Osborne's last chance

Maybe the title isn't strictly true.  There is always the April 2015 budget but tomorrow, when Chancellor George Osborne delivers the government's Autumn Statement, he has to get it right as this will set the tone and the battle lines for the 2015 General Election.

I have already posted here and here on what I think should be happening but I wanted to have a last- minute rant or contribution to the debate, depending on your view, on what George Osborne should be saying, tomorrow.

First and foremost, the UK is broke.  I'll say that again. The UK is broke.  We are more than £1.4 Trillion in debt.  How much more than £1.4 Trillion?  Nobody knows.  That £1.4 Trillion is just the admitted debt.  It doesn't include unfunded liabilities like future pensions to be drawn by civil servants, local government employees and MPs.  It doesn't include the more than £350 Billion of NHS Private Finance Initiative debt nor lots of other 'off Balance Sheet' financing of the type in which Gordon Brown's Labour Treasury, excelled.  Note, when companies like Enron used such accounting techniques, they were, rightly, pilloried and ended up being declared for what they were - bankrupt!  However, for entities like HM Government, the rules get suspended.

So, with a 'broke' UK, the opportunities and choices are limited.

We cannot afford HS2 - so we scrap that and save, more than £50 Billion.  Let's be clear though, that isn't really a saving - as it is just a reduction in future borrowing needs.  Also, for the sake of clarity, everyone knows the £50 Billion number is just the starting point.  The final number will be much higher, if we were to proceed.

We cannot afford International Aid.  Sorry Bono but Britain simply cannot borrow money so that we can give it to others - no matter how genuine and heart-wrenching their need may be.  It cannot be about Britain sitting on the big table and lording it over others like China, because we meet the aid obligations and they (and other nations) don't.   The money we give to other countries is ultimately funded, on an interest bearing basis, by those same Chinese!

Britain must cut back on overseas ventures.  I would dearly love us to be able to project a strong military presence around the globe and demonstrate the strength and value of our democracy and traditions but we simply don't have the money.  Today, the biggest foreign investor in Africa is China and yet how much do you think they are contributing to fight the spread of Ebola?  Britain does have a strategic interest and, to some extent a local one, in the fighting in Syria and Iraq but the major beneficiaries of holding back ISIS are Iraq, Iran, Turkey and Saudi Arabia and other neighboring countries.  If Britain is to fight on their behalf, then they should pay us top dollar for doing so.

Now to domestic matters.

All government spending must be cut.  That is all as in all.  No ring fencing, no special cases, no phasing in.  Simply put, no, no, no!

Or another way, cut, cut, cut.

Firstly, and this helps Cameron cut the Gordian Knot about immigrants, immediately announce a cut in welfare payments to all non-native born Britons.  If you do not have a British passport, or the right to one, then you get no welfare.  Zero, nada, zilch.  I know that Human Rights lawyers and the European Court of Human Rights (ECHR) and all of the others that want Britain to spend money it doesn't have, will scream and shout and threaten all sorts of retribution but that's all they can do.  We must pass legislation to immediately end our association with the ECHR and abolish the Human Rights Act.  Another advantage of doing this is that it will end the Coalition and the Conservatives will have to govern alone, without the dead, interfering hands of the Lib Dems on the tiller.    I would think that George Osborne could even sell raffle tickets, for the benefit of the national debt of course, for the winner to tell Vince Cable he is fired!  I would buy a ticket for a fiver.  Hell, I might even buy two just for the chance to see the look on the face of a man who has taken sanctimonious 'prattishness' to new Olympian heights.

Secondly, as said before, tell the NHS, that funding is cut by say 20%.  This can be reduced to 15% if they abrogate their PFI deals and get significant reductions in their PFI payments.

Thirdly, All other government departments a significant cut in expenditure plans as outlined in my earlier mails.  Though, the more I think about the unsustainable deficit and the increasing debt mountain, perhaps deeper and faster cuts are required.

Clearly, some people will suffer from these cuts.

 Foreigners who take advantage of our overly generous welfare payments.  Financiers who gulled a spend-freely Socialist government into excessively generous PFI deals, and NHS back-office staff and civil servants who allowed this to happen - 'because at the end of the day, the Government will pay'.  They will suffer loss.  hard as it sounds, I don't think that is our concern.

So too though, will Britons suffer loss and therefore the tax cuts side of the equation needs to be put in place.  Accelerated raising of the tax threshold, immediate reductions in fuel duty and abolition of asinine 'Green' taxes will be a start.  Here's a further idea.  Use some of the money that  is saved by not funding International Aid, to promote charitable giving at home.  Allow  people tax-relief on up to say £1,000 of a contribution that they make to any charity that supports UK based charities that only work in the UK.    So nothing for contributing to Oxfam, Band Aid or Save the Children but full relief, up to £1,000 for money or goods given to a local food bank, for example.

This should be the thrust of the Autumn Statement but, scared by UKIP and bullied by their Coalition partners, the Lib Dems and in thrall to the Labour dominated media, Osborne's speech will likely mean more borrowing, more debt and the sound of cans being kicked down the road.

Taxing times for the Chancellor

With the UK budget scheduled to be unveiled on March 20th, Chancellor George Osbourne is receiving lots of advice on what to do.  So I will throw in my 'two-pennorth worth'.

Essentially there are three problems.  The UK is over-taxed, lacks economic growth and is over-stretched, debt and deficit wise.

I hold to the opinion that economic growth and tax reductions are self-supporting.  Cuts in taxes (however these are labelled) will stimulate growth.  There has been talk of further bouts of Quantitative Easing - where the Bank of England prints 'money' and pumps this into the economy.  I still hold to the view that the only way such inflationary measures will work is if you actually put the money printed, directly into the hands of consumers.  Please don't tell me that the BofE buying government debt is benefiting the economy (I will return to this later).

So to tax cuts and economic growth.

Firstly, let's do something simple about employer National Insurance Contributions (NIC).  Though how something that is compulsory can be called a 'contribution' escapes me.  So, how about this.  Effective from the day that this is announced, any Small, Medium-sized Enterprise (SME) that engages a new employee, will be able to enjoy a 5 year NIC holiday for that employee.  In my mind, an SME is one that employs less than say 500 people.  That should help stimulate employment growth and reduce a cost burden on companies.

In fact, let's take it one stage further, and extend the holiday, until the new employee's 25th birthday.  So either 5 years NIC holiday or until the person reaches 25 years of age, whichever is later.

Secondly,  be bold!  Reduce the basic rate of tax to 15% and accelerate the raising of the tax thresholds.   Raise the threshold for 2013/14 to £12,000 and, here is the crafty bit, enshrine in the budget a commitment to raise it in the next 5 years by £2,000 each year.  I appreciate that this may provide a dilemma for the Labour party - will they oppose or finally stand-up for low-paid taxpayers?  This might flush out who it is that they actually represent - the workers or the shirkers!

Third, reduce the next rate from 40% to 38%, again, with a commitment to reduce this by 2% per year for the next 5 years.  That might help the squeezed middle class that politicians bleat about so often but rarely actually do anything about!

Fourth, eliminate the 'green taxes' that are currently imposed, with immediate effect.  These economically insane charges merely transfer money from masses of people to an ever-richer few.  The taxes can never work in reducing so called greenhouse emissions, the science on so-called global warming is being daily discredited (and exposed for its untruths) and the UK acting unilaterally is plainly madness.  Sorry Britannia but you no longer rules the waves and while you saddle your people and companies with ever higher energy prices, the rest of the world is getting on with making a living!

Fifth,  and this is where the equation starts to balance out and where we address government debt.  Commence a programme of real cuts in government expenditure.  In all departments, take the 2010/11 out-turn as the basis and cut all expenditure by 10% in the coming year and enshrine 2% cuts in expenditure for the next five years.  Again, challenge the tax and spend socialists to decide on whose side they are on - the tax payers or the public service unions?

Sixth, abolish the Department for the Environment and Climate Change - completely.  Oh and this is over and above the savings from the preceding paragraph!


Please stay with me, not far to go now.

Seventh, Include a measure that with effect from after the 2015 election, MPs expenses will be subject to the same tax rules as those of the rest of the population.  That is, the benefits in kind that they receive (free or subsidized transport, meals and housing support) are taxed just as they would be if these privileged few were treated the same as the general population.  Some may say this is unfair but since those standing for election know the terms and conditions under which they will be employed, I suggest we ignore their complaints.  Remember their basic salary is more than two and a half times the national average wage.

Eigth, Local Government - commencing with this fiscal year, set a limit of minus 5% on council taxes - so they must cut council taxes by at least 5%.  Those that don't will see the central government grant being reduced by the amount that they would have had to reduce expenditure  to afford this cut.  Again, enshrine this in the budget and see the socialists and their fellow tax and spend travelers squirm.

We must get to a stage where tax increases - income, NIC and council taxes - are not considered natural, quite the reverse.  We have come to a stage where a council pats itself on the back if it keeps a council tax increase down to inflation levels.  That is plain wrong - what we need is cuts and continuously so - councils, like government, need to get out of the way and only do the things that the individual can't do.

Ninth, tell all government departments to re-negotiate all of their PFI deals, with a minimum target reduction of 20% in PFI fees required.  If these can't be achieved because the financiers won't play ball, then cancel the contracts.  Walk away and give them back their schools, hospitals and government office blocks and make a court date!  

Tenth, ensure that the budget includes a measure that states that if the recently 'won' EU budget cuts are not approved by the European Parliament, then the UK will immediately cease all payments to the EU - all payments.   Please don't even bother to talk about democracy and such, in the same breath as the  EU, EU Commission or EU parliament and that such an act would be undemocratic.  These people need to understand that we, the people, have had enough.  There is no more money, as Liam Byrne said.  There is no more gravy train.  No more is going into the trough!

OK, so maybe this, when run through the various Treasury models, won't be cost neutral but since we are increasing the deficit anyway, isn't it better to do so, in order to put money into tax-payers pocket's?  That is my kind of Quantitative Easing!

PFI - Call their bluff

The Private Finance Initiative was a great 'wheeze' dreamt-up to park long term liabilities off of the balance sheet of UK Inc.  You know, the kind of thing that got Enron into trouble and caused UK politicians, of all hues, to rain down criticism on these people.  No hypocrisy there!

 NHS hospitals are under increasing financial pressures and are faced with long term liabilities (PFI contracts) that they simply cannot sustain.  If the NHS was a commercial organisation it would approach it's landlords and seek revised terms - bluntly stating that they can't afford the payments, any longer. 

So why don't they or rather the individual trusts do just this?  What will these finance companies do - sue the NHS trusts?  If the NHS just turned back the property to the funding institution and each trust declared itself bankrupt, what then?  I can't think that there would be anything to stop other organisations immediately (or even in anticipation) setting themselves up as trusts (authorised by the Department of Health) and then offering to make use of these facilities but at reduced rates.

It is only because the PFI companies know that at the end of the day, the UK Taxpayer sits behind and acts as financial guarantor for the NHS Trusts, that they do not adjust their rates. 

So, take away that guarantee. 

I know, some will say 'it is unfair to change contractual terms after signing a contract' but that happens all the time in business.  The majority of these contracts were signed when the UK was living in denial and way beyond its means.  Times have changed.  These contracts need to do likewise.

The smart PFI people will read the writing on the wall and volunteer to reduce rates.

If we can't do the above, then let's tax the gross income from such contracts at a higher rate - say a special levy of 25% might be a good start.