Why Major's tax promises just don't add up

So tax cuts can be paid for from savings in public spending? Think again, says Nicholas Timmins - the options are seriously limited

If you want to cut taxes, one obvious place to start is to cut spending. But how can the Government impose the Prime Minister's promised "ruthless" spending cuts while maintaining its claim to be the protector of the common wealth, thereby refuting Alan Howarth's damaging accusation? Only with immense difficulty.

For since 1979, government spending, far from rolling back the welfare state, has come to concentrate on it. In the year the Conservatives took office, 53 per cent of spending went on health, education, social security and housing. Since then, spending on council housing and defence has been cut, and money has been raised and costly subsidies ended by selling off the bulk of the nationalised industries.

Despite this, the pressure of higher unemployment and an ageing population, plus the priority given to law and order, have helped ensure that virtually two-thirds of government spending goes on the welfare state.

In housing, capital spending has been cut. But the policy of reducing revenue costs by driving up rents has had such a dire effect on the housing benefit bill and on discouraging benefit recipients to take low- paid jobs that the Government has called a halt. Rent increases of 5 per cent a year in real terms are being wound down. And for the first time since 1990, housing associations are not being asked to raise a higher proportion of their capital from private finance - another factor that has been pushing up rents.

In other words, the policy of cutting public spending on housing appears to have run its course - unless a U-turn on recent government decisions is to be made.

On health, the Government is pledged to raise real-terms NHS spending each year - a promise Stephen Dorrell, the Secretary of State for Health, was underlining again only yesterday. No cuts there without a broken manifesto promise.

Education is the Government's current top priority, and one of three areas (the others were health and law and order) that John Major promised to protect in his speech on Monday night to party agents.

This, in a search for really substantial cuts, leaves only social security - the pounds 90bn bill that accounts for approaching 30 per cent of all government spending, and is the right's favourite target. Here, Peter Lilley, the Secretary of State, has already been busy. A range of measures, including cuts to Serps, raising women's pension age to 65, introducing the Jobseeker's Allowance and the new invalidity benefit, have cut social security spending by a projected pounds 4bn a year by 2000, and by pounds 14bn a year by the middle of the next century. His approach, in the main, has been to reduce the numbers entitled to claim, rather than to cut benefit rates. This produces results - but far too slowly to allow big tax cuts before the next election.

The quick fix would be to cut the cash sums paid. But Lilley has resisted that. Current benefits do not let claimants live the "life of Riley", he has said. When people say "come on, surely you can cut pounds 5bn from pounds 90bn", Lilley's on-the-record response has been: "Well, pounds 5bn is 1 million people losing pounds 5,000 a year, or a larger number losing smaller sums, or fewer losing even more. And we don't want to take money away from people for whom it is intended. There's no justification for that."

There is, of course, the drive against fraud - now a cross-party objective. Recent government research suggests there is pounds 1.4bn of fraud a year in income support and unemployment benefit alone - a billion of it accounted for by people claiming while they are working, or claiming to be single while living together. New order books, computers and, in effect, social security identity cards will cut that, probably by several hundred million over two to three years - enough for 0.5p off the standard rate of tax. Serious money, but no panacea: such sums are more than offset by the inevitable upwards pressure from rising numbers of elderly.

So to really cut spending, something radical will have to be done. The options are well known. Child benefit could go, but it is protected by a manifesto pledge. There are school vouchers, which parents would have to top up, but that idea is "rubbish", according to Gillian Shephard, the Education Secretary. Tax breaks for private health insurance or charges for hospital stays have repeatedly been ruled out. Loans for student tuition are not even on the agenda, and would be unpopular. Using National Lottery cash for the pounds 300m arts programme is small beer and was ruled out yesterday. Or there is privatising more of social security - industrial injuries, for example, or unemployment and invalidity benefit - all of which are difficult and unlikely to produce short-term savings.

The Government is caught in the same box that all governments face: past commitments heavily dictate future spending and there are no short- term panaceas. Labour faces the same difficulty, and its one suggestion to date of a cut is taxing child benefit, something that might save a few hundred million from a pounds 6bn bill.

Good housekeeping, competitive tendering and using private, rather than public, capital look to remain the chief routes to constraining public spending in the short term, unless the Government takes another leaf out of the radical right's book. Growth - producing more tax revenue and lower spending on unemployment - remains the painless way to tax cuts.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
Jamie and Emily Pharro discovering their friend's prank
video
News
i100
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
people
Life and Style
techApp to start sending headlines, TV clips and ads to your phone
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
Life and Style
tech
Arts and Entertainment
Daniel Radcliffe and Zoe Kazan in What If
filmReview: Actor swaps Harry Potter for Cary Grant in What If
News
Our resilience to stress is to a large extent determined by our genes
science
Travel
travel
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Pornography is more accessible - and harder to avoid - than ever
news... but they still admit watching it
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Project Manager (App development, SAP, interfacing)

£50000 - £60000 Per Annum + excellent company benefits: Clearwater People Solu...

Systems Developer Technical Lead

£65000 - £70000 Per Annum: Clearwater People Solutions Ltd: Our client based i...

Energy Engineer

£25000 - £30000 Per Annum: The Green Recruitment Company: Job Title: Energy En...

Techincal Accountant-Insurance-Bank-£550/day

£475 - £550 per day + competitive: Orgtel: Senior Technical Accountant-Insuran...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment