Prime Ministers Questions was yet another example of the Punch and Judy style of politics that is so prevalent today. It is reminiscent of two schoolboys arguing over who’s dad is bigger or stronger, yet, these grown-up children in Parliament are the very people we are supposed to rely on to represent our interests. We are slowly becoming a laughing stock as our politicians consistently fail to represent our interests, whilst many are guilty of taking the public for a ride in terms of their expense claims. Even the Ayatollah Khamenei believes that he is entitled to sit in judgement of the people of this country based on his views of our political leaders.

Yesterday, Brown and Cameron swapped blows regarding the level of capital spending in the UK over the coming years. Brown is quite clearly guilty of a deliberate attempt to mislead the public. It is self-evident that capital spending is being reduced, even if this is as a consequence of this government bringing forward capital projects from future years, which inflates the current spend, but has the effect of reducing the amount available in future years. Some would argue that this is quite a reckless policy, especially given Brown will almost certainly not be in power when someone else has to deal with the fact that there is nothing in the kitty. Mind you, that has become a fairly common trait with Labour government, their spend, spend, spend policy invariably leaves a Conservative government to clean up the mess.

Meanwhile, whilst Cameron has Brown on the ropes, he lacks the courage to state the bloody obvious and that is, we have no choice but to reduce public spending. Tax receipts are down, public sector spending is out of control, the economy is contracting and more and more people are becoming an economic liability, rather than an asset as a consequence of increasing unemployment. I would have more respect for David Cameron if he was to demonstrate that he has the courage and moral rectitude to come clean with the public. Instead of highlighting Brown’s lies ( after all we all know that he is a stranger to the truth), Cameron ought to be outlining why there is a need to reduce public spending and how they intend to do it if elected. Instead, he is allowing Brown to dictate what the “10% Tory cuts” amount to, using the classic New Labour trick of emotional blackmail, less for pensioners, less for the NHS, less for the Police etc.

Apart from the fact that most people already understand that we are in for a tough few years, Cameron also has the OECD stating that the Treasury figures for the UK economy are at best optimistic, but more likely completely wrong. He has the rating agency Standard & Poor making veiled threats to reduce the UK Plc credit rating unless the government gets it’s house in order and puts in place a concrete plan to reduce public debt. And, now, he even had the governor of the Bank of England stating that “scale of the deficit is truly extraordinary” and usggesting that the government should be more ambitious with their debt reduction plans. In other words, Cameron has some very powerful people or organisations supporting the notion that our economic situation is dire and we need to reign in public spending, yet he still lacks the courage to take the bull by the horns. It is this lack of backbone, even when the odds are in his favour, that leads me to doubt Cameron’s ability to offer the strong leadership this country needs to get itself out of the mess created my New Labour’s social engineering project.

Apart from public spending cuts, there is also a need to look at whether we are getting value for money from our public services. For example, in spite of the fact that we have record numbers of police officers, the number of front line bobbies (I have excluded PCSO’s) is but a tiny fraction of the 156,000 officers that are employed. Crime is rising not falling and police openly admit that they consider their job to be the investigation of crime, rather than the prevention.

The NHS has received a massive increase in spending. To fund this all UK workers were surcharged an extra 1% on their entire earnings and employers were charged an extra 1% of their wage bills. This added £billions every year. This burden on employers and employees will increase by a further 0.5% shortly. Yet, in spite of the enormous amounts raised to invest in the NHS, new build was financed using PFI, a hugely expensive way of funding new hospitals, and much of the money went into higher wages, not improved services. Now that the NHS have identified that there may be a real term reduction in the NHS budget, we are threatened with ward closures and increased waiting lists. In other words, the NHS are holding us to ransom, instead of investing the money wisely, they simply spent it. There is a subtle difference in my terminology, but a huge difference in practice.

Take the money being wasted on spy databases. £billions have been committed to IT infrastructure projects, most of which have not been thought through, many have contracts that amount to a blank cheque in terms of costly overruns and to be frank, most are simply not needed. This is not a wise investment of our taxes at a time when the country can least afford a spendthrift policy. It is also worth noting that many of these contracts do not benefit UK companies.

The list goes on and on. That notwithstanding, it is so bloody obvious to most people what we need to do, that to tell us different is patently insulting. Unfortunately, our politician’s still believe that we are not grown up enough to be able to handle the truth, so instead they either lie to us, or avoid being candid. My message to politicians of all parties is to stop treating us like idiots. They must tell us how they see the situation in unambiguous terms, what they believe needs to be done and how long they expect the pain to last. They must tell us how they will ensure that we get value for money and what they will do to ensure that tax increases are only be considered after all other areas have been exploited. If the people of this country and its politicians are not to be looked on by other countries as a bit of a basket case, then we need a man (and a party) with a plan.

New Labour has brought this country to the brink of bankruptcy and yet, even now, when everyone else can see it, they remain in denial. How on earth can any pollster find people that are daft enough to believe that Darling and Brown are best placed to get us out of this mess? Never have I felt such utter despair. Up and down the country, people are having to tighten their belts and reign in their spending, only then can they hope to get themselves out of debt or survive a period of reduced income. Ask anyone and they will tell you this is simply commonsense, anyone that is, other than a ‘New Labour’ MP or the recipients of New Labours redistribution of taxpayers money. New Labour believe that they have discovered the secret to dealing with reduced income and spiralling debt, just borrow more! If that were not enough, they elect to lie to themselves and their masters, by suggesting that things will get better by the end of this year and by 2011, we will be in the money again as a consequence of a boom, the like not seen since the ’dotcom era’.

Our government tells us that the economy will shrink by 3.5% this year, whereas the International Monetary Fund suggests that it will be 4.1% and the the Centre for Economic and Business Research, 4.5%. Even taking account of the Governments hugely optimistic and unlikely forecast, they will have to borrow £175bn this year. In my view, the governments forecast is a lie and I believe they know it is, but rather than give it to us straight, they would sooner treat us like idiots. If the governments figures are wrong and most economists believe they are, then borrowing will be even higher, something our government, your government, doesn’t want you to know until it is too late to do anything about it. Even when it was announced that the economy shrank by 1.9% in the first three months of this year, the government still insisted that their figures were accurate, in other words, we (the government) are right and everyone else is wrong. Early estimates suggest that if the IMF figures are more accurate that those of the Government, then borrowing will increase by around £30bn per year, no wonder this Government doesn’t want us to know the truth.

Next year, the government is forecasting growth of 1.25%, yet in spite of this, they still need to borrow another £173bn. Once again, others, such as the IMF, suggest that the growth figures are vastly optimistic, suggesting instead a contraction of 0.3%. In spite of this, the government then tell us to expect a dotcom like boom in 2011, with a forecast growth figure of 3.5%. Utter fantasy, but even with this spectacular figure, the government will still need to borrow £140bn. Followed by £118bn in 2012 and £97bn in 2013. In other words, even taking this governments completely unrealistic contraction and growth figures, we still need to borrow more than £700bn over the next 5 years. Even to a Cabinet simpleton, this has to indicate that we, as a country, are living well beyond our means. It is also worth noting, that even before the property slump and the recession, we were still borrowing well in excess of our income, with further fancy footwork taking place to move other government debt, such as the Private Finance Initiative (PFI) off the government balance sheet. So, no matter what Gordon Brown will have us believe, we were heading for a fall even without the recession. If he denies this then he is either a fool or a liar..perhaps both! We must not be surprised that this government is lead by liars either, after all, it was they who made a manifesto commitment not to raise the higher rate of income tax and they who promised a referendum on the European Constitution and then denied us the right by falsely claiming that the renamed treaty was not the same. Two manifesto promises, two out and out lies, why should the electorate ever trust any party again over manifesto promises?

The government has decided that anyone earning over £113,000 per year must lose all of their personal allowances, which will cost them around £50 per week and anyone earning over £150,000 per annum, will face a tax rate of 50% on all earnings above the threshold. This governments justification is that these people have gained most during the boom years and should, therefore, pay more now. The truth is somewhat different. Over the past 11 years, the people that have benefited most from the boom, in relative terms, is the lower paid, funded in no small part by those on middle and higher incomes. This was as a direct consequence of the governments programme to redistribute wealth. The government has also said that those that earn more must pay more. But they already do. Someone on £113,000 per year pays, in cash terms, seven times the tax that an individual earning £25,000 per year does.

It is also worth noting that anyone lucky enough to earn over £100k per year has not been gifted it, they have earnt it through promotion, success, hardwork and/or entrepreneurial risk taking. No employer would pay someone over £100k per year if they weren’t worth it. It is also worth remembering that these people are resident here, which means that they spend the majority of their money in the UK, therefore, they will be contributing substantially to the economy in the form of other indirect taxes as well as helping to create employment through the purchase of goods and services. The money that the government takes from these people won’t be handed straight over to the poor as they imply, instead, it will be used to plug a huge gap in government finances…which has become something of a bottomless pit. I would sooner have the taxpayer keep more of their money which, if they spend on goods and services, will be the best natural stimulus this country could possible have. If the government could not fleece the taxpayer so easily, they would be forced, as the rest of us are, to ensure that available funds are spent wisely and are only used on what is necessary, rather than desirable.

The bottom line is, that the only way we are going to get ourselves out of this mess is if we reduce our spending, this is basic economics and most 8 years olds could tell you that. Increasing taxes reduces the amount of money in the economy and it is this that will prolong the recession. The government is asking us all to believe that it can spend our money better and more wisely than we can, is there anyone out there, other than those that do not contribute, that would agree with this statement? For those that believe this government has its priorities in the right place, then they should consider the following; According to the government, the increase in tax announced for higher earners is worth up to £7bn per annum, although other experts believe the actual figure is much, much lower, but taken at face value, this tax increase pales into insignificance when set against government spending on databases. The government intends to spend, in spite of the recession, some £105bn of our money over the next 5 years on databases and other largescale IT projects, that is equivalent to over £20bn per year, or half the defence budget. These databases are designed to allow the government to drive a coach and horses through our civil liberties, monitor our every move and spy on our every deed. How can that be a priority at anytime, let alone during a recession, the databases are far from an essential spend?

The government has failed to grasp the nettle of public sector pension schemes which now costs us £2.7bn every year and rising. Even though the government has hammered private sector pension schemes with a tax take amounting to more that £100bn over the past 10 years, they have done nothing to deal with the public sector pensions, where the gross liability has been estimated to top £800bn. This abdication of their duty is simply breathtaking. For those that are not aware and, in the interest of putting things into perspective, 20p in every £ of our council tax goes directly towards funding local government pensions (source: Taxpayers’ Alliance). With public sector pay now above the levels of those in equivalent jobs in the private sector and better job security, little wonder that questions are being asked. Some MP’s have been whining in recent days that they should not be expected to vote for less money in relation to their lavish expense allowances. Why not, the rest of us have not been given a choice?

Alistair Darling noted in his budget speech that there will be £15bn of “efficiency savings”. Note, these are not cuts, but efficiency savings. What I don’t understand is why they have only noted them now, any well run business would have an ongoing programme of efficiency measures designed to save money. If they are genuinely efficiency savings, then the government must hold its head in shame, because that is the equivalent of admitting that this government has presided over a massive programme of excess and/or waste. But lets call a spade a spade, it is not just efficiency savings that are needed, but cuts, real cuts. The Conservatives lack the courage to outline what they would cut, which leaves them open to any charge the Labour government wants to send their way, such as cuts in health and education. They (the Conservatives) should have the courage of their convictions and tell us what they will be, we know they are necessary, but scrapping the ID Cards system, whilst wholly sensible, does not cut the mustard. By contrast, the LibDems have highlighted some 8 or 9 areas they would cut. We all know that the LibDems won’t get enough support to form a government, but based on the fact that they are willing to put their stake in the ground and then fight their corner, they are demonstrating considerably more moral courage and conviction than their Conservative counterparts.

Because I don’t want to be accused of highlighting the problems, but not putting forward any solutions, the following would be my first port of call in terms of saving money. And, for the record, I would not be looking to increase direct taxation, since as I have already argued, the best stimulus this country could get, is the natural one provided by people spending their own money in the way they so choose.

1. Scrap all database/unnecessary IT projects, including, but not necessarily limited to; the Communication Database, ContactPoint, the Travel Database, the NHS Database and the ID Card Scheme. Saving £105bn over the next 5 years. It is worth noting that over-runs on this Governments 8 largest projects total a staggering £18.6bn (source: Times & Computer Weekly). That’s right, this is just the over-runs, not the total cost!
2. Scrap the ‘Tax Credit’ system and return to a simplified tax and benefits system that does not see people pay a higher rate of tax simply so they can fill a form in a claim it back as a tax credit. The same objective can be achieved by using personal allowances and a simple tax system. Minimum savings of £4bn per annum as a result of less fraudulent claims and errors (currently £2bn per annum), plus savings in process and administration.
3. Can local council’s publicity machines, saving £430m per annum.
4. Cancel the Child Trust Fund (Baby Bonds) programme, saving £470m per annum.
5. Reduce International Development Aid budget by half. At this time, we can ill-afford to offer £billions in aid to other countries. Saving of £2.5bn per annum.
6. Close down the Regional Development Agencies that have delivered little, if anything, for businesses in the UK. Annual saving of £2.1bn
7. Reduce funding to the Scottish Assembly, the current ’Barnett Formula’ is outdated and the amount paid allows people in Scotland to benefit from services that those in England cannot, such as free prescriptions and free care for the elderly. This is neither fair, nor equitable. The budget should be trimmed by at least 10% saving £2.6bn per annum.
8. Withdraw automatic right to ’sick pay’ for public sector workers. Savings £1.7bn
9. Reduce the number of consultants used by various government departments by half. Saving £1.5bn per annum. Use the balance to recruit the skills that are necessary rather than pay inflated costs to outside companies.
10. Reverse the increased cost of Quangos in the UK, which has risen by £41bn to £123bn. Saving £40bn per annum.
11. Close tax loopholes which cost the UK Exchequer £8.5bn from High New Worth Individuals, £3bn from large companies and a further £7bn as a result of tax evasion and other activities. Total: £18.5bn

There are, of course, many other areas where our money is squandered, my particular suggestions would save approximately £70bn. Any halfway competent government, or government in waiting, could come up with a set of plans that could easily trim 5%-10% off government expenditure without necessary affecting front-line services. This could lead to savings of up to £60bn per annum. In fact, the European Central Bank found that if the UK’s public spending was as efficient as say, the USA or Japan, we could realise a saving of 16% without any cuts in front-line services, that is a whopping saving of £93bn per year. Throughout government there is duplication, waste, excess and abuse, this area should be tackled well before cuts in essential services are considered and this is what the opposition parties should be focusing on.

Far be it for me to defend the so called “rich”, but I would like to make some pertinent points in relation to this governments’ decision to increase taxes on those earning over £100,000 and £150,000.

First if all, I am at a loss as to how anyone can describe someone that earns over £100,000 as ‘rich’, take a look at any of the newspapers that still have jobs advertised and you will see countless middle management jobs and sales positions which offer earnings of around £100k, including bonuses or commission. So, these are not all city bankers, many of them may be your next door neighbours, or perhaps your boss. These are people that have almost certainly earned their positions through merit, not spongers or low-lifes! Yet, when our members of parliament refer to them, it is as if they are the great unwashed. Yet many of these people are creating jobs for the rest of us, should they really be treated with such contempt and disdain?

When people stay on in further education, this is invariably because they want to maximise their chances of doing well in the workplace, because they want to aspire to be successful, in terms of position and earnings. Are those that are successful to be judged as one of the great unwashed if they succeed in earning over £100,000 per year? One of the things that I am always hearing is that those that earn more should pay more. I agree, but they already do, taxes are paid in cash terms, not percentages. Take an average person earning £25,000 per year, they will pay £5945 in tax and national insurance every year. They will also, most likely, be entitled to additional tax credits and other benefits which will further reduce their net contribution in taxes.

Now, lets take someone earning £113,000, this is the level at which the individual will lose all of his or her entitlement to a personal allowance. As a consequence, their net tax contribution will be £40,362 (rising to £43,304 from next year), which is between 6.8 and 7.3 times more tax that Mr and Mrs Average. Or to put is another way, in percentage terms, they will be paying twice as much as the average wage earner (38% instead of 17.7%). Yet, they will not be entitled to any tax credits or other benefits. It is also likely, that someone at this level will receive ‘private health insurance’. However, even though this reduces the burden on the state system, the individuals will actually be taxed on the cost of private health, as a ‘benefit in kind’. For anyone that things this is a perk, they need to be reminded that this ‘benefit’ is not provided because the employer is feeling benevolent, but because they need their employee back to work as quickly as possible.

It is all very well deriding those people that have achieved success in their careers, but it is also worth remembering that these same people provide the exchequor with the same amount of net tax as 7 people on average earnings. Yet, they do not get seven times more pension, nor do they get seen by their doctors seven times faster, instead they are actively and unfairly targeted for yet more money. They are not rich, they are successful, they are achievers and this country would be a much poorer place economically, commercially and intelectually if we did not have people like this. Take a look at what ‘brain drain’ has done to some African countries where their skilled people left in droves following a change of government, some have never recovered, do we really want that here?

I dislike envy, as much as I hate greed, both are destructive in their own way. In the USA, they have always heralded success, placed people that have achived on a pedestal, here, we invariably look on with contempt. The politics of envy assume that these people have got ‘rich’ at the expense of their employees, rather than accepting that they are more likely to have been directly or indirectly responsible for creating jobs and wealth. I remember one of my former bosses saying that he never had a problem paying out large commission cheques to sales people, because it meant they were generating business, profit and security for the company and its employees.

There is a very real risk that, by removing all personal allowances for those earning £113,000 or more and, increasing income tax to 50% for earnings in excess of £150,000, many successful people will look to take thier skills, trade, entrepreneurship and money elsewhere. There simply has to be a limit to what they will accept. If they do leave, how many jobs will be lost as a result of the skills shortage? White collar workers are no less skilled in their trade as, for example, an electrician, coach builder or car worker. Anyone who suggests otherwise is naive. If these successful people spend their money in other countries, how many jobs will be lost as a consequence of the comparitive downturn in sales?

I believe taxation must be fair and equitable. From a moral perspective, it is okay to say those that earn more, must pay more. But it is not acceptable to state that those that earn more must also be hit with a penal rate of tax as if they were not part of the human race. Remember, many are already contibuting in cash terms, more than 7 times as much as the average worker. This country is in a mess and we will all have to accept that public services will have to be cut and taxes will have to rise, but it is, in my opinion, fundamentally wrong to target one section of the workforce for special treatment in the form of penal tax rises. Especially when so many companies and genuinley rich people are still using loopholes to avoid paying income or corporation tax.

I know that my comments will annoy many who are struggling to pay their mortgages, it will also irritate some that believe people who have been successful in their careers are not deserving of higher salaries, but this country needs achievers and to keep them, we must reward them. With the exception of bankers and the public sector, I don’t know of any business that will pay more than an employee is worth, nor a company that would be prepared to keep someone on that was not delivering results. If they are paying their taxes, even if this is as much as seven times that contributed by the average worker and then spending the money in our country, why should so many people judge them so harshly. These people also have mortgages and commitments, the only difference is scale.

I do not earn over £100,000 per annum, but my sense of fairness is what motivated me to write this post, plus I suspected that those that do earn over £100k would be roundly condemned. I am unusually indifferent to those that disagree with me on this issue because I have seen first hand what happens when countries start to lose key skills in what has been dubbed a ‘brain drain’. The country, the economy and the people all suffer in equal measure.

Not before time George Osborne has outlined what the spending priorities will be if the Conservatives win at the next election. Although in traditional Tory style, his comments lacked any detail, but there there was at least a clear statement of intent, one which I could subscribe to. He said that The Conservative party will prioritise spending cuts rather than tax rises to address the atrocious state of the public finances. George Osborne said “You don’t want to kill off the recovery with heavy tax rises that bring you back to square one.”

Osborne stated that health, schools, defence and international development would be protected from cuts in 2009/10, but beyond that, would only commit to real term increases in health and to match Labour’s commitment on overseas aid of 0.7% of GDP. These cuts are likely to amount to £5bn, not nearly enough, but it is a start. For me there are a number of positive aspect to this statement which I find encouraging.

A politician has finally understood that you cannot simply take the easy way out every time their is a funding gap and fleece the already hard-pressed taxpayer. The Conservatives have made a great play of all the stealth taxes we have had to endure over the past 11 years as well as the increased tax burden. To then add to it, whatever the economic circumstances, would be hypocritical, at least until they have exhausted all other options. There is a huge amount of waste and excess in the public sector and it needs to be brought under control. Personally I believe a saving of £5bn is small beer and this could be much higher, without necessarily impacting on front line services.

I am also encouraged that the Conservative’s are finally willing to open themselves up for Labour party attacks along the lines of “a vote for the Conservative Party will lead to public sector cuts”. Anyone with an ounce of commonsense will know that our current public sector investment is unsustainable, it would have been if there had been no economic downturn, so it sure as hell is now. Increasing taxes will mean there is less money in the economy and therefore it will take much longer to come out of this recession. The best fiscal stimulus in a natural one and that is by allowing people to keep more of the money they earn, not less.

Labour jibes that a vote for the Conservatives will lead to cuts in schools and health are designed to be emotive, but it is clear that the current spending is not sustainable in the short or medium term and, deep down, the electorate knows that. No matter what party is in government, real term cuts are inevitable.

The voters of this country are also shoppers and they know that when times are hard, they have to make their money stretch further, this means cuts in non-essentials, reducing debt and making every penny count. They know that if they are prepared to shop around, money can be saved without necessarily compromising quality, for example buying supermarkets own label products, frequenting discount stores, utlising the intenet to research prices etc. This is because most people do not have the luxury of boosting their income by simply helping themselves to someone else’s money, as is common with governments when they get their sums wrong. The taxpayer always has and I suspect always will be the easiest target for spendthrift governments such as New Labour.

I am also heartened that the Conservatives are prepared to take a position and then defend it. So far they have promised to fix our ‘broken society” and as we all know that is an intangible that they couldn’t be accurately measured on. But a commitment to cut wasteful and excessive public spending is tangible, we will be able to judge them on their deeds, not their words. In fact, the Conservative party, if true to their word, is at risk of becoming a party of conviction and in my view at least, that makes them more electable. I would like to see George Osborne and his team put more work into this commitment and identify some of the areas where they will make cuts….yes, I say cuts, because we will inevitably have to make cuts in real terms. They could make a start with the £20bn a year that the Labour party have committed to spend on new databases that achieve nothing other than infringe the civil liberties of the people of this country, then move on to complete a wholesale review of the unfunded public sector pension schemes which are crippling the public sector finances. For example, it was reported last week that 20p in every £ collected in Council Tax, goes directly towards paying local government pensions.

It is worth reminding ourselves that the vast majority of our taxes go to support or subsidise those less fortunate, therefore, £1 in tax does not mean £1 in benefit to the taxpayer, as all government’s past and present would us believe. And, to help those less fortunate than the majority (soon to become the minority), we need an army of civil servants, many of whom are now better paid than the private sector and have much better pension schemes.

My best guess is that for every £ paid in tax, the average taxpayer will receive no more than 20p in benefits, now that IS a number the Tax Payers Alliance should try and calculate. The bottom line is we, as taxpayers, must insist that we get value for money. If my estimate is right, then for every pound that is taken from us, we get only 20p of value, is there any justice in that. I think not, it is taking social responsibility too far and I suspect that if the true number was ever published, there would be a massive backlash from the taxpayer. 

This is only one solid policy statement offered by the Conservative party that I fully concur with, I hope that in the coming months, we will have more sensible, tangible and worthwhile policy commitments. You never know, they may actually become a party that is worthy of our vote, rather than one which wins the election as a consequence of the electorate voting against New Labour, rather than for the Conservatives.