Yesterday, the Resolution Foundation published five ways for the Chancellor to ‘find’ £4.4 billion without pursuing the tax credit cuts. Here they are:
The Foundation deserve some praise for having proposed some alternatives at all. Too often the opponents of the cuts simply deny the need to replace them with anything. Resolution have at least considered the numbers.
But, that’s as far as our praise can go. Readers will note that four of the five proposals are in effect tax increases – ‘finding’ money by just taxing people or businesses more.
When faced with the difficulties of the public finances, one cannot rule out any and all tax rises forever. But it cannot be the solution to rely on them ahead of cuts in public spending. Are we really meant to accept, only a few months into a government elected on the basis of its commitment to reining in public spending, that there are no more savings to be found in our annual public spending of well over £700 billion?
That would be fantastical – almost as fantastical as that entertained by those who deny the need to ever tackle the deficit.
Only one of the Resolution Foundation’s proposals – reducing planned increases in the state pension – is a spending cut. But it would also breach a clear manifesto promise. Osborne may, as Nick Timothy argued earlier this week, have bound himself up in promises, but whether that was wise or not the pledges must still be honoured.
ConservativeHome is not arguing that the Chancellor should abandon his plans – he may have a halfway house of mitigation in mind, for example – but if he now believes they are politically unsustainable, there are alternatives available.
Given total freedom, there are plenty of savings we would like to make – particularly those targeted more at the better off, such as reducing universal perks for pensioners who are sufficiently well-off as not to need them, or abolishing HS2. But the Government has promised not to do so, so we must be practical.
If the tax credit plans are to be ditched, then the replacement plan must satisfy three criteria: it must be a spending cut, it must not breach a manifesto pledge, and it must also be a real saving deliverable in the relatively short term (ideas like “reform the housing market, so rent eventually falls and leads to lower housing benefit” don’t quite fit the bill).
The Resolution Foundation proposed one spending cut, which did not meet these criteria. Instead, then, here are two which do: