ippr: Our progressive spending review plan

Our guest writer is Nick Pearce, director of the Institute for Public Policy Research (ippr)

How should Labour respond to the spending review this week? The temptation will be to oppose the cuts without offering a clear alternative. But that would be a serious mistake. Labour needs to use the opportunity to reassert its economic credibility, to reclaim the mantle of being pro-business and pro-wealth creation, and to re-establish its reputation for straight talking. This means taking some difficult decisions on benefits, tax and spending.

As a contribution to the debate around the spending review, ippr has set out an alternative to George Osborne’s plan. The first key point is that the pace and scale of deficit reduction set out in the June Budget is both highly risky and unnecessary. It threatens the recovery and is not needed to reassure the markets.

The ippr plan suggests reducing the cyclically adjusted deficit over six years rather than four. Most critically, we think it is wrong to go ahead with cutting capital expenditure so sharply, which would see spending on areas like housing and transport fall from £39 billion this year to £20 billion in 2013/14. Sadly, this decision was gifted to the coalition by the last Labour government. It’s time to reverse it.

The ippr proposes that net investment is protected at around £30 billion, or 1.8 per cent of GDP; the level it was at in 2005/6, before the financial crisis. Investment in major infrastructure projects such as high speed rail, housing and low carbon energy will help to create badly needed jobs and promote long term growth.

But this spending commitment needs to be balanced with cuts elsewhere. Labour should drop its pre-election commitment to ring fence the NHS, schools and police numbers; protecting international development alone. If all departments except the Department for International Development faced cuts, no one department would need to bear a real cut of more than 10 per cent over the next four years.

The ippr supports the principle of universalism, but this doesn’t mean protecting all universal benefits. The Winter Fuel Allowance and free bus passes serve no pressing economic or social need for an increasingly prosperous pensioner generation. So they should be cut or taxed. We also need to accept that the VAT rise to 20 per cent is here to stay, however regrettable.

These are tough calls, but these are tough times. The ippr alternative plan offers progressives a robust, credible and costed alternative.

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18 Responses to “ippr: Our progressive spending review plan”

  1. mezko

    RT @leftfootfwd: ippr: Our progressive spending review plan: http://bit.ly/9yChXx by @ippr director Nick Pearce

  2. Richard Moorhead

    RT @leftfootfwd: ippr: Our progressive spending review plan: http://bit.ly/9yChXx by @ippr director Nick Pearce

  3. Rick Muir

    RT @leftfootfwd: ippr: Our progressive spending review plan: http://bit.ly/9yChXx by @ippr director Nick Pearce

  4. Robert

    “The ippr supports the principle of universalism, but this doesn’t mean protecting all universal benefits. The Winter Fuel Allowance and free bus passes serve no pressing economic or social need for an increasingly prosperous pensioner generation. So they should be cut or taxed. We also need to accept that the VAT rise to 20 per cent is here to stay, however regrettable”.

    Then Dear Boy we might as well stay with the Tories, if living under New labour means living on a pension of £130 a week means we have to cut bus passes, heating for the people at the bottom, affecting the real disabled or even these that pretend because if your willing to go to your doctors tell them you disabled your bloody sick in the head.

    If we are heading for voting for a leader because he has a sexy smile, we already had that with Blair and to many young men gave their lives for this.

    I’ve left the labour party and it looks more and more what we have now is two parties who’s only aim is to cut from those that have the least while allowing those people who really caused the crises to get away with it.

    It’s also time to remove charity status from so called bloody think tanks, they are not charities they are political groups…

  5. jeff marks

    if we want to save money, how about cutting all out of work benefits after 3 months. then we can make the pensioners live like kings and have plenty left over to help developing countries adjust to ‘global warming’.

  6. Deborah Segalini

    If VAT at 20% is progressive, I don’t know what would count as regressive!

    Here’s an idea to raise some cash: remove charity status from all private schools – see how they like having to cut their one-to-one tuition and increase their class sizes.

  7. Ed Cox

    RT @leftfootfwd: ippr: Our progressive spending review plan: http://bit.ly/9yChXx by @ippr director Nick Pearce

  8. Daniel Robert Tye

    RT @leftfootfwd: ippr: Our progressive spending review plan: http://bit.ly/9yChXx by @ippr director Nick Pearce

  9. matthew fox

    20% vat is not progressive. A better idea would be to scrap Vat on goods/services under £300.00 and also have progressive vat rates, so if someone wants to buy a Rolls Royce or Porsche, they have to shell out.

  10. John Rentoul

    RT @leftfootfwd: Interesting ippr alternative spending cuts; show the kind of choices Miliband/Johnson must make http://bit.ly/dkW0BZ

  11. micpayne

    RT @johnrentoul: RT @leftfootfwd: Interesting ippr alternative spending cuts; show the kind of choices Miliband/Johnson must make http://bit.ly/dkW0BZ

  12. jeff marks

    how about a mosque tax to pay for the security services and the vast worklessness in the British muslim community.

  13. william

    ‘Labour needs to reassert its economic credibility’ if is to have any chance at the next election.It could start by an analysis of the disastrous consequences of GB at the Treasury, admit as much , blame him, promise never to do it again, and pray the electorate will buy honesty, which they will.

  14. John Woods

    I am one of the undeserving poor who main position in life, which disqualifies me on any Means Testing basis, is that I have some capital so I can ride out the shocks of the likes of Margaret Thatcher and George Osborne but I would feel very aggrieved if my winter fuel allowance or free prescriptions were means tested or the free TV licence I expect to receive in two years time was means tested. I believe most pensioners would feel the same. Why are we building two aircraft carriers, giving aid to other G20 countries, feeding the people of Gaza (they get 70% of their requirements in aid, mainly from the EU).Let us be careful about the vulnerable in this country because we know George Osborne will not be so careful. Most pensioners I know have made money out of their houses and use this cushion of capital to support lifestyles their parents would consider extravagant. This is unlikely ever to happen again and most of us are part of the “bank of Mum and Dad”, in supporting the life choices of our children.

  15. Oliver Hill

    Hey Jeff, has anyone ever told you what a vile human being you are?

  16. jeff marks

    @Oliver – ad hominem ignored

  17. Mr. Sensible

    The best thing that cuts a deficit is growth, so maintaining capital investment is a good idea.

    I do not think we need to keep the VAT increase; it is not to cut the deficit, and is instead to pay for Osborne’s tax cuts.

  18. Welcome news on capital spending but CSR appears to favour south over north | Left Foot Forward

    […] There were some snippets of good news in the Chancellor’s Spending Review statement yesterday. One was the announcement that the budget for capital spending in 2014-15 at £47.1 billion will be £1 billion higher than previously planned – though it could have been even higher (£56 billion) if the Chancellor had followed ippr’s alternative deficit reduction plan. […]

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