A budget of woes? Where has our imagination gone?

June 20, 2010


Ruth Porter is communications manager at the Institute of Economic Affairs. The opinions expressed are her own. Join Reuters for a live discussion with guests as Chancellor George Osborne makes  an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.

George Osborne has the chance to do something really radical on Tuesday in his budget statement.

He must cut public spending to shore up Britain’s precarious economic situation – he has no choice.

But the fiscal crisis also means he can do far more than this.

Indeed, the Chancellor has perhaps the best opportunity in a generation to make the sweeping changes necessary for the UK to reduce the size of the state and restore economic growth.

Imagine using the budget to restructure how we tax: flattening income taxes, reducing corporation tax, getting rid of bizarre exemptions to VAT, abolishing inheritance tax along with Capital Gains Tax and simplifying enormously the tax rules for individuals and businesses.

Such a package would boost private investment and encourage entrepreneurship and innovation by removing much of the stifling bureaucracy that hangs like a stone around the neck of businesses.

And what about public services?

Government spending has risen to over 50 percent of GDP and the public services have become insatiable in their appetite for money. Yet the services provided, despite huge funding increases, are largely poor quality and bad value for money: the government’s own figures show that.

Cutting public sector pay and reducing pension entitlements for public sector workers could be just the start of a series of radical reforms where education and health services are decentralised, schools are allowed to make profits (with parents sovereign) and power is devolved to local councils that are required to raise a much greater share of their budgets locally.

If the Chancellor were inspired he would extend the reforms to welfare and destroy the insipid reliance on the state that has eaten away at people’s confidence and sense of community.

He would take away whole swathes of entitlements offered by the state, from free bus passes to winter fuel allowances.

He would encourage people to help each other without the state always acting as a middle man.

Charities and communities thrive only when people are connected – not driven apart and told they aren’t needed by a state that nannies us.

For far too long we have been content with the status quo, with a present which contains little in the way of hope that things can and should be different.

A budget may sound like a funny time to talk about imagination, but Osborne cannot afford not to make a start.

He will not do everything in this budget – it is an emergency budget. But time will tick away for the coalition. He must clearly signal the direction of travel.

Picture credit: Chancellor George Osborne visits the UK Pavilion at the Shanghai World Expo site June 4, 2010. REUTERS/Aly Song

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