Ed Miliband and Ed Balls recently attempted to make some headway on the key issue of economic growth by asserting that they may not be able to reverse Coalition cuts after 2015, whilst also promoting their five point plan for jobs and growth.
However, with the budget due in just over a month, on March 21st, a more effective tactic to gain economic credibility would be to propose a fully costed alternative. Here are 10 proposals for inclusion in an alternative:
1.Investing in the economy
Will Straw at IPPR has led calls for a British Investment Bank to be introduced to get the economy moving. Funding should be diverted to diversify and modernise the economy, focussing on key growth areas such as green energy, robotics, science and technology. £15 billion upfront with a further £4 billion annually would give it real teeth.
2.Cutting spending on war and nuclear weapons
Greenpeace estimates that renewing the Trident nuclear weapons programme could cost as much as £97 billion over 30 years, including upfront procurement costs of potentially £15-20 billion. This should be scrapped. In total, the Institute of Economic Affairs believes the defence budget can be cut by £17 billion per year.
3.Putting more money in people's pockets
The Citizen's Income Trust advocates paying everyone an unconditional 'Citizens Income', which would provide greater financial security and save around £10 billion per year. Increasing the Personal Allowance to £12,000 per year would put an extra £800 in the pockets of working people and the Adam Smith Institute believes that this will cost an extra £15 billion. The potentially cost-neutral move to a lower rate of VAT is part of Labour's five point plan, and this will increase economic activity as well as helping the lowest paid, who spend a higher proportion of their wages.
4.Making the tax system more transparent
Income tax and National Insurance should be merged, which the TaxPayers Alliance believes could save businesses administrative costs of £450 million. Any change to these must be carefully managed to ensure fairness. Income tax returns should become public documents, creating much greater insight into how the very wealthy manage their finances to evade and avoid paying their fair share.
5.Promoting responsible business practices
Spending £3 billion per year encouraging socially responsible organisations, such as energy co-operatives and childcare mutuals, can bring economic and social benefits. Introducing shared maternity-paternity leave would be an important step towards greater equality, and would cost around £30 million. Tax breaks could be offered to organisations like the Charity Bank who pay their lowest earners a minimum percentage of what the highest paid employee receives, as this produces knock on societal benefits.
6.Tackling fraud and undesirable business practices
The Tax Justice Network estimates that tax evasion costs £109 billion per year. If tougher penalties were introduced, which led to a modest reduction (of perhaps 3 per cent), this would result in £3 billion being saved in the first year. Higher fines for anti-competitive practices should be introduced, and the Office of Fair Trading is currently pursuing an increase in this to 30 per cent of total revenues. Taxpayer subsidies worth £88 million to private schools should also be scrapped. Internationally, the viability of introducing a worldwide financial transaction tax (Robin Hood Tax) and a unitary business tax should be actively sought.
7.Creating more apprenticeships for young people
Ed Miliband has advocated awarding government contracts to firms offering apprenticeships, which could make a substantial difference given that state spending represents around half of UK GDP. Introducing this policy wouldn't cost the public purse anything.
8.Initiating a major house-building programme
There are about four million people on housing waiting lists. Spending £10 billion on a major house building programme would help reduce this, whilst also creating jobs and investing in infrastructure. Ministry of Defence land could be used to build many of the homes on. Potentially, current social housing tenants could then either rent or buy these new homes for cost price (not market value), freeing up their existing housing for others in need.
9.Focussing on untaxed wealth
Housing bubbles in recent times have resulted in mountains of untaxed wealth. The long discussed Mansion Tax should be introduced on homes worth more than £2 million to reclaim some of this. The Institute for Fiscal Studies believes that this can raise £1.7 billion per year. The viability of a land value tax should be pursued and implemented if it is found that this could fairly take over from existing property taxes.
10.Incentivising responsible behaviour
Introducing an alcohol unit tax in England could bring in an additional £700 million, as well as reducing health costs and inequalities. Cleaning up chewing gum costs in the region of £150 million per year and MPs have called for a levy, which at 10p per piece could raise £100 million. The economic and social merits of personalised carbon credits and the regulation of illegal substances should be thoroughly analysed.
The proposals are cost neutral, with the upfront £15 billion of a British Investment Bank offset by the saving in upfront procurement costs from scrapping the Trident nuclear programme. The remaining amounts are annual, with just under £33 billion brought in, largely from savings in the defence budget and by introducing the Citizens Income. Around £32 billion would be spent largely on increasing the Personal Allowance and building thousands of new homes.
By setting out in detail new tax and spending policies, this will enhance the public's perception of the economic competence of the Labour top team. Ed Miliband has seen an upturn in fortunes recently and the budget represents an opportunity to put down a real marker.