Politicians must confront tricky issues such as health charges
Sunday 30 September 2012
Quite suddenly the debate about fiscal policy in Britain has become serious. Ever since the financial crisis broke most of the discussion here has been about how much more money the Government should borrow or the rate at which it should get back to balance.
There is nothing wrong with that debate; indeed it is the great practical question facing the coalition. But behind it is another even greater question, which is: how do we achieve long-term sustainable public finances?
In the past few days Nick Clegg has made that the centre point of his pitch to the Lib Dem conference. Frank Field, the thoughtful Labour MP, has pointed out on the radio that UK governments of both main parties have refused to raise sufficient revenues to meet their spending promises. The Institute for Fiscal Studies has gone into the long-term financial implications of Britain's ageing population both on the radio and in the papers. And there have probably been other commentaries on this that I have missed.
I find this comforting. It is a massive change from the calls for the Government to "support the economy" by borrowing yet more than it is doing at the moment – a small thanks by the way to Mr Clegg for pointing out that we were borrowing £1bn every three days. It is a change too from the attacks on "the cuts", when those cuts have hardly begun. But of course taking long-term fiscal issues seriously does mean confronting very difficult questions. Take two of those.
One of them is that to raise significantly more tax, the tax base must be broader. The obvious way of doing that would be to increase the range of VAT, which at the moment is levied on only about half of all consumer spending. Are we ready for VAT on food? Most European countries do levy that but it would be a tough one for us.
The other would be to impose more user charges on public or quasi-public services. We have made a start on university fees but to widen that to even modest charges for access to medical services? Tricky. But that is the sort of debate that we have to have.
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