Jonathan Algar – Increase the minimum wage
Healthier economic times are returning – as demonstrated by three quarters of not only growth, but accelerating, private-sector led growth. Based on that firm foundation, George Osborne should use this Autumn Statement to send a clear message to the electorate that the Government is committed to not only strong growth, but inclusive growth.
Unemployment is falling but real wages are, too. The problem is particularly acute among the bottom quartile of the income spectrum. This Autumn Statement should be used to tackle the significant problem of continued falling living standards in hard working low-income households head on.
Lifting the income tax threshold has been, and will continue to be, one of this Government’s great progressive achievements. But in austere times business must also play its role in tackling the blight of families trapped in working poverty.
That is why Bright Blue believes the Conservative Party should make good its claim to be “considering ways to raise minimum wage”, and commit to a significant and sensible increase this Thursday. In a nutshell – make work pay.
But what of the risks? As Bright Blue has previously highlighted in its Autumn 2013 policies, there is now a strong academic consensus that a sensible minimum wage does not cause unemployment. Firms adapt well: reducing profits or pay differentials, or boosting productivity.
The electoral calculus for our Party is clear – the polling screams swing voters want not only healthy economies but also evidence the proceeds of growth is being shared fairly.
Outcome: the benefits of the increase are felt by individuals, families and the Treasury (though savings in tax credits and benefits). Increased disposable adds more fuel to the economic recovery. Let’s then get to work on smart policies of further increases by sector and region.
Johnathan Algar is an executive member of Bright Blue
Antonia Cox – Raise the national insurance threshold
“What is the Conservative answer to the cost of living question? Tax cuts. As recovery beds in, Labour has shifted tack to highlight higher energy costs and stagnating wages. Last week showed the coalition government responding, in turn, with intervention in energy prices and payday loan terms.
But that feels socialist to me.
Conservative logic, by contrast, says tax cuts are the right answer to the cost of living question. Let people keep much more of their own money – then they’ll have more to spend.
This government has already raised the threshold at which income tax starts, taking 2.7m people out of tax already. By April 2014, no-one earning less than £10,000 will pay income tax. Taking the low paid out of tax is 100 per cent Conservative. It’s absolutely the right thing to do regardless of whether the beneficiaries vote for us. It’s expensive in terms of foregone tax revenue, because raising the threshold helps people all the way up the income distribution, but there is little harm politically in that.
Yet Budget announcements of distant future threshold rises get fewer headlines than does slashing the basic rate. So the government has received little credit. It’s time, therefore, for a further, noisier push in the same direction, which could be through raising the National Insurance threshold of £7,748, from April.
That would get noticed in particular by women. They are statistically more likely than men to work in low paid jobs, and to work part time. In the tabloid and broadsheet newsrooms where I used to work on the case studies illustrating Budget and Autumn Statement stories, we liked simple changes that clearly benefited women and family finances. Gordon Brown, by contrast, increased NI. When people see better numbers on their pay slips in black and white, no-one can say it’s a con.
Antonia Cox is a Telegraph journalist turned education campaigner.
Nick Faith – Abandon the renewable energy target
Reducing the deficit, restoring stability and rebalancing the economy. These will be at the forefront of the Chancellor’s thinking as he takes to the dispatch box on Thursday. The question is: how to achieve these objectives with a coherent set of fully costed policies that benefit everyone in society?
There is a strong argument, for instance, that the plan to extend free school meals to all primary school children might not be the best use of £600 million. Is it really fair and a sound use of public finances to hand the wealthiest parents in society a hand out? Why not use the money to drive up the quality of childcare in the poorest areas of the country?
The Government appears to have its sights set on scaling back the Energy Companies Obligation (ECO). This is a mistake. ECO is a useful mechanism to improve energy efficiency in the UK’s poor quality housing stock. But electricity and gas bills are a major concern for hard pressed people up and down the country so it’s right the government tries to address this issue. Our suggestion would be to abandon the EU’s renewable energy target, the cost of which is expected to add £108 to bills by 2020.
George Osborne also needs to get Britain building. He should pledge to build 1.5 millon good quality homes by the end of the next Parliament. Councils that fail to hit their housing targets should have to release land to local people who want to design and build their own homes – importantly in line with the neighbourhood plan, meaning that residents have a real say in the proposed development. Likewise, Osborne should make it a requirement for councils to sell off expensive social housing as it becomes vacant.
Finally, the Chancellor should focus on rebalancing the pay and pensions of public sector workers so that they are in line with those in the private sector. This move could save £6.3billion a year in public spending, money that could be better spent on tackling unemployment and investing in new infrastructure projects in local areas. Moves to local pay deals would also enable top performing public sector workers to be paid more, increasing productivity and improving public services.
Peter Franklin – Cut the anti-green c**p
To start off with, I’d like the Chancellor to cut the ‘anti-green cr*p’ that he and the Prime Minister have been indulging in. All the indications are that he will target the Energy Company Obligation (ECO) as a way of reducing energy bills. Like most of the green levies, ECO is badly designed – but to merely water it down, without tackling its fundamental flaws, would be worse than useless.
Energy efficiency is the cheapest way of meeting our energy needs and environmental objectives. It also creates jobs here in Britain and tackles the problem of fuel poverty at source. Anything that reduces investment in energy efficiency is a blindingly obvious false economy.
My fear is that ECO won’t be replaced with something better, but ‘relaxed’ instead. This means that the big energy companies will be allowed to fulfill their obligations by doing the easiest efficiency work that could be readily funded in other ways. This would only serve to strengthen the grip of the ‘big six’ over the energy sector and further undermine competition.
Away from the running farce that is British energy policy, the Chancellor should use his Statement to renew his commitment to fiscal conservatism. This doesn’t just mean staying the course on deficit reduction, we also need a very clear signal that there will no return to the easy credit and bubble-inflating policies of the past. Schemes like Funding for Lending and Help to Buy should be wound down as soon as possible.
Government intervention should centre on genuinely productive factors such as skills and infrastructure not artificial increases in the supply of credit. Furthermore, this should be a local growth agenda, with investment decisions made locally not in Whitehall.
Finally, any scope for tax cuts should be focused on anti-employment taxes like business rates and employers’ NI contributions.
Peter Franklin edits ConservativeHome’s Deep End
David Green – Introduce Government guarantees for bank lending
The first priority should be to abandon misguided policies that have impeded our economic growth. Policies intended to reduce carbon emissions have made some of our industries less competitive and caused the closure of some factories, including the aluminium smelters in Anglesey and Lynemouth. Above all, the Government should scrap the carbon price floor.
Uncontrolled immigration has added to public expenditure. It is often said that most immigrants come to work and not to claim benefits, but this distinction is irrelevant because it ignores the huge growth of in-work benefits in recent years, including tax credits, housing benefit, and child benefit. These cash benefits can exceed wages. At the peak of immigration in 2008 and 2009, the Institute for Fiscal Studies estimated that 45 per cent of UK families received more in tax credits and benefits than they paid in income tax and national insurance contributions. And, according to the Office for National Statistics, in 2011-12 the bottom 20 per cent of households received over 57 per cent of their gross income from cash benefits. For the next highest 20 per cent it was 42 per cent, a huge wage subsidy.
Focusing on work also ignores the fact that the first wave of immigrants tend to be young men looking for work but after a short time they bring in their relatives, including older parents. In the late 1990s, before large-scale EU migration began, only 12 per cent of new arrivals came to work.
The Government’s growth strategy has been to create a ‘wealth effect’ by pushing up housing prices. People sitting on assets tend to spend more. A more resilient strategy would be to encourage an investment-led recovery. Banks are reluctant to lend without collateral. One solution is government guarantees, a policy followed by the American government on a vast scale. We should extend the Enterprise Finance Guarantee Scheme, but in 2013 the number of loans guaranteed fell compared with earlier years.
David Green is the Director of Civitas
Peter Hoskin – Cut taxes for small businesses
I’ve been writing for some time about what George Osborne will do when the economy starts growing again. Will he use the extra tax receipts and lower benefit pay-outs to fund various sweeteners? Or will he simply consolidate his deficit-reduction plan? This Autumn Statement represents the first time he has really had to make that choice – and, like my former colleagues at the think-tank Reform, I hope that he takes the latter approach.
The reasons for this are political, economic and moral. Political: because, if Osborne starts to bribe the electorate now, it would weaken both his attack on Labour governments past (that they failed to fix the roof, etc.) and his warning against Labour governments to come (that they would upset the country’s progress towards fiscal sanity). Economic: because, although this Government has made some progress in containing its borrowing, it’s always worth remembering that the overall debt stands at £1.3 trillion – and rising. And moral: because, with an ageing population and all that, there’s already plenty of upwards pressure on the taxes to be paid by future generations.
That said, if the Chancellor is to shake up taxes a bit, he could do worse than prioritise two of the levies that, in fairness, he’s already sought to cut. The first is the National Insurance Contributions paid by employers: these were cut by a hefty £2,000 for small business in the last Budget; perhaps he might extrapolate that to employers who hire young people. The second is fuel duty: Osborne should at least pledge that it will be frozen until 2015 – this, remember, was dependent on the money being found when he announced it at Tory conference – but he might also make changes to how it is collected. I’d love to see him pay for these measures, at least in part, by removing benefits such as Winter Fuel Allowance from their wealthier recipients. But, sadly, that’s unlikely to happen.
My final request is about presentation. The Chancellor, as a good conservative, shouldn’t over-sell what the Government can achieve. One mini-Budget won’t allay everyone’s worries about the cost of living, particularly with the prospect of rate increases in future. And one man isn’t responsible for economic growth. It’s the people who create jobs, who take jobs, who shoulder tax increases and benefit cuts, who deserve the credit. Let the main message of this Autumn Statement be: thank you.
Peter Hoskin is a ConservativeHome Contributing Editor
Andrea Leadsom MP – Tigthen up on benefits for non-nationals
Plan A is working. Millions of private sector jobs are being created, inflation is down and the economy is the fastest growing in the developed world. There is far to go but we are gradually cleaning up the mess left by Labour. I’m sure the Chancellor will continue with this plan in the Autumn statement – it is the best way to help families who are struggling to make ends meet.
I hope the cost of living will be an additional focus:
- Moving some green taxes from energy bills to general taxation would boost households and businesses alike. A big reduction in tax payer subsidies to the wind-farms that are blighting our communities without significantly contributing to our energy needs would be welcome.
- More action to help the lowest paid in our country is needed. Employers could be invited to give decent pay rises to those on the lowest incomes, where part, or even all, of the rise could be deducted from Employers’ NI. Increasing the pay of the lowest paid would be a boost to consumer confidence and the impact on Exchequer revenues could be offset by partial reductions in Working Tax Credit. Increasing the pay of low earners, helping employers to afford the cost of it, and reducing welfare dependency – a strong policy for the recovery.
- Further action to level the playing field between migrants and British born workers is fair. Wages at the lower end have been held down by competition from migrants, thanks to uncontrolled immigration under Labour. A stand alone ‘national insurance policy’ could be introduced to cover the costs of accessing Britain’s welfare state by anyone who has been non resident (with exemptions for those posted overseas for work) in Britain for 12 months. This would be paid for by the employer. This would mean employers can still freely employ legal migrants, but the costs of providing their national insurance would be born by the employer instead of the taxpayer.
Andrea Leadsom is MP for South Northamptonshire
Andrew Lilico – Osborne needs to tell us that he still believes in markets
First, I want him to explain to the public why, even though growth has returned, that does not mean that spending cuts and tax rises should end or be slowed. When growth was slower than Osborne expected, he allowed the deficit to overshoot his original targets. If he now responds to faster growth by slowing deficit reduction that will mean his policy is that when the deficit overshoots that should be allowed, but when it undershoots he’ll take a political dividend instead of allowing the deficit to fall.
Second, I want him to say that he recognises that there is a problem with the cost of living – indeed, that it has been a sustained problem for some time and could well get worse as a problem in the future. But he should also say that the fundamental driver of higher prices is not energy bills or payday loans interest rates or pension charges or any of the other things he’s been looking to cap. Inflation is the result of loose monetary policy – of interest rates at 0.5 per cent and QE at £375bn. He should fess up and say it’s him that’s doing it, and argue that that was either a good thing or a necessary thing – whatever his defence happens to be.
Connected to that, third he needs to tell us that he still believes in markets – that capping prices and wages in this area and that are not a reflection of any general philosophy but, rather, a response to voter demands – he’s only anti-market where the public insists he be anti-market.
Fourth and finally, I would like him to start painting more details of his vision for Britain in the future, once recovery is secured. I would like to see some more of his vision of a Conservative future for our economy.
Andrew Lilico is an economist.
Simon Richards – Concentrate on deficit reduction
However, the scale of Government debt should still be a cause for concern. Rather than vote-grabbing gimmicks, which we shall see plenty of nearer the general election, he should concentrate on paying off more debt than planned, faster than planned.
More than any other measure, this will help control inflation and thus help savers. Old people save more than average – and they vote (often for UKIP) in droves, so there is political – as well as economic – sense in being prudent.
He should take two measures to help families struggling with household bills:
- commit the Conservative Party to repeal of the Climate Change Act
- announce a phased reduction in the TV Licence
Carbon taxes and the TV Licence are out of date and unsustainable. We’d all be better off out without them.
Simon Richards is Director of the Freedom Association