Wednesday, 7 October 2009

Day 2 - Being straight with the British people

Lots of good events at the Conference fringe but only one thing being discussed in the bars - George Osborne's speech.

We all know our nations finances are in a mess thanks to a reckless Labour government and that radical measures are required to bring our budget into balance and to build a better Britain for future generations. The problem is how to communicate this to an electorate already feeling the pain of Labour's recession and yet to feel the even greater pain of their massive public debt.

George was at pains to remain serious throughout and to stress "we are all in this together". Just how bad things are we can only begin to guess, so his speech was a finely balanced attempt to be honest with the public about just how difficult the choices made by a Conservative government would be.

The following are examples of specific savings that should be made in addition to the tens of billions of pounds of efficiency savings and productivity improvements that the Conservatives would deliver throughout the public sector over the next Parliament in order to reduce waste, deliver more for less, and protect front line public services.

The measures would save more than £7 billion a year in government spending by the end of the next Parliament, or more than £23 billion over the Parliament. These savings come on top of the longer term savings from raising the State Pension Age.

These measures could all be implemented without harming front line public services, and show how the burden of dealing with Labour’s debt crisis should be shared fairly while protecting the poorest and most vulnerable in our society.

Reduce the cost of government without harming front line services:

· The Government should recommend no headline increase in pay for all public sector workers in 2011, except for the lowest paid one million who should be protected. Military personnel on active service overseas should be more than compensated by doubling the Operational Allowance to an average of £4,800 for a six month tour of duty. Altogether this would reduce government spending by £3.2 billion a year from 2011 onwards, or more than £12 billion over the next Parliament. These savings are equivalent to protecting more than 100,000 public sector jobs.

· The Government should set out plans to reduce the administrative costs of Whitehall bureaucracy and Quangos by at least one third. This would reduce government spending by £3 billion a year by the end of the next Parliament, or by more than £7 billion over the Parliament.

· The Government should find ways to cap the biggest government pensions, including those for senior civil servants, local council executives and Quango managers. This cap should prevent any taxpayer-funded increase in senior government pensions already worth over £50,000 a year, and stop all taxpayer-funded pensions for these groups in future exceeding £50,000 a year. This would reduce the growth of public sector pension liabilities by hundreds of millions of pounds over the next decade.

Concentrate benefit spending on the poorest and most vulnerable:

· The Government should stop new spending on Child Trust Funds for better off families. Disabled children and the poorest one third of families should continue to receive both new Child Trust Funds at birth and top-up payments. This would save £300 million a year or £1.5 billion over the next Parliament.

· The Government should stop paying tax credits to households with incomes over £50,000 by starting to means-test the Family Element of the Child Tax Credit at a lower threshold. This would save £400 million a year or £2.0 billion over the next Parliament.

· The Government should cut benefits by up to £25 a week for anyone currently receiving Incapacity Benefit who fails a new work test and is therefore entitled only to Jobseekers Allowance. This would save more than £1 billion over the next Parliament, of which £600 million should be used to help get the unemployed back into work.

Ensure that the burden is shared fairly:

· The new 50p tax rate and associated changes to the taxation of higher earners should be kept in place for at least as long as the public sector pay freeze, in order to ensure that the richest in our society pay their fair share of the burden of tackling Labour’s debt crisis.

· We hope the new international rules on bankers’ bonuses work – that is the best solution. But if we find the money that should be going into stronger bank balance sheets is being unreasonably diverted into bigger pay and bonuses, we reserve the right to take further action and that includes using the tax system. We believe in the free market not a free ride.

Tackle the pensions time bomb while ensuring a decent standard of living in old age:

· The Government should announce an updated review of the state pension age, as recommended by Adair Turner’s Pension Commission. Given the state of the public finances and rapidly changing demographic projections, the review should consider whether the increase in the pension age from 65 to 66 should be brought forward from 2026, but starting no earlier than 2016 for men and 2020 for women.

· This should be combined with a renewed commitment to re-link the state pension to earnings growth in the next Parliament in order to ensure a decent standard of living for all in retirement, halt the spread of means-testing and restore incentives to save.

· According to the National Institute of Economic and Social Research, every year by which the pension age is increased reduces government borrowing by about two thirds of a per cent of GDP. Once the pension age for both men and women increases by a year there will be a saving of around £13 billion a year.

So, no matter how good a time you have catching up with old friends and sharing ideas with new colleagues you can't help thinking about the problems that lie ahead for our country. Serious times demand serious men and women ready to make serious decisions and today I think we saw George Osborne is ready to be one of them.

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