The Chancellor, George Osborne, has a further £25 billion in cuts in his sights that he says is vital if we are to eliminate the UK’s deficit.
And £12 billion of this will come from benefits.
Just to remind readers, the deficit is not the UK debt. The deficit is the amount that is added to the national debt every year, which is north of £1.2 trillion and climbing.
The money borrowed is usually used to do a mix of two things: invest in the future (such as infrastructure) and to pay for the day to day running of the country when we’re short of cash.
Further, apart from selling assets like Royal Mail, there are two basic ways the government can get its hands on cash: tax income or borrow it.
As the UK is borrowing so much just to keep the country going it shows that it is not collecting enough in tax to do the job we require of it. The government is, after all, with this chancellor’s speech looking to cut running costs not infrastructure investment.
As a country we might well feel that we should be socially responsible and help those with health and social needs as they fall on hard times as well as a pension when they get to a certain age, but the basic point is that we have not got enough in the pot to pay for it forever unless something changes.
If we want to keep the same level of benefits, pensions and so on as we have in the past then we will have to start collecting more tax to pay for it, we cannot keep borrowing more to pay for it. The question is who pays and how do we ensure they actually pay and not have money lost in avoidance schemes?
If we want to get rid of the deficit without raising tax then we have to cut the money we pay out. Then the question is who suffers? The NHS? Pensioners? Education? Legal Aid?
In every political decision taken there will be ‘winners’ and ‘losers’, it’s just how you spin it that matters to governments to make it look like the most benefit.
Another point to remember is that (apart from quantitative easing and banking bail-outs etc) the money the government takes in tax and borrowing is normally for supporting services and the redistribution to those that most need it. With insufficient tax coming in do you forget support to the banks and (supposedly) endanger the whole economy, cut services and have hospital waiting times rocket up, or reduce the money you give to the poorest and least able to help themselves?
As a country we have bent over backwards to think up and implement weird financial ways of keeping banks in business as well as supporting house prices that keep the wealthier people in clover. Why are we therefore now not straining every sinew to keep the benefits in place for the people that need them?
So, here’s a thought for a start: what if we were able to cut right back on QE and the ability of the banks to ‘create’ money via loans and fractional reserve banking whilst the government itself ‘printed’ new money without borrowing it or paying interest on it and used it to pay all the state and public sector pensions directly to pensioners?