By Vivienne Russell | 16 October 2013
The next UK government could increase public spending by £20bn a year – 1% in real terms – from 2016 and still manage to cut the deficit, according to a Fabian Society commission.
Chaired by former Treasury select committee chair Lord McFall, the society’s Commission on Future Spending Choices issued its final report, 2030 Vision, today. It follows a year-long investigation of the spending options open to the government that takes power in 2015.
McFall said it was wrong to assert that there was no alternative to future spending cuts.
‘Instead there are “constrained alternatives”,’ he said. ‘Our research shows that an incoming government committed to deficit reduction will have choices and will be able to afford a modest increase in public spending.’
He added that a further round of ‘savage’ spending cuts must be avoided. ‘This will be possible if rising tax revenues are ploughed into public services and if high-income groups are asked to pay a little more.
‘This choice is no less fiscally responsible than the coalition’s plans, but in place of short-term “slash and burn” it opens the way for government to start rebalancing spending to meet Britain’s long-term needs.’
Among the commission’s specific recommendations are means-testing for the Winter Fuel Payment, ending the ‘triple lock’ on state pensions, which guarantees pensioners at least a 2.5% rise, and some reforms to disability benefits. Taken together this would save £5bn from social security spending.
The commission said these changes would mainly affect wealthier older people who had suffered less from austerity than many other groups.
However, any further cuts to social security spending should be ruled out.
Andrew Harrop, general secretary of the Fabian Society, said: ‘Compared to the government’s cuts to public services and social security, our ideas for savings avoid damage to the most economically beneficial spending and maintain a fair system of social security that protects lower-income households who have been hardest hit by living standards crisis.’
The commission is also urging the next government to consider modest tax rises, which it said would be preferable to sticking to the current government spending plans.
While broad-based tax rises should be ruled out, high-income groups could pay more, with reform of pension tax relief an ‘obvious place to start’.
The commission also called for government spending plans to be subject to a long-term approach, with administrations setting out their thinking on spending for the next 20 years. This would help ensure that spending on long-term objectives such as skills and capital projects does not lose out to short-term pressures.
Scrutiny and transparency should also be increased and a new Office for Public Performance established to restore faith in the quality of public spending.
‘We need to bridge the gulf in understanding and trust which separates people from their government,’ McFall said.
‘Our recommendations for reforms to the spending review process, improved independent scrutiny and a proposed new Office for Public Performance will help restore people’s confidence that taxpayers’ money is spent wisely and effectively.’
