In preparation for a recent media appearance, I had to work out what I would do if I were prime minister for a day. The programme turned out to be less serious than I had anticipated – invading France and bringing back the stocks were typical topics of discussion – so much of what I had planned to say went out of the window. Regardless, here's what I was originally thinking...
My first priority would be sorting out the public finances. The government is now overspending by something like £15m an hour, 24 hours a day, 7 days a week. They are going to borrow £175bn this year, and more than £700bn over the next five. That's on top of the £3tn or so of debt we've already got, once you include PFI, the nationalized banks, unfunded public sector pension liabilities, and the rest. With figures like that it's perfectly clear that the government's £15bn 'efficiency drive' just isn't going to cut it – far more radical cuts are needed. I think £100bn should be the absolute minimum, and like former Blair adviser David Halpern, I'd argue 20% is a good figure to aim for. Things just can't go on as they are.
My other economic priorities would be tax and pensions. On the tax front, radical simplification would be the order of the day. At 10,000 pages Britain's tax code is now the longest in the world, and imposes an administrative cost of more than £5bn a year on the UK economy, which is just ridiculous.
On pensions, I'd start by acknowledging the extent of the problem. Over 65s now outnumber under 16s. And while there are currently four potential workers to support every pensioner, by 2050 there'll only be two. As a result, our PAYGO pension system (where current taxes are used to pay current pensions) is simply not sustainable. I'd follow Chile's lead and introduce compulsory private savings accounts, in place of national insurance contributions. As Kristian Niemitz points out on the IEA blog, Chile's highly successful system just celebrated its 28th birthday, so it's high time the UK caught up.