Tax Commission proposals would cause £120 billion of extra cuts

Will Straw takes apart the plans of the 2020 Tax Commission, published today, which proposes cutting taxes to 33 per cent of national income.

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Proposals by the Institute of Directors and right wing pressure group, the TaxPayers’ Alliance, would cut more than £120 billion from public spending after the next election. The 2020 Tax Commission, which is published today, proposes cutting taxes to 33 per cent of national income.

The proposals do not, however, outline where the related cuts to public spending would come from. According to the Office for Budget Responsibility (Table D.6, pdf), total public spending will be 42.2 per cent of GDP in 2014-15. Bringing this down to 33 per cent – even allowing for 1.5 per cent of Gross Operating Surpluses in the national accounts* – would require a further 7.7 per cent of cuts, equivalent to £121 billion in today’s prices.

Chart 1 below from the 2012 budget (pdf) details how these spending cuts could be made. The £121 billion would be roughly the same as the entire health budget (£130 billion); the combined education (£91bn) and defence (£39bn) budgets; or equivalent to cutting 60 per cent of the entire social protection budget which includes all pensions (£207bn).

Chart 1:

Government-spending-2012-13
The report includes proposals to introduce a flat rate 30p ‘direct’ income tax to replace income tax and National Insurance. This would slash taxes paid by those in the higher 40p and top 50p rates while doing little for those paying the basic rate of 20p. They also propose replacing corporation tax and inheritance tax with a tax on ‘distributed income’. Richard Murphy explains how this would allow a huge tax loop hole for those who retain their income in shares.

The net result of the changes would amount to a significant transfer of income from poor to rich. Those advocating the report include Fraser Nelson, editor of the Spectator, David Frost, former Director General of the British Chamber of Commerce, and Allister Heath, editor of City AM.

 


See also:

£25bn welfare cuts? Hilton’s plan is absolute nonsense 17 May 2012


 

* Gross Operating Surpluses include all non-tax government income. OBR estimate this to be 1.5 per cent of GDP (Table 4.6, pdf).

 


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42 Responses to “Tax Commission proposals would cause £120 billion of extra cuts”

  1. JamieJones77

    Tax Commission proposals would cause £120 billion of extra cuts, writes @wdjstraw: http://t.co/rg0Z00jG

  2. Shamik Das

    Tax Commission proposals would cause £120 billion of extra cuts, writes @wdjstraw: http://t.co/rg0Z00jG

  3. Jon Burke

    Tax Commission proposals would cause £120 billion of extra cuts, writes @wdjstraw: http://t.co/rg0Z00jG

  4. Richard Darlington

    Tax commission from @the_TPA & @the_IoD means £120bn cut – the whole NHS budget – @wdjstraw of @IPPR on @LeftFootFwd http://t.co/bX7Idy3r

  5. Richard Murphy

    Tax Commission proposals would cause £120 billion of extra cuts | Left Foot Forward http://t.co/HBYvMkqu The TPA do not say who would suffer

  6. Sir Bill Taylor

    RT @wdjstraw: 2020 Tax Commission's £120bn bombshell. Cuts equivalent to entire NHS budget: http://t.co/scIA5tyi Great piece of work!

  7. Sir Bill Taylor

    RT @wdjstraw: 2020 Tax Commission's £120bn bombshell. Cuts equivalent to entire NHS budget: http://t.co/scIA5tyi Who are #taxpayersalliance?

  8. Gus Hoyt

    Tax Commission proposals would cause £120 billion of extra cuts | Left Foot Forward http://t.co/HBYvMkqu The TPA do not say who would suffer

  9. Paul Hunter

    Tax Commission proposals would cause £120 billion of extra cuts | Left Foot Forward http://t.co/HBYvMkqu The TPA do not say who would suffer

  10. Shifting Grounds

    Tax Commission proposals would cause £120bn extra cuts @wdjstraw http://t.co/CbKppmNp @leftfootfwd

  11. The Dragon Fairy

    2020 Tax Commission's £120bn bombshell. Cuts equivalent to entire NHS budget: http://t.co/86foYaHc

  12. Alison Johnstone

    Tax Commission proposals would cause £120 billion of extra cuts | Left Foot Forward http://t.co/HBYvMkqu The TPA do not say who would suffer

  13. Mohan Began

    Tax Commission proposals would cause £120 billion of extra cuts | Left Foot Forward http://t.co/tupCSx1U #world #news

  14. Political Planet

    Tax Commission proposals would cause £120 billion of extra cuts: Will Straw takes apart the plans of the 2020 Ta… http://t.co/0DQTnbpJ

  15. Barry Edwards

    Is the first sentence of the last paragraph “The net result of the changes would amount to a significant transfer of income from rich to poor” the wrong way round?

  16. John Slinger

    Shameless plug for an event at which Labour members/supporters/friends have a chance to pitch a policy idea on housing in 90 seconds to an audience chaired by Jack Dromey MP (Shadow Housing Minister)..

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  17. Lord Blagger

    And the deficit is going to cause 150bn plus interest worth of cuts.

  18. JoAnne Rust

    RT @leftfootfwd: Tax Commission proposals would cause £120 billion of extra cuts http://t.co/4zvqCG9h typical totally ridiculous TPA idea

  19. Guido Fawkes

    Still be less of a cut in expenditure than Ireland has implemented.

  20. R Bates100

    I think so, too

  21. T

    Tax Commission proposals would cause £120 billion of extra cuts | Left Foot Forward http://t.co/HBYvMkqu The TPA do not say who would suffer

  22. Tim

    Tax Commission proposals would cause £120 billion of extra cuts, writes @wdjstraw: http://t.co/rg0Z00jG

  23. Frank

    What has that got to do with anything?? The financial system in the UK is not comparable to that in Ireland unless you are admiting that Osborne’s policies are an absolute disaster.

  24. Mdbuk1987

    Ignore Staine as he is a shrill bitter joke these days.

  25. Why the Taxpayer Alliance's tax plans are dead in the water | Left Foot Forward

    […] See also: • Tax Commission proposals would cause £120 billion of extra cuts 21 May […]

  26. I'malrightJack

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 bbcnews skynews Cameron Labour Everyone RT!

  27. Fuck Oxbridge

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 bbcnews skynews Cameron Labour Everyone RT!

  28. I'malrightJack

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 #nhs ukuncut Mumsnet #parents nut Everyone RT!

  29. Michael Turner

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 #nhs ukuncut Mumsnet #parents nut Everyone RT!

  30. Roy Bailey

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 bbcnews skynews Cameron Labour Everyone RT!

  31. Ian Alex Blease

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 #nhs ukuncut Mumsnet #parents nut Everyone RT!

  32. Qian Yu

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 #nhs ukuncut Mumsnet #parents nut Everyone RT!

  33. Lesley Farrington

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 bbcnews skynews Cameron Labour Everyone RT!

  34. Mandi Riseman

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 #nhs ukuncut Mumsnet #parents nut Everyone RT!

  35. Rachel Roncone

    Abosuletly Shocking! Osborne plans to give away £120bn via a tax dodge http://t.co/YZxNiZp3 bbcnews skynews Cameron Labour Everyone RT!

  36. Anonymous

    Right, in your world, where the UK remains in recession, because of the economic politics (not policies, that’s too kind) tailored to help your 1%.

  37. Anonymous

    And what does that have to do with the left?
    The Tories don’t plug events here, have the grace not to either.

    (And the answer is rent caps, which needed to be implemented last year)

  38. charlene sibley

    Frm yest: Tax Commission proposals would cause £120 billion of extra cuts, writes @wdjstraw: http://t.co/rg0Usqaw

  39. Cole

    I seem to remember Osborne lavishly praising the Irish economic management – just before it all imploded.

  40. Lord Blagger

    How can you tell its not a basket case like Ireland. After all, you can’t be a little bit pregnant, can you?

    It’s not the financial system that’s the issue. It is government finance that is the issue.

    How much debt does the UK have, including any debts hidden off the books such as pensions?

    For the ‘income side’, we know what it currently takes. 550 bn a year.

    If that income doesn’t support the debt, its pretty unlikely it can raise taxes to cover. The direct implication is that the 700 bn a year is going to have to be cut by over 30%

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