The Chancellor has been urged to be bold by cutting back on public expenditure in a wide range of areas in order to balance the books as the UK looks to rebuild its economy following the ravages of the coronavirus pandemic. The TaxPayers’ Alliance (TPA) is recommending 15 new measures which it says will guarantee dramatic savings over the course of the next five years.
Ministers must refuse the tired argument that there is no more fat left to trim
These including a freeze of public sector pay rises, which the think tank predicts would be worth £36.5billion by the end of 2026, and scrapping all overseas aid, which it suggests would yield a whopping £81.3billion over the same period.
John O’Connell, chief executive of the TPA, said: “The government’s manifesto commitments and the economic challenges of the coronavirus crisis can only be met with bold action that protects taxpayers.
“Ministers must refuse the tired argument that there is no more fat left to trim.
Rishi Sunak could save almost £300billion over the next five years, the TPA said
Rishi Sunak with Prime Minister Boris Johnson
“If the government increases outgoings, it’s vital that it simultaneously saves to spend.
“To get the economy moving again, the Chancellor’s spending programme must be balanced with big savings and an unapologetic war on waste.”
The TPA’s analysis runs until the financial year 2025/26, and projects that if the 15 recommendations were applied over the course of the next five years, £293.3billion would be shaved off the budget as a result.
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Nicola Sturgeon is unlikely to be impressed by the TPA’s ideas
However, some of the suggestions are likely to be highly controversial – the suggestion that free bus passes for old people should be scrapped for example, and the plan to raise the state pension age from 65 to 68.
Additionally, the proposal to scrap the Barnett formula, whereby Scotland gets more grant relative to Wales, and which would save £5.7billion in 2020/21 alone, and £29.1billion by the end of 2026, is unlikely to go down well north of the border.
Nevertheless, the ideas are likely to strike a chord with many within Mr Sunak’s own party, who have voiced concerns at the prospect of tax increases to cover the costs of the pandemic.
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The Taxpayers’ Alliance is urging Mr Sunak to scrap free bus passes for pensioners
Tory MP John Redwood
Yesterday John Redwood MP tweeted: “You cannot tax your way into prosperity.
“Let’s have a positive economic plan for recovery next week based on backing enterprise.
“Let people keep more of what they earn to spend as they wish. We need more confidence not punishment.”
The TaxPayers’ Alliance’s proposals
Mr Sunak is believed to be considering ways to increase taxes to pay for the cost of the pandemic.
He told the Conservative Party conference last month he would always look to “balance the books”, adding “If instead we argue there is no limit on what we can spend, that we can simply borrow our way out of any hole, what is the point in us.
“I’ve never pretended there is an easy cost free answer. Hard choices are everywhere.”
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An analysis by the Resolution Foundation suggested Mr Sunak would need to find £1,000 for every adult in the UK over the course of the next five years.
One source told the Times Mr Sunak was considering cutting pension tax relief for higher earners as one means of raising cash.
People on higher incomes currently enjoy tax relief on their pension tax contributions of 40 percent, compared with basic rate tax payers, for whom the rate is 20 percent.
The insider said the Chancellor was “very attracted” to the idea of a flat rate of 25 percent, a significant reduction for people on high incomes.