To avoid further cuts, Osborne should raise taxes and reduce benefits

Rather than cutting over-stretched public services, the Chancellor should raise more from the wealthy through tax rises and cuts to universal benefits.

In the build-up to the Budget, most of the debate has been on the here and now, with the Chancellor being urged to boost growth through capital investment or temporary tax cuts. But this will also be a critical Budget for the medium term as George Osborne sets the public spending envelope for 2015/16 ahead of June’s spending review. There’s still time for him to avert another historic public spending mistake.

As part of the Fabian Society Commission on Future Spending Choices we analysed the impact of Osborne’s existing plans as implied by the 2012 Autumn Statement. On the basis of his current commitments to protect spending on the NHS, schools and international development, in 2015/16 we can expect another cut to unprotected public services of £5bn. The services affected include defence, police, social care and local government. Across unprotected departmental spending this would be a real-terms cut of 3.8 per cent compared to 2014/15.

The public services at risk have already been the worst hit by austerity and a further year of reductions would bring the total real cut to these areas since 2011/12 to £36bn or 22 per cent. It is surely unwise to plan further cuts to those budgets that have been hit the most already. Indeed, many areas will face significant pressures even if their budgets stand still in real terms, while an aggregate freeze would still mean cuts to many budgets to make space for growth in other priority areas.

The £5bn pounds required to prevent these further cuts could be found in four ways: cutting the NHS, schools and international development; slowing the pace of deficit reduction and increasing the stock of debt; further cuts to social security; or raising taxes.

Cutting spending on the NHS and schools is not attractive given the rising demand both of these areas face as a result of our ageing population and the new baby-boom. International development spending plans, meanwhile, are part of a long-term international commitment which has cross-party support.

Increasing debt to pay for everyday public service spending is also unattractive. On the current economic outlook, more debt-financed spending is needed but to stimulate the economy today through temporary stimulus and capital investment, not for ordinary government activity. Extra borrowing may also be required in the medium-term if economic growth comes in below the OBR’s previous projections, which are likely to be downgraded this week. But this would merely be to achieve George Osborne’s existing spending plans. Since a future government may well need to push its deficit reduction programme beyond 2017/18 simply because of the state of the economy, it would be unwise to plan for extra discretionary debt-funded spending too.

Instead, the £5bn to prevent further public service cuts should be found through tax rises and social security cuts for 2015/16. These changes should be pre-announced but only implemented if the economy has returned to growth by then (and there is nothing to stop this policy sitting alongside temporary tax cuts in the meantime).

Choices regarding tax and welfare changes should be taken together, since they are both financial transfers between citizens and government. Decisions should be made from the perspective of who has the greatest capacity to absorb changes. This means that any reforms should target the top half of the income distribution, who both have the broadest shoulders and have escaped lightly from austerity until now. There is also a case for increasing the burden placed on older people. Relatively speaking, retired households are lightly taxed and have not suffered welfare cuts to the extent of younger families.

In isolation the idea of up to £5bn of tax rises may appear alarming (it is equivalent to 1 per cent on VAT or income tax). But at present the brunt of deficit reduction is being born by public spending, not tax rises. On current plans, the chancellor is expecting to close the deficit through a combination of 85 per cent spending cuts and 15 per cent tax rises, compared to his original 2010 plan for 27 per cent to come through tax rises and Alistair Darling’s plans of 30 per cent.

So it’s time to shift the balance of deficit reduction away from public service cuts. The good news is that another year of public service cuts can be prevented at the ‘low’ cost of £5bn. The Chancellor should announce 2015/16 tax and benefit plans to generate this money from those who can bear the burden best.

Chancellor of the Exchequer George Osborne leaves 11 Downing Street on March 18, 2013 in London. Photograph: Getty Images.

Andrew Harrop is general secretary of the Fabian Society.

Photo: Getty Images
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I'm far from convinced by Cameron's plans for Syria

The Prime Minister has a plan for when the bombs drop. But what about after?

In the House of Commons today, the Prime Minister set out a powerful case for Britain to join air strikes against Isil in Syria.  Isil, he argued, poses a direct threat to Britain and its people, and Britain should not be in the business of “outsourcing our security to our allies”. And while he conceded that further airstrikes alone would not be sufficient to beat Isil, he made the case for an “Isil first” strategy – attacking Isil now, while continuing to do what we can diplomatically to help secure a lasting settlement for Syria in which Assad (eventually) plays no part.

I agreed with much of David Cameron’s analysis. And no-one should doubt either the murderous barbarism of Isil in the region, or the barbarism they foment and inspire in others across the world.  But at the end of his lengthy Q&A session with MPs, I remained unconvinced that UK involvement in airstrikes in Syria was the right option. Because the case for action has to be a case for action that has a chance of succeeding.  And David Cameron’s case contained neither a plan for winning the war, nor a plan for winning the peace.

The Prime Minister, along with military experts and analysts across the world, concedes that air strikes alone will not defeat Isil, and that (as in Iraq) ground forces are essential if we want to rid Syria of Isil. But what is the plan to assemble these ground forces so necessary for a successful mission?  David Cameron’s answer today was more a hope than a plan. He referred to “70,000 Syrian opposition fighters - principally the Free Syrian Army (FSA) – with whom we can co-ordinate attacks on Isil”.

But it is an illusion to think that these fighters can provide the ground forces needed to complement aerial bombardment of Isil.  Many commentators have begun to doubt whether the FSA continues to exist as a coherent operational entity over the past few months. Coralling the myriad rebel groups into a disciplined force capable of fighting and occupying Isil territory is a heroic ambition, not a plan. And previous efforts to mobilize the rebels against Isil have been utter failures. Last month the Americans abandoned a $500m programme to train and turn 5,400 rebel fighters into a disciplined force to fight Isil. They succeeded in training just 60 fighters. And there have been incidents of American-trained fighters giving some of their US-provided equipment to the Nusra Front, an affiliate of Al Qaeda.

Why has it proven so hard to co-opt rebel forces in the fight against Isil? Because most of the various rebel groups are fighting a war against Assad, not against Isil.  Syria’s civil war is gruesome and complex, but it is fundamentally a Civil War between Assad’s forces and a variety of opponents of Assad’s regime. It would be a mistake for Britain to base a case for military action against Isil on the hope that thousands of disparate rebel forces can be persuaded to change their enemy – especially when the evidence so far is that they won’t.

This is a plan for military action that, at present, looks highly unlikely to succeed.  But what of the plan for peace? David Cameron today argued for the separation of the immediate task at hand - to strike against Isil in Syria – from the longer-term ambition of achieving a settlement in Syria and removing Assad.  But for Isil to be beaten, the two cannot be separated. Because it is only by making progress in developing a credible and internationally-backed plan for a post-Assad Syria that we will persuade Syrian Sunnis that fighting Isil will not end up helping Assad win the Civil War.  If we want not only to rely on rebel Sunnis to provide ground troops against Isil, but also provide stable governance in Isil-occupied areas when the bombing stops, progress on a settlement to Syria’s Civil War is more not less urgent.  Without it, the reluctance of Syrian Sunnis to think that our fight is their fight will undermine the chances of military efforts to beat Isil and bring basic order to the regions they control. 

This points us towards doubling down on the progress that has already been made in Vienna: working with the USA, France, Syria’s neighbours and the Gulf states, as well as Russia and Iran. We need not just a combined approach to ending the conflict, but the prospect of a post-war Syria that offers a place for those whose cooperation we seek to defeat Isil. No doubt this will strike some as insufficient in the face of the horrors perpetrated by Isil. But I fear that if we want not just to take action against Isil but to defeat them and prevent their return, it offers a better chance of succeeding than David Cameron’s proposal today. 

Stewart Wood is a former Shadow Cabinet minister and adviser to Ed Miliband. He tweets as @StewartWood.