Plan A

Today provided yet more evidence that the Chancellor’s Plan A, the plan to reduce the deficit and tackle the root cause of the UKs economic instability, is working.

The budget deficit for this fiscal year to date (April 2011-Jan 2012) was reduced by £15.6 billion, more than the predicted £9 billion, showing the deficit reduction plans have moved ahead of target. 

This committment to this deficit reduction is one of the only things keeping markets confident in the UKs ability to ride out this financial storm.  This confidence ensures that interest rates are kept low, vital for everyone’s ability to rapay personal debt.

Whilst growth is still slow and is predicted to be slow for some time to come, positive signs emerge every day that the UK is on the right path to recovery.  Mortgage leading in up 10%, the motor industry is exporting extremely well to the Chinese market, banks have improved their profitability, and numerous retailers have recorded fantastic growth.

More can be done at this stage.  Far from cutting ‘too far too fast’, the government is not cutting enough!

Further reports have shown that the 50p tax rate is simple not bringing in the necessary funds to the Exchequer.  This needs to be cut, allowing for those earners to utilise their spending power.  Corporation tax could be reduced from 26p to 20p.  Small businesses often work on a very tight budget, and any reduction in costs would allow for a reallocation of funds, either into employing another member of staff (if the red tape wasn’t a crippling factor here), or into new technologies that could lead to essential growth.

Each point leads to a necessary rant about Europe, but I shall leave this to another occassion.  Small businesses really can contribute to the regeneration of our economy, but they are being strangled by the bureaucracy and ludicrous tax burdens placed upon them by Europe.

Time to step up a gear Osborne.

Sophie Shrubsole

Former BUCF President (2010-2011)

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4 thoughts on “Plan A

  1. There are good reasons to drop the 50p tax rate, but I’m note sure that anyone earning over £150,000 needs help utilising their spending power :P

  2. With regard to progress on deficit reduction, it should be noted that the fiscal year isn’t over, so we can’t be completely clear on how much progress has been made.

    The £127bn figure was the prediction made in the last autumn statement which was an upward revision of the prediction in the 2011 budget which in turn was also an upward revision of predictions made in the 2010 budget. I hope that the government outperforms the £127bn prediction made in the autumn and that the deficit is closer to their initial promises made in June 2010.

    “This committment to this deficit reduction is one of the only things keeping markets confident in the UKs ability to ride out this financial storm.” (sic)

    Moody’s Investors Service actually outlined a range of factors that have kept our credit rating high, not least of which was the fact that UK gilts have an average maturity of nearly fourteen years. Our large domestic investor base was also mentioned. I should also point out that the eurozone crisis has made UK government bonds comparatively attractive to investors, helping to keep yields down. The low Bank of England base rate is more a reflection of low growth at home than fiscal prudence.

    The paper produced by the Centre for Economics and Business research was generally vague and heavily qualified its comments throughout. It also described high rates of VAT as a factor in lessening revenues. The treasury may give us solid data on budget day as to how much revenue has actually been raised. Until that time it should be pointed out that 10 European countries have top marginal rates of income tax at or near 50%, including Finland (53%) which according to the World Economic Forum, has consistently ranked as one of the most competitive economies in the world.

    Cuts and ‘reforms’ to corporation taxes combined with the cancellation of the employer NICs increase will add an extra £5.5bn to the deficit by 2016. I’m not entirely sure how you would wish to pay for further tax cuts when the government that you support claims that we can’t afford to put planes on our aircraft carriers or give a helping hand to teenagers who try to stay in education. We already have lower corporate taxes than most of our major competitors (in the USA it sits at 38%) and cuts in corporation tax have not surprisingly done little to encourage growth so far.

    It’s a little strange that this article calls for serious action on the deficit but also reverts to type by calling for tax cuts that will only add to it. I would like to ask; as Sophie has called for tax cuts, is she now saying that there is some room for fiscal manoeuvre?

  3. My article doesn’t actually give a time frame for tax cuts. What it does call for is an increase in the rapidity of cuts to State spending – this is vital.

    One of the biggest barriers to growth is bureaucracy. Red tape needs to be tackled in order for companies to feel confident about hiring and investing in people.

  4. It’s very easy to call for spending cuts and reductions in red tape, but much harder to deliver when the detail needs to be worked out. The article gives more detail on tax cuts than spending cuts; tax cuts that will add to the need to cut services.

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