13p on income tax or VAT? Even the OBR think George can't do his sums
It was, of course, good old George “50% is just a temporary tax” Osborne who created The Office for Budget Responsibility (OBR), and now, proving its complete independence, the OBR has formally announced what we already knew- that the gap between money coming in to Treasury coffers (including tax revenues) is not going to meet money going out in future. Perhaps George should have downloaded the Money Saving Expert Budgeting tool...
The main problem is that we are all too healthy. Despite having a 77%* chance of being cancer riddled and/or obese, we are all living too long. And that costs money, both in terms of healthcare services, social care and public sector pensions (even though they are now a bit cheaper than they were before). And this is “clearly not sustainable.”
In its first study of the country’s long-term fiscal prospects, the OBR said that, without a change in government policies from 2016-17, rather than reducing the country’s overdraft, increased costs without a matching rise in income would mean going even deeper into the red.
But it’s OK. The OBR have a plan. In addition to years of austerity, “permanent” tax rises and spending cuts worth £22 billion will be required. I didn’t say it was going to be a popular plan.
To put that amount into context, that works out at an increase of almost 13p on the basic rate of income tax, or 13 percentage points added to VAT. And that is assuming the NHS just gets more efficient, rather than needing extra cash to look after all those old people.
Cheery sorts the Institute for Fiscal Studies called the OBR report “a timely and salutary reminder that, all else being equal, significant further fiscal retrenchment will be required over the medium term to offset the estimated detrimental impact of changing demographics, and other factors, on the public finances”. They did, however, restrain from saying we told you so.
But do we really think we are going to see a 13% increase in income tax or VAT? George can’t even bring himself to think of the 50% income tax rate as permanent, so the chances of him getting away with charging low and middle income earners 13p more are slimmer than Rupert Murdoch’s chances of winning Person of High Morality of the Year. And VAT? Look at the fuss over 2.5% in recent years- he may as well put the UK economy out of its misery now.
But perhaps that is the answer? A personal life quota for every person in the UK, and when you have had your allotted time on this Earth you trundle off to a small room to remain forever in Veritas. I mean Dignitas. Same thing.
* see yesterday’s comment about statistic being made up. But you know what I mean.