Readers may already have noticed an excellent new report – How to Save £50bn – which was jointly published by the Institute of Directors and the Taxpayers' Alliance last week. The logic behind its call for spending cuts is impeccable and, I would have thought, difficult for anyone to disagree with:
- The UK faces a massive fiscal crisis, with borrowing going through the roof.
- If the economy does not recover as well as the government forecasts, the deficit will be even worse than anticipated.
- Failure to bring borrowing under control could lead to the UK losing its AAA credit rating, which would have serious knock-on effects on Sterling and interest rates.
- Higher taxes could smother economic recovery, which would make reducing the deficit even more difficult.
- Public spending grew more quickly in the UK between 2000 and 2007 than in any other OECD country. That's why we have a structural deficit.
- We need both long-term reforms and short-term spending cuts to tackle the deficit.
- Governments can bring spending under control if they really commit to it: look at Canada in the 1990s.
The report then goes on to make 34 separate recommendations for reducing public spending, which would save just over £50bn in total. I've pasted a full summary of their proposals below (click here if you can't see it).
This IoD/TPA report is an important contribution to the debate on public spending, and one that I hope policymakers will take seriously. The ASI is working on a similar project at the moment, which focuses a bit more on capital expenditure. We are planning to publish it early next year.