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PATERSON OWEN NW

The Conservatives, Labour, the Lib Dems and UKIP all agree that substantial further public spending cuts are needed in the next Parliament. Those who disagree should vote for the Green Party, I suppose.

Within this it is perfectly reasonable for the Conservatives to say that there will also be some tax cuts. That could be justified on the basis that certain cuts in tax rates would probably mean increases in tax revenues. Or it could be justified by finding extra spending cuts – not just to balance the budget by the end of next parliament with zero borrowing by 2018-19. But also to allow for simultaneous progress in reducing tax.

Similarly it is perfectly logical, in principle, for Labour to accept that the total spending by the state – of £714bn this year – needs to come down but that within that lower total they would spend a billion more on this or two billion more on that.

However when sunch scenarios are put forward to the electorate even the more numerically challenged journalists spot a fruitful line of enquiry:

“If the deficit is not only to be eliminated, but there are also to be some tax cuts or spending increases, then where is the money to come from?”

As Wormtongue says in Lord of the Rings, “A just question, my liege.”

I had a go at answering it last year and got to £106bn. But then I am not a politician – they tend to become rather evasive on the matter.

At least the matter is being addressed by Owen Paterson, the Conservative MP for Shropshire North. He has even established a think tank – UK 2020 – to assist with these and other difficult matters.

In his speech at the launch of the event, Mr Paterson started by setting out the extent of the challenge. He said:

“In Gordon Brown’s final year, the Government spent £670 billion, but only raised £513 billion in tax. This resulted in a deficit of £157 billion. That meant borrowing £300,000 a minute.

“But we should reflect very soberly on the fact that we are still borrowing about £200,000 a minute because the Coalition Government will be spending over £100 billion more than it raised in this final year in office.

“At the end of the last financial year we had added £437 billion to the national debt, which now stands at £1.5 trillion.”

Mr Paterson highlighted the report of the Taxpayers Alliance of £120bn in wasteful state spending. It is easier to identify wasteful spending than to eliminate it – for instance there is £20.3bn of public sector fraud. But the TPA list certainly included some solid policy options – ending gold plated public sector pensions, ending welfare payments to those earning over £100,000 a year, ending business, arts and agricultural subsidies.

Mr Paterson continued:

One of the most striking features I noticed while attending Cabinet, is that there are too many chairs at the table. We shouldn’t shy away from getting rid of departments. It is easy for Government Departments to lose focus of their central mission and to become obese. We must sharpen up Departments and ensure they are effective. Can we afford BIS, DECC, DCMS or DfID as independent Departments with all the associated costs?

That would save a bit in terms of admin. But the real issue is whether the state should carry out a particular role.

For instance we could go back to have the Minister for the Arts having his desk at the Privy Council Office – which I think was where Tim Renton used to sit. But should we continue to spend half a billion a year on the Arts Council?

Mr Paterson was earlier the Northern Ireland Secretary, he says:

“When I was Secretary of State, state spending represented an incredible 77.6 % of the economy of Northern Ireland. Nowhere needed tax reductions more to revive business. I managed to get an agreement between all five political parties and the business community, united under“Grow NI”, to campaign for the devolution of corporation tax so that it could compete with the 12.5% prevailing in the Republic.”

A sensible tax cut that would probably enhance rather than impair the public finances. But if regional aid was abolished, including to Northern Ireland, getting the support of the Northern Ireland political parties might be rather harder to achieve.

In some ways the political acceptable route is to link the tax cut and the spending cut. Thus with the examples above Ulster businessmen would get a Corporation Tax cut at the same time as they lose their regional aid subsidy. Or theatres across the UK would lose their Arts Council grant at the same time as VAT on theatre tickets was abolished.

Mr Paterson’s indications or where spending cuts should be undertaken may be tentative.

Yet he has still shown rather more courage than most politicians – who prefer to discuss easier subjects.

36 comments for: Paterson is facing up to the tough issue of further spending cuts

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