Budget advice for Osborne

When the last Labour government left office (doesn't that sound great - last Labour government), they left three things for the incoming Conservative administration.   A very significant deficit and debt position, a massive £600Bn PFI burden for future generations and a note from the Chief Secretary to the Treasury advising 'there's no money left'.  The latter was at least honest but, as can be expected by Labour, the financial position did not inhibit them making wild spending promises in their 2010 General Election manifesto.

They also left something else.  Some ticking time-bombs in their last and penultimate budgets.  This included the imposition of a 50% top rate of tax.  This was supposed to only be for one year - that was the Labour position, when in power, but then it flipped to them wanting it in place for ever. Same old Labour - lies and hypocrisy!

So, some advice for George Osborne as he puts the finishing touches to the pre-election budget that he will deliver, next week.

Lay-out the Conservative agenda regarding taxes and spending and put these in the budget package so that they can be enshrined in law and present whichever party wins the imminent election, with a clear path forward.  If the proposals are defeated, maybe because of lack of support from the Lib Dems, then this will provide clear evidence of the tax, tax, tax desires of the opponents.

National Insurance - In order to promote the hiring of under 25s, abolish NI contributions for both employees and employers.  All parties make regular speeches talking of the need to reduce youth unemployment, so this should have no opposition - unless it's just lip service that is being paid.

Tax thresholds for OAPs.  It is plainly wrong to overtax people who have made provision for their retirement - either through pensions or savings or both.  So for all pensioners, increase the tax free allowance to £15,000 for the first £30,000 of income.  Then on income over £30,000, reduce the allowance so that for every £1 of income, the allowance is reduced by £2 until the tax free allowance of £12,500 is reached.

Tax Rates for OAPs.  Reduce the rate of tax for OAPs  to 15% on first £30,000, 30% on next £20,000 and then 40% on anything remaining.

Tax thresholds for other workers.  Increase personal allowance to £12,000 for the tax year 2015/2016 and then to £13,250 for 2016/2017 and £14,500 for 2017/2018 and £15,500 for 2018/2019 and £17,000 for tax year 2019/2020.  

Tax rates for other workers.  Reduce the basic rate of tax to 15% and the 40% rate to 38% and commit to reducing this to 36% in 2016/2017, to 34% in 2017/2018, 20 32% in 2018/2019 and 30% in 2019/2020.  Commit to abolishing the 45% rate with effect from the 2017/2018 tax year.

Non-Dom taxes - Increase the Autumn Statement announced charge from £90,000 to £150,000 in 2015/2016 and £200,000 in 2016/2017 and then £300,000 in 2017/2018.

Tax on High value homes owned by companies -  Increase the Autumn Statement announced charge from 50% above inflation to 100% in 2015/2016 and 200% above inflation in 2016/2017 and then 300% above inflation in 2017/2018.

Inheritance Tax threshold and rates - Increase the threshold from £325,000 to £500,000 with effect from 2015/2016 and to £650,000 with effect from 2017/2018 and then £750,000 from 2019/2020.  Impose a flat rate of 25% on any estate in excess of these thresholds.  Exempt all military personnel and Police, Fire and Ambulance personnel that die while on or as a result of being on, active service.

Eliminate the so called Green Taxes - these serve only to put subsidy money into the hands of rich landowners and in the process, impoverish our people.

Then to pay for this,  don't spend, don't spend, don't spend.

Reduce all budgets, across the board by 15%, with the sole exception of defence, with further cuts of 3% for the remaining life of the next parliament.  For defence, meet the commitment to get this to 2% of GDP, and then retain as this level, from 2016/2017.

The astute and economically competent will recognise that even with 15% cuts the budget won't be balanced.  So the ring-fence around NHS and Education expenditure has to be removed and these departments must contribute to the overall reduction in the reach of government.  In order to perhaps mitigate the impact on the 'blessed' NHS consider making the reduction in Local Government expenditure 20% instead of 15%.  That will be bad news for those councils that want to continue their outreach programmes for LGBT unemployed or single mothers but the whole thrust of the budget and Conservative policy must be to recognise that working people must be able to retain more of their money rather than it being taking by the government.

Abolish, completely and utterly, the Department for the Environment and Climate Change.

Also to assist the NHS, ensure that it is clear that the government will not stand as the lender of last resort behind any NHS Trust that, for example was to declare itself insolvent and unable to meet its onerous PFI payments but that were such to occur, the government would immediately intervene to establish an alternative NHS Trust which would not accept the PFI liabilities of its predecessor organisation.

Finally bring MPs back in line with the people that they represent by making the expenses that they receive, taxable, just as they are for all other 'hard-working people'.  I have never heard an explanation of why MPs should be treated differently to ordinary people!  No doubt, being taken down from the lofty levels to which they have elevated themselves,  this will upset some MPs but all MPs must first and foremost recognise that they are servants of the people not their rulers.

Election Budget for UK

George Osborne is, in addition to being the UK's Chancellor of the Exchequer, the Conservative Party's internal election strategist.  So this begs the question, will he use the upcoming budget as an opportunity to start the process of rolling back the state and reducing taxes?  Will he take the chance to load the dice in favour of the Conservatives or at least directionally the Conservative way?

There is a convention in British politics that a current government cannot burden future governments or tie their hands etc..  This doesn't though, seem to apply to taxation.  Rates set by one government end-up being followed by successors.  Neither though does it seem to apply to any other than 'future unclear' policies.

So..........

How about a budget from George that lays out a tax-cutting and spending-cutting strategy, into the future?  How about the 2014 Budget speech going something like this.

Tax Threshold
The popularity of this coalition government's policy of raising the tax threshold, which will reach £10,000 starting this year, is such that we will continue with this strategy of taking more and more low-paid people out of tax, altogether.  The budget that I bring before the House today, includes measures to raise the tax threshold to £12,000 from April 1, 2015 to £15,000 by April 1, 2017 and £20,000 by April 1, 2020.

Income Tax Rates
The budget also includes measures to reduce the basic rate of taxation to 18% and the next rate of taxation to 39%, with effect from April 1, 2014 and to reduce to 15% and 35% respectively by April 1, 2017.  Also to eliminate the current top rate of tax, of 45%, with effect from April 1, 2016. 

These measures will serve to continue the reduction of the tax burden on the lower-paid, which has been a feature of this government's tax policies.  At the same time, recognizing that the 45% rate is a dis-incentive to individuals we will abolish this punitive level.  We already know, from numerous independent and government fact-based studies, that high rates of taxation produce little in the way of meaningful income raised for the exchequer and only serve to engender a divisive culture of envy.

Inheritance Tax
Inheritance Tax is often cited as an iniquitous tax since it argues against our people putting money away for their future and providing for their loved ones.  It also taxes that which has already been taxed.  With effect from April 1, 2015 the nil-band threshold will be raised to £1 million.  This will then be raised by £200,000 on each successive April 1, so that by April 1, 2020, the nil-band threshold will be £2 million.  At the same time, with effect from April 1, 2015, the rate of taxation applied will be reduced to 30%.

Non-Doms
The issue of non-domiciled taxpayers has long been an issue for this House.  People that live in the UK and enjoy all the benefits that this brings, do need to contribute more to the country in which they reside.  Effective from April 1, 2014, the so called non-dom tax will be raised to £100,000 and will then rise by increments of £200,000 on successive April 1, until April 1, 2020.

Fuel Taxes
It is widely recognized that fuel duties impose a heavy burden on small and medium sized enterprises.  This government sees such SMEs as a powerful force in continuing the growth that the policies of this coalition government have engendered.   Effective from midnight, all fuel duties will be reduced by 5%.  We intend to go further and enact, in this budget, future reductions in duty such that in the next 4  successive years, on April 1, fuel duties will be reduced by a further 5%.  Thus by April 1, 2018, fuel duties will have been reduced by 25% from their current levels. 

SMEs
Staying with SMEs and here we mean a business that employs less than 500 people.  Effective from April 1, 2014, an SME that engages a new employee, will be able to enjoy a 5 year NIC holiday for that employee for both the employer and the employee.  We will also enact legislation that extends this '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.  This is expected to provide a further boost to the employment prospects of our youth and to help Britain avoid some of the horrendously high levels of youth unemployment, seen elsewhere.

Green Taxes
The government is committed to protecting the environment, however, after review of the so called 'green taxes' that were brought in under the last administration, we have decided to abolish them, with effect from April 1, 2014.  Our review has concluded that these taxes do nothing meaningful to reduce carbon emissions but do place a very heavy burden on the pockets and budgets of our people.   Our review results point to the conclusion that temporary reductions or freezes in these taxes is a gimmick.  What is needed, to help the British energy user, is abolition that will aid our industry and improve its competitiveness, where it is up against other nations that are not so burdened and this will also bring very welcome relief to our people, particularly those on low or fixed incomes.

Spending
While the positive effects of cuts in taxation on the economy are known and thus expected, this government believes it prudent, if I may borrow a phrase, to also reduce spending.

This government believes that it is not a given that government has to be involved in everything.  In the past we managed very well as a nation, when we had smaller government.

We are seeing for example, in the educational reforms that are being implemented, that when central and local government step back and allow other providers into the system, great and beneficial changes follow.

Balanced Budget
This government aims to continue to reduce the deficit and strives to start to pay down our already high debt.  The country is now experiencing economic growth, after the disruption felt by the 2008 banking crisis.  The growth is not as uniformly spread, as we would like but the tax cutting measures, of which I spoke earlier, will start to address this.  However, we do not believe that it is sustainable to continue with old borrowing and spending and borrowing  patterns.  Every householder knows that when times are better, then is when you put money away for the future - when you can afford it.  That isn't the time to go out and get further into debt!  As for the average household, so for the country.

This budget will enact legislation to ensure that with effect from the fiscal year commencing on April 1, 2014, all budgets placed before the house are balanced without the aid of further borrowings.  Going further, any surplus that is achieved, where taxes raised exceed public expenditure, will be used to pay down government debt.  We owe this commitment not just to the current inhabitants of Britain but to the future generations.  We must be able to look into the eyes of our children and grandchildren and say that we put a great debt burden on you and your children but we are working to lift this burden.

Department of Energy and  Climate Change
With the earlier mentioned abolition of so called 'green taxes', the Department of Energy and Climate Change will cease to exist, from April 1, 2014 and all of its personnel and facilities will be reduced to zero by April 1, 2015.

Local Government
We have continued to see local councils failing to heed the message that all households have received in the last few years.  Belts need to be tightened!  Speak to any working person, up and down the country and they will tell you that they have had to draw in their horns and learn to spend less.  This is plain common sense but it hasn't percolated through to some of the town halls in Britain, where waste and profligacy continue.  Therefore, the settlement for Local Government, for the fiscal year commencing April 1, 2014 will decrease by 15% from the preceding year's levels, across the board.  There will be an exception to this.  Those councils that propose no increase in fiscal year 2014 Council Tax rates, will not receive a decrease in the settlement. 

From April 1, 2015, the settlement will be reduced by a further 5% and this will continue for the fiscal years commencing April 1 2016, 2017 and 2018.  Again, those councils that do not increase council taxes for their people, will only see the settlement be reduced by 2.5%  in those years

Welfare Benefits Cap
My colleague the minister for Works and Pensions will introduce legislation that reduces the so called benefits cap, to £20,000 with effect from April 1, 2015 and then by £1,000 for each successive year up to 2020, so that by April 1, 2020 the cap will be £15,000.  This government believes that as a nation we must make work pay and reward the workers not the shirkers.  These are strong words but it is a fundamental of the British way of life that hard work should produce rewards, not idleness.  It is not the job of government to give people the wherewithal for life's luxuries.  A safety net, yes! A  smartphone or wide screen TV, no!

Welfare Trap
My colleague will also introduce legislation with the aim of eliminating the so called Welfare Trap, where persons coming off of benefits find that for every extra pound they earn, the cost of taxation and reductions in benefits are such that the effective value to them, of working is very small.  This legislation will take effect from April 1, 2014 and will allow for transitional arrangements for those long term unemployed - defined as those having been in receipt of state benefits for longer than 12 months - such that for the 12 month period following their taking up employment, the reduction in benefits will be such that the effective rate is not greater than 50%.  After those 12 months, and continuing for a further 6 months, the reduction in benefits will be such that the effective rate of reduction would be 25%.  This would mean that after 18 months, the special concession for a  long term unemployed person would cease.  This government did not create this welfare trap but this legislation will give people the opportunity to move into employment and off of benefit dependency.

Other spending
All other departments, except for the Ministry of Defence, will reduce departmental budgets, for the year commencing April 1, 2014 by 10%.  For the years, commencing April 1, 2015, 2016, 2017 and 2018, the budgets will reduce by a further 5%, from the immediately preceding year's budget.      

This is a budget for the people of Britain, this proposes reductions in taxation, paid for by reductions in spending.  We don't aim to put money into people's pockets.  We aim to leave it there and not take it out in the first place!  This is a budget unashamedly for workers.  This is a budget also for our children and grandchildren - we must start to reduce debt, for their sakes.  

I commend the budget to the House!