If in control for long enough, the left will always run out of other peoples money. There is going to have to be a swing back towards less government because the kitty is not just empty but mortgaged to the eyeballs.

I can only hope that the public will reject the left and big government for decades to come.

“The difficulty is: how can public borrowing be reduced without sacrificing leftist objectives? ”

It can’t. All you can do is wait until the public finances improve (10 years?) sufficiently for you to start spending money on a large scale again. The Right have the same problem – they can’t cut taxes as much as they’d like to.

Well, get rid of ID cards, raise inheritance taxes and the top rate is a good start.

Close tax loopholes and tax havens would also be a good addition. Tax avoidance costs the UK economy several billions every year – money that should be flowing into the coffers and funding basic public services.

But, Sunny, what if the UK’s finances are on the wrong side of the Laffer curve and increases in tax actually reduce revenue: http://www.samizdata.net/blog/archives/2009/04/on_the_wrong_si.html

That increases in tax reduce what is available to be taxed is quite a widely accepted phenomenon. The left would have to tread very carefully on this.

I have an added suggestion. There is an awful lot of waste in the education system. The government could offer a tax credit equivalent to around half (or even a quarter) to parents who were willing to handle their children’s education either privately or through home education programmes. There have been several cases where a well targeted voucher or credit programme has been able to save an awful lot of government money at no cost in terms of education to students: http://www.cato-at-liberty.org/2009/04/20/the-california-legislature-is-being-misled/

And: http://www.cato-at-liberty.org/2009/03/06/vouchers-vs-the-district-with-more-money-than-god/

Assuming my stats are correct (quick google search rather than detailed analysis)

1. Cut military spending by 50%- should be roughly 15 billion from that.
2. Abolish the DFID – roughly 4 billion
3. Withdraw from EU (no idea, couple of billion perhaps)
4. Abolish subsidies (again no idea)
5. erm…..can’t think of anything else major that is also consistant with keeping current levels of Health and Education spending (Cutting spending on the police would be political suicide, and stupid given we can expect crime to rise).

Which leaves social security spending. Basically we need drastic welfare reform to remove people from benefits into employment. But doesn’t leave people starving or homeless when they lose their jobs.

What’s this thing you guy’s have with inheritance tax? Isn’t it money that has been earned and therefore taxed by the person who died – why does it have to be taxed again? It makes no sense at all?

Precedent suggests scrapping the ID scheme would save double if not triple the Government’s official guesstimate, because as usual they have failed to include any costs other than the initial set up and running in one bit of government (the NHS IT scheme is a case in point, with an original official guesstimate of some £2bn).

Of course in the scheme of things even this may seem a small amount. But, even so, the official guesstimate works out to over £200 per UK household.

Then there is of course the IMP, rumoured to cost £12bn.

And eBorders.

I’ve certainly had no resistance to pointing out that (if you’ll excuse the racist stereotype pun) “we wouldn’t be starting from here.”
Have you tried explaining that you’d have nationalised the troubled banks and insurance companies, rather than saddling the country with enormous debt to bail them out?

Start by making the banks pay back the bail-out funds120p in the pound. Scrap ID cards (database’s). Reorganise local governments into regional governments – that would, at first, lead to a loss of employment. Invest heavily in green manufacturing jobs, people work, people pay taxes. Increase CGT to kill off the loop holes. Tax each share transaction at 1p per share sold or bought.

You’ll find many of us nasty righties in full agreement with Mr Dillow’s point number 3. The question now is not whether the state should be shrunk, there is not other option, but how it can be done with the minimal disruption the the services that people actually need (e.g. not ID Cards).

Everyone has talked ‘tough choices’ but we have had a politics of the surplus. So now harder questions about spending and taxation priorities are in play. ‘What not to spend’ is a good progressive question, not least because there are some areas (green jobs; youth unemployment) where we should spend more, not less, so we can’t be for more everywhere of course.

A link which I think is relevant to some of this
Stuart White (who coauthored our pamphlet on the public defence of taxing inheritance) has what I think is a good – and balanced – piece on the pros and cons of Vince Cable’s LibDem budget, based on the conceit that the LDs have formed the government
http://www.nextleft.org/2009/04/that-liberal-democrat-budget.html

Argue for greater workers’ control of public services.

Workers do have some control over public services – for example, they can go on strike. There are many examples of them doing just that. They have done so in order to increase their own pay and conditions. They have never done so to decrease public spending.

Common sense suggests that if they had more power, they would use this to demand even more money, driving public spending up still further.

The problem is, it’s not obvious how this gap can be greatly closed in ways the Left would like.

The Left has continously and consistantly demanded even higher spending. What do you expect? If the government spent twenty times its current budget, there would still be something more to spend money on. And people demanding that the budget be increased to pay for it.

As an aside, I have just remembered this quote:

“Therefore, any one wishing to maintain among men the name of liberal is obliged to avoid no attribute of magnificence; so that a prince thus inclined will consume in such acts all his property, and will be compelled in the end, if he wish to maintain the name of liberal, to unduly weigh down his people, and tax them, and do everything he can to get money.”

http://italian.about.com/library/anthology/machiavelli/blprince16.htm

ad, amusing though that quote is, Machiavelli’s idea of what ‘liberal’ meant is a little bit different to the UK political understanding.

Also from ‘The Prince’:

“Therefore it is unnecessary for a prince to have all the good qualities I have enumerated, but it is very necessary to appear to have them. And I shall dare to say this also, that to have them and always to observe them is injurious, and that to appear to have them is useful; to appear merciful, faithful, humane, religious, upright, and to be so, but with a mind so framed that should you require not to be so, you may be able and know how to change to the opposite.”

Perhaps not exactly a textbook we wish our leaders to follow. Although we can probably name a few who’ve done just this.

Unfortunately, it is the only textbook that works to gain and retain power in real politics. Of course, I am sure there are more up to date versions of it.

Close tax loopholes and tax havens would also be a good addition.

Yes, let’s shut down Switzerland. And companies that relocate abroad, taking jobs with them, should be forced to stay here. We can chain them to their desks. Grrr.

…or we could say “Japan’s national debt before the recession was 160% of GDP; this wasn’t a problem; it’s not a problem for us either, except in the eyes of wibbling libertoonians who don’t understand finance or economics”.

@5, exactly how does taking gbp4bn per year away from the world’s poorest people meet leftist objectives?

“2. Campaign for higher inheritance taxes. In the latest year for which we have data, £58.3bn (pdf) was inherited. The tax rate on this was a mere 5.8%. Why should inheritances be taxed more lightly than work or savings?”

Because people have already paid taxes on them before, and getting taxed twice for the same money is extremely unsavoury?

Oh Sunny – the IFS have already said that the 45% rate would *decrease* revenue due to increased avoidance and people moving overseas. I don’t know if they have said anything about the 50% rate yet, but I would be surprised if they didn’t come to the same conclusion.

It’s clever politics but at best useless and maybe harmful – but that’s Gordon Brown all over.

You have a very strange idea of how people behave. The very rich – earning millions – may well employ expensive advisers, but most people earning around or just above the new 50% band (including me if you want me to declare an interest) do not. I don’t even maximise the simple breaks such as pension contributions. One reason is a bit of laziness, but another is a view that 40% is not unreasonable.

But you can be sure of one thing now, while I am unlikely to leave the country, I will take every step to minimise my tax bill from now on. I’m pretty sure that I can get my bill lower than it is now, even with the 50% rate, and I have been given a big incentive to do so. Not through “loopholes” – just through doing some obvious things.

So of course Dillow is right: there simply aren’t enough rich to soak, and the more you try to soak the fewer there will eventually be.

In addition to the obvious – ID cards, NHS computer (if it’s not too late), slash quangos – I would cut public sector pay across the board in some tiered way: above 100k 15% cut, above 50k 10% cut, below 50k 5% cut or something along those lines. We see employees in private firms taking cuts to maintain employment – the same needs to apply to the public sector. Hell, public sector employment has risen over the past year – how on earth is that justified, let alone afforded??

Anything else is just tinkering.

Brown has got us here – in a way I want him to stay to fix his own mess.
But I would rather see him at the bottom of the sea.

Oh, and what the hell are the “green jobs” which Sunder expects the government to magic out of the air?
And how can they be in any way sustainable if they are a cost to government?

“Politics of the surplus” – what?
Brown has never run a surplus has he?
That’s part of the problem.
He is a fool who really believed he had abolished bust.

I’m afraid I can’t see what the Fabians have to contribute to this debate whatsoever.
Your mindset simply cannot countenance the scale of cuts which will need to be made.

@18 you’re abolishing VAT and alcohol duty for people who pay income tax, then?

@20 Brown ran a surplus from 97-03ish (well, national debt fell as % GDP – actual cash surpluses are irrelevant)

Hey, I just found £75bn:
http://www.independent.co.uk/news/uk/politics/the-big-question-should-trident-be-replaced-and-does-britain-really-need-nuclear-weapons-425556.html

Also, I’m sure we could get some of this £12.7bn back if we cancelled CfH as well:
http://www.theyworkforyou.com/lords/?id=2008-07-08a.623.0

Here’s another £5bn we definitely shouldn’t spend:
http://www.bettertransport.org.uk/media/press_releases/may_2008/m25

There’s plenty more roads schemes we could sensibly scrap, and save at least hundreds of millions by abolishing PFI, especially now we’re often double-underwriting it (RBS, Treasury).

A billion here, a billion there, it soon adds up to real money..

It isn’t that hard, really. I reckon it would take about an hour to find the best way to save that £118bn (although the tax ideas are interesting too, and should be deployed so we can spend more on useful stuff: anti-poverty measures, affordable housing, grid upgrades, public transport, etc).

john b – so nothing to worry about then?
Yes, Brown implemented to Tory plans at first…then went bonkers.

Did you read Dillow’s post?
Brown has left us with a 5.5% of GDP *structural* deficit, with debt/GDP forecast (optimistically) to rise to 80% of GDP.
Genius.

Read Willem Buiters pithy and devastating analysis:

http://blogs.ft.com/maverecon/2009/04/darling-is-doing-his-best-to-clean-up-browns-mess/

>3. Argue for greater workers’ control of public services. The fact is that it’s top-down command and control managerialism that got us into this mess, on two counts – by allowing the mismanagement of banks that caused the financial crisis, and by allowing waste (a lot of which is management) to proliferate in the public sector. As I said, it is only workers’ control that offers hope of genuinely useful cuts in public spending.

I don’t think history supports that statement, but I’d agree on the Command and Control point – which I would apply across the board. One of the places to start will be with the NHS, which means everything from GP salaries to looking at a more European model.

One problem was that once Mr Brown shugged off the “follow the Conservative” straighjacket he started measuring how much money he was throwing at things, not whether it was working.

If top rate tax increases will reduce tax take, then once again ideology is prioritised over reality.

I see no real reason to believe the budget figures on future tax take, since most of the forecast deficit and borrowing figures are likely to be fairy tales. I think they are simply inventing a basis to justify trying to avoid public service cuts this side of an election.

Politically I think that winning the next election would be more devastating for Lab than losing it – they may recover from the latter in a decade or so.

>2. Campaign for higher inheritance taxes. In the latest year for which we have data, £58.3bn (pdf) was inherited. The tax rate on this was a mere 5.8%. Why should inheritances be taxed more lightly than work or savings?

That needs unpacking.

What percentage of Estates are entirely exempt due to being passed e.g., from husband to wife?

Is it proposed to increase the tax to a point where partners of those who die will be forced to sell their houses in most circumstances?

“What else can we tax” is barking up the wrong tree.

M.

Nick – do you actually have evidence to suggest we are on the wrong side of the laffer curve? And also, isn’t it likely to change anyway with the crackdown on tax havens?

Brilliant article. Very much what the left needs to be working on at the moment. Very interesting to read about the possibility of worker control and more efficient management.
We are very likely to see BIG spending cuts, be they front line services OR back office savings. If they really are to be the latter we lefties may find ourselves in a real bind if the Tories actually succeed in providing more efficient services without real front line services being cut.
I just don’t think they will

Because people have already paid taxes on them before, and getting taxed twice for the same money is extremely unsavoury?

As JohnB has pointed out other taxes such as VAT and petrol/alcohol duty are paid out of income which has already been taxed. Also, a major part of many estates will comprise of a property on which there has been a substantial capital gain, and this will not have been taxed previously.

Sunny – well that sort of predictive evidence is very difficult to come across, but as cj has said, according to the IFS we may have already passed it: http://www.guardian.co.uk/politics/blog/2008/dec/05/pre-budget-report-tax

“Cracking down” on tax havens, assuming that is even successful, would surely just add to the problem as it would just raise the real income tax for higher earners even further and more suddenly, creating more of a jolt in marginal income loss. All it takes is a few of these higher earners to leave or not work as much as they otherwise would have and you have cancelled out the benefits of the tax rise.

The IFS has more or less said we are at the optimal rate at 40%, or certainly that anything more than that would be counterproductive.
The *optimal* rate might – oh horror ! – be lower.

The IFS briefing of the tax and benefits impact of the 2009 Budget is here – http://www.ifs.org.uk/budgets/budget2009/tax_benefit.pdf

See page 5:

* “Huge uncertainty about how much people will reduce their taxable
income in response … Work less, retire earlier, emigrate, contribute more to pension or charity,
convert income to capital gains, incorporate, invest in tax avoidance…”
* “£2.4bn also ignores any effect on consumer spending … indirect tax revenues could fall by up to £1.5 billion”
* “This reform alone could actually cost money” (demonstrated on page 7)

Admittedly only about a few percent of taxpayers are up at these levels – and we obviously don’t care about these successful entrepreneurs, professionals, authors, sportsmen, etc – but there is also the iniquity of the 60% marginal tax rate from £100,000 to £112,950 (more if you include national insurance contributions). But the current government clearly doesn’t seem to mind tax rates at these levels – see the similar ridiculous marginal tax rates that apply as tax credits are withdrawn from millions of lower and middle earners – see the 70%+ and 90%+ effective rates on slide 11 from the presentation at http://www.ifs.org.uk/conferences/presentations/brewer_nzae_july08.ppt

“If they really are to be the latter we lefties may find ourselves in a real bind if the Tories actually succeed in providing more efficient services without real front line services being cut.”

Whatever you think of the Tories, if they manage, (however unlikely that is), to provide efficient services, this would be a good thing. Spending just to increase the size of the public sector is idiotic.

“@5, exactly how does taking gbp4bn per year away from the world’s poorest people meet leftist objectives?”

It’s a fair question, but the answer lies in your assumption that the 4 billion spent by DFID actually ended up in the pockets of the worlds poorest people.

Instead I’d argue that historically the function of ‘aid’ spent by the UK government was largely about supporting corrupt governments that were strategic assets, providing a hidden subsidy to the likes of BAE systems and influencing the policies of receipient countries. I’ve no doubt that there are lots of well intentioned people in DFID, and that some of the aid projects achieved some good. But in a situation where cuts are needed I wouldn’t lose any sleep over losing the department if it meant some health and education services were saved.

Chris, a detail. I think halving spending on big military projects would save rather more than you have estimated. Looks like you have used half of “Defence Capital DEL”, £4.5 billion. But I think significant project cost is booked to Resource DEL, like R&D and training that does not directly create a tangible asset. If you look in the MOD accounts you will find “Defence Equipment & Support” costs £16.5 billion in the Net Resource Outturn 2007-08 (page 290).

The MOD accounts say “amounts spent on research are not capitalised, and certain development expenditure is expensed” (page 243). It is not easy to follow this in the accounts. As an example the F-35 aircraft carrier planes have £1.9 billion R&D spending before we order the first plane which provides a tangible capital asset, and it is not clear to me which budget covers this large amount of R&D.

State expenditure has exploded under Brown, and it’s foolish to suggest that cuts couldn’t be made without affecting services. The private sector has had to tighten it’s belt over the last several years, and the public sector should learn from this.

The standard leftist response, which is to find new things tax, is just wasteful profligacy.

As a start, measuring services in terms of cash spent is utterly wrong. New computers aren’t rubbish because they cost less than they did ten years ago, and the NHS certainly hasn’t improved in line with expenditure.

Regarding the laffer curve, this is all irrelevant. Let’s assume some money is actually raised by this tax: all this means is that another transfer will have taken place from the productive side to the non-productive side of the economy. Labour has done tax increases to death, and to no avail. We simply can’t afford more of it.

@34 you’re confusing UK aid policy with most other countries. DFID is well-known throughout the international aid community for *not* attaching ‘buy British, buy arms’ strings to its development funds, unlike the US and France. Removing that would be something of a shame.

(I’d axe Trident, halve other military project spend, and take 10% off total NHS spending focused on last-year-of-life care: “no, you can’t have that £10,000 per dose drug which’ll keep you alive, bedridden & in pain for six months, but here’s as much morphine as yo

@34 you’re confusing UK aid policy with most other countries. DFID is well-known throughout the international aid community for *not* attaching ‘buy British, buy arms’ strings to its development funds, unlike the US and France. Removing that would be something of a shame.

(I’d axe Trident, halve other military project spend, and take 10% off total NHS spending focused on end-of-life care: “no, you can’t have that £10,000 per dose drug which’ll keep you alive, bedridden & in pain for six months, but here’s a bed in a friendly hospice with an unlimited supply of self-administered morphine”)