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How last week's Budget could have been a lot more radical

Last week's Budget by George Osborne has been widely and deservedly welcomed by most on the Right as an ambitious attempt to repay the debts left behind by Gordon Brown.

It boosted the Tory position in the opinion polls and Ipsos-MORI found that Mr Osborne was the most popular Tory Chancellor in their history of polling! I fear that won't last in a world where Prime Ministers go from hero to zero within months but it's nonethless a welcome start.

Missing5Could the Budget have been better? It could have used the opportunity of crisis to have been a lot more radical. Here are my five suggestions...

(1) Higher sin taxes to pay for lower jobs taxes: George Osborne promised a review of certain sin taxes in the autumn but I was surprised that he did not use the opportunity of the fiscal crisis to tax things that are least socially useful (eg smoking, drinking, pollution and the hi-value housing market) to cut taxes on the things that our economy most needs at present (jobs and investment). I don't like so-called replacement taxes at election times because voters understandably suspect that the taxes you promise to increase will increase but the revenues from those taxes won't all go to funding tax relief. The UK economy desperately needs growth at present and higher taxes on the less socially desirable activities are a price worth paying for lower taxes on job creation.

(2) Middle class welfare could have been used to pay for welfare-to-work: Too much of the UK's welfare system (£53bn according to Policy Exchange) benefits higher earners. Axeing just one-fifth of that bill and diverting it to help eliminate the disincentives that face low income people as they move from benefits into work would have benefited all taxpayers in the medium run as dependent people move from beneficiaries of the Exchequer to net contributors.   

(3) A fair squeeze on NHS spending: I've already written enough about this but tighter control of NHS spending could have been used to avoid the job-destroying VAT increase or to ensure cuts in non-protected departments were realistic. Lord Lawson joined the chorus against NHS ring-fencing yesterday.

(4) Replacement of the Barnett formula with a Big Society Fund: Even the left-leaning IPPR says the current formula used to send English taxpayers' money to the rest of the UK is "inequitable".  It should have been reformed and the savings invested in a fund to support the 'Big Society' (an idea strangely absent from the Budget). I would have used the Big Society Fund to invest in small charities with innovative records of tackling social problems. Charities that showed good use of small grants could get access to a ladder of help which could include first matched funding, then loan facilities, then a right to take over under-used community assets and eventually a passport to run public services (all steps in the ladder would reinforce independence from government). The best political revolutions leave behind institutions and the Big Society Fund could be used to create an alternative voluntary sector, built by churches, community-based not-for-profits and the new parent-run schools. Such a Fund would bring welcome radicalism to Nick Hurd MP's current civil society strategy, which is regrettably skewed towards establishment NGOs.

(5) Time limits on tax rises: Mr Osborne could and should have done more to communicate that the tax rises introduced because of the fiscal emergency are time-limited and will not be kept to fund a permanent increase in the size of the state. 'Sunset clauses' inserted into, for example, the 50p tax band would have sent the right message to the nation's wealth creators.

Tim Montgomerie


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