Osborne’s recent promise to make no new taxes after general election is a compelling political statement. As spending must be paid for, how Chancellor Osborne plans to pay could include taking from National Health Service, pension fringe benefits, and education, says Paul Johnson of the Institute for Fiscal Studies. The Chancellor says welfare cuts and other social services will provide enough funding to fill the “£25 bn black hole.” Social services spending cuts and higher taxes are likely to become necessary in the next five years, says IFS.
no new taxes
The first to speak about “no new taxes.” At a Parliamentary Press Gallery luncheon event, Chancellor Osborne repeated that he does not need new taxes to balance the government’s books in order to accomplish “fiscal consolidation.” He repeated that the necessary financial goals will be accomplished through additional cutting of expenses. In conclusion, he called upon Labour and Liberal Democrats to declare what new taxes they propose.
Voters may imply that voting for the opposition will bring new taxes. According to IFS, it is likely that hitting middle-income wage earners with creeping tax rates that rise with inflation would bring new revenues without a formal tax increase. This stealthy form of tax increase would ultimately cause people to reduce the amount they spend on goods and services.Top UK economists say the government would need to raise £10 bn from new taxes: identifying new or deeper spending cuts on top of an already £11.5 n of cuts prompts people to ask about the inevitability of some form of increased taxation.
Knocking down the ring-fence? The IFS’s Johnson says that Chancellor Osborne is likely to remove current protection from education, the National Health Service, and pensions. Pension fringe benefits currently include free bus fares and winter season fuel allowance for senior citizens. These fringes help to protect the retirees’ spending power relative to inflation. Other items currently protected by the ring-fence include the overseas aid budget (about £11.3 bn). Many citizens might prefer Osborne’s taking funds from foreign aid or freezing current spending levels of NHS before accessing social services programmes.
Filling the black hole. Decreasing the deficit is important, and Chancellor Osborne must keep the deficit from growing. Labour will challenge the Tories to share the proposal of how the goal of filling the black hole without “no new taxes” is to be accomplished.
Mr. Osborne’s early statement is an obvious attempt to distinguish the Tories from Labour and Liberal Demoncrats. These parties have not discussed their platforms’ position about new taxes after the 2015 General Election.
- George Osborne: We don’t need to raise taxes to beat deficit (independent.co.uk)
- No need for tax rises, says Osborne (bbc.co.uk)