As the sterile thinking of incumbent politicians will not be sufficiently radical to reverse the growth in the size of government over the coming years, we asked IEA bloggers how they thought the budget should look. The following budget speech was composed from their responses.
● The government commits itself to no more bailouts of any industry and repudiates all policies that involve economic nationalism. We commit ourselves to a new long-term fiscal policy aimed at restoring the integrity of public finances and reducing both taxes and government spending.
● All accrual of final salary pensions in public sector schemes will cease from 1st January 2010. Negotiations will start immediately with a view to developing new pension arrangements for public sector workers.
● All parents will be able to spend their share of local education authority per-child funding to obtain an education for their child of their choice. This amount will be fixed in real terms at the level of education spending in 2007/08. This means that education spending will fall relative to national income but the quality of education will rise dramatically due to the disciplines of choice and competition.
● Housing support will be focused on the needs of individual households rather than on landlords. Social housing grants and capital supports to local authorities will be abolished and replaced with a revamped Housing Benefit system where support is paid directly to eligible households.
● Electricity generators will be free to decide on which fuels they will use. There will be no more “renewables” targets, subsidies for renewables will be abolished, and companies that decide to build nuclear power stations will be given no form of government aid. The result will be lower electricity prices and much reduced government spending on industrial support.
● The television licence will be scrapped and public service broadcasting funded from general taxation on a competitive basis.
● Large-scale government projects, such as Crossrail, will be cancelled unless they are self financing.
● English regional government and the associated quangos’ bureaucracy and spending will be abolished.
● The proposed identity card system will be cancelled.
● Rates of public sector pay and basic welfare benefits will be determined at local level, based either on local private sector wage rates or purchasing power parities.
● The Barnett formula will be abolished forthwith and a White Paper will be published later this month with a view to reducing per capita government public spending in Scotland, Wales and Northern Ireland to English levels over the next seven years.
Taxation and benefit measures
● All capital taxes and transaction taxes such as Stamp Duty and Inheritance Tax, will be abolished forthwith. Excise duties will be phased out.
● The previous extension of in-work benefits to ever-larger proportions of the workforce, motivated by the government’s relative poverty targets, will be replaced by a system that boosts incentives to progress in the labour market. Working tax credits and related benefits will be streamlined and their level substantially cut, but they will be withdrawn at a lower taper rate.
● All tax allowances will in future be indexed to increases in average earnings.
● The proposed indexation of state pensions to earnings will be cancelled.
● Proposals will be brought in to tax the tax-free lump sum available from pension funds. All revenue will be used to reduce the rate of Corporation Tax to the level of the basic rate of Income Tax to avoid the encouragement to excessive leverage that currently exists within our financial system.
● State-provided disability and incapacity benefits will cease as they relate to risks for which private insurance can be obtained.
Tax and spending measures
● Cannabis will be legalised and we will consider extending this policy to hard drugs. This will reduce spending on policing, courts and imprisonment. Cannabis will be taxed in the same way as cigarettes.