This particularly thorny question
is the subject of much discussion at present. It has also resulted in many sleepless
nights for many of our pensioners and for single occupiers of all ages, who now
fully expect to lose some or all of their entitlements on October 30th.
There is little doubt that Starmer
and Reeves are planning to use the ‘Tory Black Hole’, as they call it, to justify
both swingeing benefit cuts and tax rises in the Autumn Statement.
The size of this new ‘celestial’
phenomenon is reputed to be £22Bn, although it should be noted that the calculations supporting it have
never been fully verified. To put the amount properly in context, the calculation was based on an audit performed by the treasury in July, comparing the Spring Budget Forecast of £1226 Bn for total public spending with a post-election updated estimate by Labour. If this is correct, the difference would represent only a 1.8% underestimate of spend (i.e. well within 'experimental' error for a statistical forecast six months in advance). We know the figure also includes the £9 Bn estimated to be required to
fund recent and well-publicised above-inflation pay rises, so that arguably the
size of the inherited i.e. ‘Tory’ black hole should for the sake
of accuracy be quoted at £13 Bn, pending full verification. ASLEF and RMT secured a 14% increase over 2023 levels for their train
drivers, much of it backdated to 2023. The BMA’s Junior
Doctors have done even better percentage-wise, securing a guaranteed 22% increase over 2 years.
So we can all see where the acute need for cash to 'balance the books' has really come from….
There is, of course, another way to
generate extra revenue for the treasury without cutting yet more of our
benefits….
At risk of being accused of
providing somewhat ‘off the wall’ suggestions, I’ll put this one forward.; I think it could provide an answer
in the short and medium term, as well as performing a useful ‘social
experiment’ which should help us determine the state of our collective philanthropic
conscience.
As indicated, the pay
settlements Starmer has sanctioned so far are all well above the current rate of
inflation, and several of them apply to some of the most well-off workers in
our society. While I won’t dwell further on the morality of a new and naive government caving in to the
demands of powerful unions in this way, at a time when the pensioner population
is still smarting from the loss of their £200-£300 Winter Fuel payment, the fact
remains that he has done so.
It looks like Starmer will continue to extend
the same privilege to virtually any unionised public sector group powerful
enough to hold the country to ransom, for the sake of temporary ‘industrial
peace’. (Rest assured, this peace will only be temporary, and they’ll soon be
back for more. The BMA have indeed already stated if they don’t get more super-inflationary rises, there
will be ‘consequences’ i.e. more strikes).
Rather than expecting the
hard-pressed taxpayer to fund everything (and, remember, it is ultimately our money the government is playing fast and loose with), my suggestion would be to introduce a
scheme whereby anyone awarded a pay increase above inflation by this government
would be invited to pay 0.5% of their salary into a ‘National Benefits Fund’.
Contributions to the fund would be
entirely voluntary, and to provide an incentive, would be taken from gross pre-tax salary, with tax relief available
at the contributor’s marginal rate. For a worker earning an average salary of
£40,000 p.a. the gross payment would amount to £200, but would cost the worker
only £160. For a train driver or doctor on £100,000, the cost would be proportionally
higher at £500, but further reduced to as little as £300 after tax relief at
40%. "..Let those with the broadest shoulders contribute the most.." as the 'man himself' has said many times....
Not a lot, surely, to ask from a group of workers who have just had a double figure pay-rise to bring their pay up in some
cases almost to the 45% tax threshold.
To ensure the new benefits fund was
properly ring-fenced, and only used to augment the benefits budget, it would
need to be administered independently by trustees in the same way as are our
private pension funds.
I admit this is a slightly unconventional way of funding government shortfalls, but we do need to be inventive here if we are to stave
off even worse injustices for our benefit recipients this autumn and winter.
This donation scheme would provide a reasonable way for the better
off members of society to contribute a small amount of their wealth to the
poorest. It would also provide much-needed extra headroom for the Treasury
without incurring yet more electorally damaging wrath in large sectors of the
electorate. In time, it could be formalised as an official ‘worker levy’ if there was
sufficient support.
We should also remember here that workers generally are set to benefit from a raft of new measures designed to improve their conditions
of employment from Day 1, so it would be reasonable for society as a whole to
expect some degree of largesse from them as the privileged beneficiaries of a
new and more generous regime.
The initial voluntary nature of the
scheme would also provide a useful social experiment, and should tell us
whether we have in fact already graduated to a more caring ‘We’re all in it
together’ approach to our fellow man, or whether it’s just business as usual i.e. “…The strongest take the prize, and the Devil takes the hindmost….”
The alternative, which will I suspect, be what emerges in the Autumn tatement, be a substantial hike in Employer NI contributions and much less favourable tax relief on pension contributions. The latter will hit the worker in the pocket directly by raising their personal tax take; employer NI could be more insidious and far-reaching, since it will cause more reluctance on the part of employers to take on new staff - expect unemployment to rise as a result.
Needless to say, pensioners, who
have already paid their £200 as a compulsory donation via the withdrawal of their winter fuel payment, should not be expected
to contribute further.
I rest my case….
First published 7.10.24
Revised 11.10.24
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