Osborne has a mandate for deficit reduction and he must use it

July 03, 2015 10:23 AM

Next week's Budget announcement must be a radical one, significantly reducing spending to ensure that the Chancellor keeps the promise he made Britain before the election: that the deficit will be eliminated by 2018. With Britain still running a £75 billion deficit this year and adding to a £1.5 trillion credit card bill, it is crucial he enacts significant spending reductions early on in this Parliament.

Rather than give in to misguided calls to ease up on spending restraint, he must use this budget to go further and faster on deficit reduction without hitting families via increased cost of living taxes.

As part of the Budget, the Chancellor should announce:

  • Radical reform of Whitehall, including the scrapping of the Business and Energy Department, with their useful functions moved into other Departments, resulting in savings of more than £5 billion by the end of the Parliament
  • A further reduction in the benefit cap to £20,000 - roughly equivalent to the post-tax national average salary - saving another £700 million on top of the planned reduction to £23,000
  • The end of national pay bargaining for public sector staff, which could save around £5.8 billion by 2020
  • The end of middle class welfare, with serious means testing introduced for numerous benefits including free bus passes and the Winter Fuel Allowance

Alongside these spending measures, he should also announce:

  • The conclusions of the consultation into the merger of National Insurance and Income Tax, and bring National Insurance thresholds in to line with Income Tax as the first step towards doing just that
  • A further freeze in Fuel Duty, resisting the urge to use taxpayers who rely on their cars as a cash-cow 

Ahead of the budget, Jonathan Isaby, Chief Executive of the TaxPayers' Alliance, said:

"It's time for an end to the gimmicks and the tinkering. The Chancellor has been given a mandate to eliminate the deficit, and he must crack on with it - that means radical changes to Whitehall, welfare reform, and driving down on public sector inefficiency.

"George Osborne must also resist the urge to match our over-spending with too-high taxes. There are worrying rumours of an increase in Fuel Duty, which would hit families across the country who rely on their cars to take children to school and themselves to work. Deficit elimination should be achieved through spending reductions, not tax hikes."

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