I was interviewed by a major newspaper yesterday on how much I thought UK taxes would increase by over the life of the ConDem government. My response was it dependence very much on how you thought they would seek to control the deficit – if they really thought that so important (and group think can be wrong, of course – as was prove on the way into this mess).
Broadly speaking the Tories favoured a 4:1 ratio of cuts to tax rises, the Lib Dems 5:2 and Labour 2:1. That’s not as dramatic as it sound. It means the Tories wanted 80% cuts, Labour 66% cuts and the Lib Dems 60%.
Estimates of how much needs to be financed vary: £80 bn seems to be the latest fixation.
Government spending this year is:
So that’s 11.3% to go.
Except Health is supposedly ring fenced. As is overseas aid – in “other”.
Social protection won’t be going down much. Nor debt interest. I can’t see defence cuts being a winner under the Tories. nor cuts in law and order.
So it’s education, transport, social services, industry, housing and some other that will take the hit. Plus some other. £250bn of budget will bear most of this, and education will have to take the most.
So it’s class sized of 50 with no teaching assistants then?
I don’t think so – and nor does anyone else.
My comment to the paper in question was a as a result that cuts will not be of anything like the predicted order. The deficit will be tackled 80% by tax increase and 20% by cuts at most.
The Telegraph seems to agree this morning:
City economists now view it as an odds-on probability that the coalition will raise VAT to 20pc within 18 months, according to a panel of economists regularly consulted by the Treasury.
Others warned that the VAT increase may be able to raise barely more than a fifth of the revenues required.
Jonathan Loynes of Capital Economics warned that the Office for Budget Responsibility, the three-man independent committee charged with assessing how much to cut the deficit, could urge the Government to raise taxes by £50bn, which would imply that a 9.5p increase in the basic rate of income tax would be necessary on top of a VAT rise.
He pointed out that the committee, chaired by Sir Alan Budd, may take issue with the Treasury's existing economic forecasts, and could question the ease with which spending can be cut.
Mr Loynes said: "Tax increases eventually worth £50bn or more may be needed, at least some of which may be implemented in the emergency budget."
What was unsayable a week ago – except by me – is now being said: tax rises will happen.
VAT offers about £12bn at the rate predicted.
And may £48bn more is needed.
Only income tax can deliver that. Or, of course the programme outlined in The Great Tax Parachute which would avoid that necessity.
Don’t doubt it: tax is now centre stage.
And ConDem denials that this is what they planned just a week ago will bring their government down. Not yet. But unless they are willing to impose new taxes fairly and equitably as the Great Tax parachute recommends – and Tories never have – then we’re heading for massive social injustice.
Because let’s be clear what tax increases of this order mean. About 30 million people pay tax in the UK. Every single one is going to be asked to pay an average of £2,000 more.
That’s what this is all going to be about. this is the price we’ll pay for bakers folly – and putting their friends in charge of the bail out.