There are alternative ways of managing public finances that aren't reliant on more savage cuts.
There are alternative ways of managing public finances that aren’t reliant on more savage cuts
Never-ending austerity is the dominant vision of the Conservative-led coalition government. Last week it promised further cuts of around £55 billion to public expenditure. However contrary to the government’s claims, there are alternative ways of addressing public finances. Here are just a few examples.
Mega rich
Britain’s 1,000 richest people are estimated to be worth £519 billion, an increase of 15.4 per cent on the previous year. The wealthy elites can’t spend or consume their entire fortune, often built with the blood, sweat, brain and brawn of other people. They could even voluntarily forego 10 per cent of their wealth and it will hardly make a difference to their lifestyle.
Alternatively, the government could levy a 10 per cent wealth tax on the super-rich.
Tax avoidance
An estimated £120 billion of tax revenues go uncollected each year because of organised tax avoidance, evasion and arrears. Even by just collecting 25 per cent of the tax lost each year, government can make a massive improvement to public finances.
Yet the political will is not there. Chasing tax avoiders is a labour-intensive task, but due to austerity programmes some 34000 jobs have disappeared at HMRC.
Rather than firm action, the government is engaged in gestures. A good example of this is the proposals for a Diverted Profit Tax, or what is popularly known as ‘Google Tax’, which might raise £1 billion over five years.
This is optimistic as in the absence of a fundamental reform corporations are adept at creating complex structures to shift profits. In any case, the legislation is unlikely to be enacted before the next general election.
Pension contributions tax relief
The UK’s richest 1 per cent own about the same as the poorest 55 per cent of population. Inequalities and the demands of public purse can be addressed through reform of tax relief given on contributions to pension schemes.
Currently, tax relief is based on the marginal rates of income tax applicable to each taxpayer. If someone liable to the basic tax rate of 20 per cent puts £1,000 in to an approved pension scheme, this results in a pension contribution of £1,250. The same £1,000 results in a pension contribution of £1,667 and £1,818 for those paying income tax at marginal rates of 40 per cent and 45 per cent.
The total tax relief on pension contributions is about £35 billion a year. Employers receive another £15.2 billion tax relief on pension related National Insurance payments, making a total tax relief of around £50 billion. The UK has 29.9 million income tax payers . Of this, 25 million individuals pay tax at the basic rate of income tax or less, and 4.9 pay tax at higher marginal rates.
The government admits that only one-third of the tax relief on pension contributions goes to basic rate tax payers and the remainder goes to higher rate taxpayers. Others say that only about 25 per cent relates to basic taxpayers.
This is a massive subsidy for the well-off. By fixing the tax relief at the basic rate of income tax government can generate revenues of about £25 billion each year.
Corporate welfare
The government wants to be tougher on welfare cuts but there is complete silence on rolling-back the rampant corporate welfare programme.
Private Finance Initiative (PFI) has been promoted as a panacea for providing schools, hospitals and a variety of public services. The 725 current PFI projects have a capital outlay of £54.2 billion, but the government is committed to repaying about £238 billion.
This is a massive drain on public funds, especially as the government itself could have borrowed the money cheaply. The government should renegotiate all PFI contracts.
Railways were privatised in 1996, but the UK train fares are almost the highest in the western world. Train companies have picked up nearly £60 billion in subsidies since privatisation and pay generous dividends to their shareholders. More subsidies are on the way for the Crossrail and HS2 projects. This gravy train should be halted.
The above list is by no means exhaustive but shows that there are alternative ways of managing public finances than more savage cuts.
Prem Sikka is Professor of accounting at the University of Essex
62 Responses to “There are alternatives to the government’s slash and burn policies”
Riversideboy
Tory tosser
Riversideboy
Get your facts right if your going to defend try and defend the greedy.
Fact, private railways in Britain have had 4 billion in subsidies since Cameron and his right wing mob took over and payed out millions to shareholders-straight out of the pockets of tax payers while East Coast railways owned by the public payed £1billion back to the public purse. Tell me Mr Defender of the rich why should a plumber pay tax on every pound he makes while Branson and co don’t have to because they can cheat at will. Go on lets hear your defence
LB
Well said no doubt the greedy defenders will be on saying everyone will leave Britain but who cares?
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You don’t care because you don’t care about the poor. Branson has gone. Why are you worried? See your post above. I’ve quoted you word for word.
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Fact, private railways in Britain have had 4 billion in subsidies since Cameron
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Yep. They’ve actually had more in subsidies. The state is make a loss on the deal. Particularly stupid if you ask me.
So lets look at your plan
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The void in what these people do to earn their fortunes here can be filled by government ran companies and
co-operatives
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So how’s your government run company going to make that fortune? It’s got to somehow turn that subsidy into a profit. There’s only one way it can do that, which is screw the public. It will have to increase ticket prices by around 30% overnight without loss of sales, just to prevent the loss. More because that will drive people off the railways.
Branson’s not cheating. He’s got your message loud and clear that you’re out to take his money. He’s just not playing your game so the poor suffer.
But since you’re an anticapitalist, what have you got to worry about? Poor people have no capital, and your against them having it. You’ve succeeded. At least be honest about your aims.
Riversideboy
You have the brass neck to talk about the Coop bank when private banks crashed the economy of Europe and America….dear me talk about blind right wing dogma, unbelievable
LB
So you want to double tax pensioners?
Tax them on their contributions and tax them when they take the money out.
Why not be honest and say, pensioners we’re going to tax you 65%?