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A budget to counter the Osborne wasteland

Osborne's gladstone budgetboxYesterday I focused on Osborne’s overblown and hollow claims about recovery which will pervade his budget tomorrow, but today I propose to answer the obvious retort: so what would you do?

First, the haemorrhaging of public service jobs should be ended.  Already 642,000 jobs have been cut from the public sector since 2010, and Osborne has pledged that a further 100,000 jobs or more will be cut by 2015.  Keeping those jobs would cost £3bn in the year to the 2015 election, though that is discounted by £660m in the form of income tax and national insurance payments that would be made to the Exchequer.  The remaining £2.34bn could be raised by bringing in a permanent tax of 50% on bankers’ bonuses above £25,000 which raised £3.5bn in 2010.

Second, the public sector 1% pay cap, which Osborne plans to continue till 2016, should be lifted.   It is discriminatory against the public sector and its retention cannot be justified.  Paying at a level that keeps pace with inflation would cost £3.2bn, while paying at the rate recommended by the Low Pay Commission would cost £5bn.  That could be raised by reversing Osborne’s cut in corporation tax for big businesses to levels lower than the US or any other G7 economy, which would generate £4.4bn.

Third, the cost-of-living crisis should be addressed as an emergency.  A mansion tax on the most expensive homes which raised £2bn would pay for reversing the 10% cut in Council Tax funding (£475m), reversing the bedroom tax (£550m), and reversing the 1% limit on the increase in Child Benefit and increasing it to 5% instead (£880m).

Fourth, the Living Wage should be introduced as a matter of urgency.  The IFS calculates that paying the Living Wage (£7.45 an hour, and £8.55 in London) in the public sector would cost £3.4bn.  However the Resolution Foundation and IPPR estimate that if the Living Wage were applied to all employees in the UK, the savings to the government from higher income tax receipts and national insurance contributions, plus less spent on means-tested social security payments and tax credits, would amount to £3.6bn.

Fifth, the government should launch a major housebuilding programme concentrated on social housing for the 1.8m households on Council waiting lists and the 80,000 in temporary accommodation because they are homeless.  The National Housing Federation has stated that investment to deliver 10,000 homes would deliver 75,000 jobs and contribute £4bn to the wider economy.  A Labour government should therefore bring in an annual £5bn building scheme that would pay for the construction of 100,000 new homes a year and create up to three-quarters of a million jobs whilst at the same time contributing £40bn a year to the wider economy.

Sixth, the budget should replace Osborne’s goal to cripple the public sector by re-inaugurating an era of properly funded public services.  Social care funding for the aged has been deprived of £2.8bn funding since 2010.  This should be paid back by removing the VAT exemption from private health care treatments, which would raise £2bn, plus requiring the use of the most cost-effective medicines in the NHS, which would raise a further £1bn.  Other ways to raise funds for better public services should also be pursued, including levying levying tax on long-term empty dwellings (£2.2bn), introducing derelict property and brownfield land taxes as recommended by the Lyons Inquiry into Local Government, and enabling local authorities to levy small local taxes such as on tourism and the environment.



  1. Debs says:

    Hi Michael,

    I agree wholeheartedly with most of your points here – but I’m a bit uneasy about the ‘tourism tax’ you mention in point 6. I live in an area (Snowdonia) which is heavily reliant on the tourism industry. This area does not have a strong economy, there is high unemployment, and little in the way of ‘industry’ – apart from tourism, which provides a good deal of the local employment and income, one way or another. I’d be interested to hear how your ‘tourism tax’ might work, and how it might impact on areas like Snowdonia where employment relies so much on tourism.



  2. David Ellis says:

    `The remaining £2.34bn could be raised by bringing in a permanent tax of 50% on bankers’ bonuses above £25,000 which raised £3.5bn in 2010.’

    Michael, bankers should not be getting bonuses. Bankers should not be making profits. Bankers should be serving the real economy and should be paid salaries for doing so like everybody else. The fact that bankers get bonuses shows that they are not banking but speculating, gambling, false accounting, creating counterfeit claims on social wealth. To tie workers into this casino such that their local hospital or whatever depends on some City Fat Cat making a good bet is immoral and deeply corrupting. Banking has to be bought under social control. The bankrupt banks must be allowed to go bankrupt, their staff, estates and deposits bought into administration and used to form a new People’s Bank lending at base rate to small business and facilitating social investment in accordance with a democratic and sustainable plan. It must have a monopoly of credit so that privateers can never again operate their scam Ponzi Schemes and bankrupt an entire nation.

  3. David Pavett says:

    I am not an economist so what I say has the form of genuine puzzlement for which I would be grateful for a clear response or two.

    (A) Of the six measures proposed (1) and (2) involved increased spending on public sector wages, (4) involves increased wages in the public and private sectors, (6) requires increased expenditure on public services. That is all outlay which has to be paid for somehow. Only (3) which redistributes wealth, (5) which is a direct increase in productive activity and the cost cutting and tax measures in (6) would make more money available for expenditure. In order to balance the books should there not be rather more emphasis on measures to stimulate productive activity? And don’t numbers need to be put on all this stuff for a political campaign concerning them to have bite?

    (B) When I first read (4) it sounded like magic to me. Then I realised how it works. It would cost £3.2bn to pay for a higher minimum wage in the public sector but the income from increased taxes and reduced benefits in BOTH the public and private sectors would produce an extra £3.4bn. But isn’t this a case of holding all the other variables constant when in fact they would vary. Firms paying more out in salaries would have reduced profit margins which would raise less tax. So how does it all add up. Michael Meacher makes a passing reference to the IPPR and the Resolution Foundation. I searched their sites and documents on the minimum wage but could not find the analysis he refers to. Can we have an exact reference please?

    (C) Is not the single most important thing to pursue policies which will reduce unemployment to its post-war levels (which, even allowing for increased population would mean reducing it below 500,000)? I have seen a couple of references to “full employment” in Labour documents but they are transient blips. Labour needs to commit on this. Labour leaders would, of course, resist that since it would require far more active social intervention (in various forms) in production than their neo-liberal concepts will allow them to think.

  4. David Ellis says:

    David on full employment I am 100% in agreement. The Labour Party needs to promise a regime of full-employment by which all school and college leavers and unemployed workers who cannot find their own jobs are bought into the local workforce to share the available productive work with each paid the minimim of a trade union living wage.

    Without this pledge young people should not even piss on New Labour let alone offer them their vote. Unfortunately all that has been promised so far is a rather Orwellian sounding crappy job creation scheme for unemployed under 25s who have been out of work for over a year. It lasts for six months and is no more than an expensive employers’ subsidy.

  5. patrick says:

    to be honest i think we need to focus on getting people back to the point where a 30 hour week didnt just mean not being on benefits but out someone in a position to conytribute economically and actually create jobs. I presume the focus on using low multiple people on lower hours is about avoidance of taxes such as NI contributions now how do we adress that untill we make a days work pay we will continue to be stuck in this downwards spira. at least in my opinion.

    sorry for grammar+ spelling phone keyboard is awfull

  6. Purple says:

    I’m a Blairite and funnily enough I agreed with a few of the policies from Michael Meacher!

  7. David Pavett says:

    I struggle to understand the idea of democracy which is held by writers who put stuff on line and then show no interest in responding to direct questions about what they have written. This is rather like party leaders who turn up to a party conference to make their speech and then leave. I honestly don’t get it and yet it seems to be true of the majority of contributors to Left Futures. I don’t want to be the passive recipient of pearls of wisdom from the great and the good. I want a discussion.

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