80/20 or 50/50? – It might even be 100% tax increases to cut the deficit.

The Chancellor told us his preferred mixture of tax increases and spending cuts to curb the deficit was 20% tax rises and 80% spending cuts. Mr Ed Miliband favours something closer to 50/50.

In the government Budget Red Book we learn that the public sector net borrowing requirement was £154.7 billion in 2009-10. This falls to £37 billion by 2014-15 on the government’s plans. Over that time period tax revenue rises by £176 billion and total public spending by £68 billion (currrent spending plus £92 billion, capital spending minus £24 billion). Calculated crudely, tax increases account for practically all the deficit reduction.

The Treasury scores it differently. Presumably they count reductions in the rate of growth in spending as contributions to deficit reduction. On their figures in 2010-11 tax increases account for 41% of the deficit reduction and in 2011-12 for 43%. It pays to examine the figures before using the soundbites.

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10 Comments

  1. P H
    Posted October 3, 2010 at 7:29 am | Permalink

    Quite right and this morning reports are that child benefit may be restricted to children under sixteen years old this is yet another net tax increase in all but name.

    The only taxes that should be increasing are a special new tax on excessive state sector, BBC and the like pensions and pay. To redress the imbalance in pension provision and Gordon's raid on the private ones.

    • Robert Taggart
      Posted October 3, 2010 at 5:27 pm | Permalink

      Agree with the latter point, but, universal child benefit – to everyone irrespective of their income ? Nope.

      • P H
        Posted October 3, 2010 at 9:29 pm | Permalink

        Yes it is clearly daft to tax and then pay back as benefits to the same people. But if universal child benefit is to go then income taxes need to be reduced to compensate. Other wise it is just another back door tax increase.

      • Alan Jutson
        Posted October 3, 2010 at 10:26 pm | Permalink

        Robert

        Agreed.

        Most simple way to save money is to limit Child Benefit to 2 children only per couple, or one per single person.

        Encourages population stability, not growth in this already overcrowded Island. Reduces Welfare costs where some people seem to have more and more children just to keep their Benefit Income up or to push for a better housing requirement.

        In short it should encourage some responsibility in every way.

        No problem at all with people who want a lot of children, as long as the Taxpayer does not subsidise them all.

  2. Norman
    Posted October 3, 2010 at 8:59 am | Permalink

    Thanks for bringing this to our attention. It's good to see an MP at work for taxpayers interests in all these talks of cuts. Watching and reading the media it's as though we don't exist except to fund the public sector.

    I've said it before but we're in danger (if we are not already there) of moving from a country whose government provides a public sector to cater to the private to the other way round.

  3. Nick
    Posted October 3, 2010 at 10:51 am | Permalink

    And the reason is that you advocate increases in spending.

    Unless you cut 28% of government spending, why do think its going to be otherwise?

  4. Alan Jutson
    Posted October 3, 2010 at 12:25 pm | Permalink

    What a surprise.

    Its easier to Tax than to Cut. But the problem is, there is even less incentive to work harder, or work at all.

    It could all end in tears, with an opportunity lost.

  5. Ben G
    Posted October 3, 2010 at 9:14 pm | Permalink

    The problem with trying to cut the deficit by mainly raising taxes is that it probably won't work since it will kill job creation, and reduce economic growth in the real economy; the overall result being the tax take actually falls.

    Right now we ought to be slashing corporate taxes, and not raising personal taxation rates. That won't be enough though without taking an axe to the ridiculous legislation that's been imposed on the economy and the only way that will happen is to take power back from the EU – but the government doesn't have the brains or the guts to do this.

    I'm very hopeful that following the fothcoming drubbing that the 3 main parties will take at the local elections, a few prominent Tory MPs might defect to UKIP – hint hint Mr Redwood 🙂

    • P H
      Posted October 4, 2010 at 9:49 pm | Permalink

      Absolutely right on tax but:

      UKIP is unlikely to ever hold any power at Westminster. There are too many people who always have and always will vote labour (or Tory) and with the voting system they can never really hope to break through to any real power.

      The only hope is a sensible Tory party. True that looks unlikely too but not quite as unlikely as UKIP.

  6. Adam Collyer
    Posted October 6, 2010 at 12:10 am | Permalink

    Tragic but entirely predictable I'm afraid. (As you've often pointed out on this blog, even lady Thatcher never actually cut public spending.)

    One other wheeze those civil servants use is illustrated by the child benefit fiasco. To the civil servants, it's a spending cut. To the rest of us, it's a taxa increase in all but name.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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