort out the way they structure their budgets. Again my view is based on my limited knowledge of the situation, but as I understand it the way budgets are structured are very silo-based and don't take into account the needs of the whole of the person. So, for example, hospitals get paid by bums in beds. If social care prevents people going into hospital, hospitals get paid less, which they don't want. Or another example would be medicines - there have been some successful medicines developed that cost more to administer but mean that diseases are prevented/cured more effectively, ultimately costing the NHS less. But because they cost more in the first place, the people who control medicine budgets within a particular department won't spend the money on them.
- Climate change should be placed at the heart of everything
We should certainly be looking at the impact of climate change, which has the potential to be very costly. We only need to look to the west of England which is still reeling from the floods to see the cost (both financial and emotional) of those. Or the impact on farmers' crops (and therefore our ability to feed ourselves).
I could spend hours listing my ideas, but I won't put you all through that pain. Instead, I'll end on the point that I agree with you when you say charities that are campaigning against the cuts should provide details as to how to make the alternative work. This has been the problem with the anti-austerity movement overall, not just charities - lots of criticisms, few of them constructive. As we approach May 2015, it will be those organisations that can communicate the detail and potential positive impact of the alternative most clearly that will receive the most attention within the public debate.
Pension should and must be a
Pension should and must be a source of financial support to those who are in need of it and child benefit for up to the first and second child
Agree with most of what you
Agree with most of what you say, Joe - just a bit surprised you don't mention the money the UK spends pretending it's a major world power with submarines armed with nuclear weapons and gallivanting around the world fighting fruitless wars.
What a good piece, I would
What a good piece, I would say that it should apply much wider than just charities. Perhaps there should be fewer charities by effective mergers.
Perhaps charities could help to spread the message, we do need to be much more consistently adult in tax and spend matters.
I also wonder whether housing for those on benefits should be more like hostel rather than a full home, of a good standard of course, perhaps a little saving and an incentive to seek work if one were needed.
If families were happier to live together then perhaps too this would reduce pressure on government spending and debt.