The intention of the recent spending review was apparent; to shrink the state at the expense of the poorest members of society. The Institute of Fiscal Studies, generally a right of centre institution, has confirmed this stating the cuts will have a "regressive effect, hitting the poor much harder than the rich.” Cameron has recommenced the Tories war in its against the poor in “going after fraudulent benefit claimants”. However, back in January of this year, I’m sure that Cameron will have seen reports that benefit fraud costs the UK £1billion per year, whereas tax evasion costs the UK more than £15billion per year. However, they have continued to attack the poorest members of society, as opposed to the real fraudsters - those with enough money to afford accountants.
Cuts in welfare will affect the most vulnerable members of society including the disabled, the impoverished and those who are long-term unemployed. In addition, the job losses because of these cuts will add further strain to the welfare state, which simply cannot afford another 500,000-1,000,000 joining the growing list of people on benefits. The assurance by failed right-wing ideologists that the markets will provide replacement jobs simply does not stand up to any level of scrutiny. Most employers are “increasing efficiency” by shedding jobs, as opposed to employing new members of staff. This view is backed up by CIPD confirming that most employers intend to decrease staff levels as opposed to increase them.
In addition, the increase to the pension age will add further pressure to the job market; there simply aren’t enough jobs in the private sector to stretch to the new people joining the jobs market.
There is a lack of joined up thinking in the approach taken by the Government, and a rethink is immediately required. A solution to the “crisis” cannot be taken by a single state alone. What is a worldwide problem cannot be solved by a unilateral approach. Inflationary pressures are none existent; wage rises have been frozen in most circumstances in both public and private sectors and consumers simply aren’t spending in previous volumes. Therefore, interest rates have to stay low and a second round of quantitative easing should take place to ease the economic pressure and deliver sustainable growth. The UK lead the way in dealing with the banking crisis, and must lead the way again, encouraging other nations to follow the same path of recovery through investment in education, training and job creation. Additionally, revenue must be raised through a progressive taxation system must be introduced helping the poorest members of society, whilst taxing those who can afford to pay more. If this Government continues upon its current course, the UK is heading towards a huge social division bringing with it social unrest, mass unemployment and economic and social anarchy.
An outline of an alternative strategy to improve the economy is as follows:
An immediate halt to the cuts in public services, thus saving the treasury from having to make additional benefit payments
A further round of quantitative easing to encourage growth and economic improvement
Savings in tax relief on personal pensions by introducing a universal rate of tax relief of 20% as opposed to 40/50% for the richest members of society
Introduction of a fairer tax system, with the nil rate band stretching to £10,000 thus encouraging more people into work, further reducing the benefits bill
A progressive increase in the tax rate according to earnings, beginning with a graduated increase in taxation from a 20% figure at £10,000
A fairer tax system for the self employed. The PAYE system is overstrained due to a lack of input from the self-employed. The “grey economy” is growing and must be taxed accordingly
Attacking the tax fraudsters who cheat the UK out of £15billion worth of tax receipts
Lowering of the threshold for inheritance tax, and an increase in the rate applied not only providing additional tax receipts, but helping create a fairer society
A windfall tax on previously nationalised utility companies, to reclaim some of the excessive profits made by wrongly privatising these. A proportion of the profits made since 1997 should be reclaimed.
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