One question which is set to dominate the run-up to the election is how the gargantuan sums now being expended on the fiscal stimulus to counter the recession are to be repaid. The G20 has just added a further $1 trillion, some of which the UK will have to contribute. That is on top of the £1.7-2.2 trillions of public debt already imposed on the UK by all the special liquidity schemes, credit guarantee arrangements, bank recapitalisations and asset protection schemes launched in the last 6 months, if all the £325bn toxic assets held by RBS and £260bn held by Lloyds are included (as they must be). So how will this unprecedented level of debt, up to 50% in excess of our entire GDP, ever be paid back?

Alistair Darling has now announced that he aims by 2015-16 to return the public accounts to a tolerable level of deficit from the sky-high level of £150-200bn which it is likely to reach by the end of the current fiscal year. On top of the measures he has already put in place for this purpose, such as lowering the growth of the public sector below the growth of the economy as a whole, he has indicated that he intends to cut the deficit further by an equal amount again to achieve a total reduction of an enormous 5% of GDP per year, that is £75bn a year, cumulatively for the next 7 years. This is the most radical curback ever planned by a Chancellor in peacetime. How then might this additional cut of £30-40bn a year be achieved?
It should not be achieved by cutting front-line public services or by weighting any tax increases on those on modest incomes or low-paid. But that still leaves several options which are both practical and appropriate in the new world order the G20 is seeking to create.
A tax on the top 2%, roughly those with a salary and bonus combined in excess of £250,000 a year, is justified not only when many carry some responsibility for generating this financial meltdown, but also because the ballooning inequality of the last two or three decades is now recognised to be a major cause of the country’s social ills. Such a solidarity tax at a 60% marginal rate could raise £3-4 billion. Stopping the scandal whereby the non-domicile tax exiles, whose wealth is estimated at £126bn, from using this country but at present paying not a penny in tax could raise at least £5bn. And cracking down hard on the tax havens, which the G20 have now signed up to do, could provide at least £5-10 bn a year extra funds for the Exchequer since at present they are reliably estimated to squirrel away tax revenue otherwise payable by big corporations and ultra-rich individuals to the tune of £15-20bn a year.
If all that saves up to £20bn a year, how can cuts in public expenditure make up the rest? There are at least three targets on which the Government should focus to achieve this. One is axeing Trident, for which no clear role exists, as many in the MOD and chiefs of staff privately aver, and where Gordon Brown himself is now proposing a cutback in Bitain’s nuclear arsenal. A second is ID cards, part of Britain’s over-the-top surveillance society, and which it is now acknowledged will not stop either terrorism, crime or benefit fraud. And a third is the extravagance and waste of many of the Government’s massive IT programmes, not least in the compilation of NHS records and the mammoth white elephant of recording and checking up on all our telephone calls, emails and texting which now amount to billions a day. These cuts could well save a further £10-15bn a year, not only meeting the Chancellor’s objective, but also rebalancing the Government’s budget towards alternative objectives which should have had much higher priority anyway.

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