We saw yesterday that the OBR forecasts a gently rising recovery from here. People’s real incomes will go up modestly, share and property prices will rise a little, more people will get jobs. The trouble is the OBR have been too optimstic before about this economy. It would be wise for the government to take more action to try and ensure a faster recovery, and head off more bad news and downgrades like the ones we have experienced for the last two years.
I want people to be better off. I extend that wish to people at all income levels. Lower tax rates could help. So too could a faster rate of economic gr0wth, generating better returns for savers and higher incomes for those in work. Breaking up the state banks, writing off bad debts to speed the day when the banks have good enough balance sheets to lend more against decent projects, is central to making progress. A new generation of would be home buyers and entrepreneurs are being denied access to proper credit facilities thanks to past errors, weak bank balance sheets and now super prudent regulators who cannot resist getting the cycle wrong both ways.
I do not wish to hit people on low incomes by being mean on benefits for those who need them. The government is right not to hit the pensioners and the disabled with increases in pensions and benefits below the level of price rises. I have no wish to cut important public services. I do, however, think the government is correct in saying it must get the deficit down, and make progress in limiting the build up of debt. The Opposition too agrees with this, though there are still rows over timing and extent.
So how can you square the circle? The answer surely is to be generous to those in need, but to be firmer over eligibility for state help. Many of us wish to be generous to pensioners, so maybe as longevity rises so we have to make further increases in the age of retirement to help balance the books. A 60 or 65 year old today is on average fitter and likely to live considerably longer than the equivalent twenty years ago.
We should speed the moves to control our borders better. We should not extend out of work benefits to people who recently arrived in the UK and are not UK citizens. If they come here under the free movement of workers they should not be entitled to out of work benefits for doing so. The availability to work test should be applied to ensure that those who can work do work when work is available.
The introduction of a high cap for housing benefit in understandable, as the government does not wish to destabilise families living in dear to rent homes . There could be a much tighter cap for new claimants.
The UK could have a couple of years off from meeting the 0.7% target for Overseas Aid whilst we are sorting out our large budget imbalance. There are still items in the Overseas Aid budget that do not represent value for money, or further the noble aims of relieving poverty and disease in the poorest countries. Mr Cameron could dig deeper over the excessive contributions we currently make to the EU budgets. Why not tell them we do not wish to contribute to the EU regional aid and agricultural programmes? it would be cheaper to do our own.
There is universal acclaim for more public capital spending. We need to remember that these are often growth projects, which then need revenue finance to keep them running once built. When trying to reduce public spending, you do need to limit new capital works. If we gain better control over our borders then we will cut the need for extra schools, hospitals and social housing, which will represent a substantial saving to the taxpayer.
Let’s have lower more competitive tax rates, better working banks, and more realistic public spending. Then we could match or probably exceed the OBR’s forecasts for rising incomes and a more successful economy. Some seasonal cheer is better than more gloom about austerity.