There is going to be some extremely bad news in the Budget. Public sector borrowing is rocketing out of control, and is now expected to hit around £190 billion in 2010/11, and threatens to bury any recovery and create a double dip recession. With their new 45p income tax rate, the Government have sadly already started to put in place symbolic measures that will do little for the public finances but will undermine Britain’s long term competitiveness. Those measures will have to be backed up by big tax rises if the Government don’t put in place significant cuts in public spending. With the tax burden having gone up significantly over the last ten years even before this crisis got under way, that would mean a crippling burden for ordinary families and do massive damage to Britain’s economic prospects.
That makes Alistair Darling’s pledge to cut spending by £15 billion very welcome, if perhaps insufficiently ambitious. What we need now is for him to demonstrate a genuine willingness to cut back the bureaucracy. Imprecise pledges of ‘cuts’ tend to get politicians in trouble because the public have heard them before. The key to making a pledge to cut waste credible is to show a willingness to take concrete steps that would reduce the size of the bureaucracy and get rid of wasteful organisations.
The Regional Development Agencies are one place a waste cutting programme could start. The roughly £2 billion that they spend each year could be better used forestalling increases in taxes like National Insurance that make it more expensive for businesses to keep people in work. After that, Darling could slash back the BERR bureaucracy and increase the savings to around £3 billion. Other potential targets could include the Strategic Health Authorities, which are the NHS regional tier, and huge savings could be found within the education quangos and department if the Government started making schools accountable to parents instead of Whitehall. Cutting wasteful government will mean making policy choices that allow public services to do more with less.
Business support is just one area where the Government could start showing a genuine willingness to take tough decisions and reduce the size of the expensive bureaucracy that threatens to bankrupt Britain. Until we hear about those kinds of concrete steps, we should sadly expect that the Government will continue to try and finance massive deficits by trying to squeeze ever more out of taxpayers already wrung dry by tax rises over the last decade. And the risk of a serious collapse in the public finances will continue to hang over the economy for some years to come.
Matthew Elliot is Chief Executive of the Taxpayers’ Alliance