Enforcing £12bn welfare cuts ( and a lot more beyond that if the deficit is really to be eliminated) is not only draconian and callous as a means of making the poor subsidise the rich so that the latter can walk away free of any liability, nevertheless no-tax-increases in this Parliament doesn’t end the matter. It doesn’t preclude cutting back sharply on enormous and wasteful tax breaks which could make a huge contribution to paying down the deficit. To take one example, the IMF, no less, has calculated that fossil fuel companies globally get £3,400bn a year subsidies, at a rate of £10m every minute of every day, more than the total health spend of all the world’s governments. That is 6.5% of global GDP, and if the UK hands out fossil fuel subsidies proportionately to that, it would be spending £100bn a year subsidising oil, gas and coal. The current UK budget deficit is £92bn a year.
Take another example. The buy-to-let market is currently booming, and lat year according to the mortgage lender Kent Reliance British landlords made £112bn from capital gains and rental income. Over £44bn of this came from rents very largely paid for out of Housing Benefit grace of the government/taxpayer. This subsidy to private landlords can only increase in the current severe shortage in housing supply. What gives a bitter piquancy to this is that a third of all houses bought under the Right to Buy have now ended up bought by private landlords and their rents raised steadily towards market levels, sharply diminishing the supply of Council housing at rents that tenants could afford.
Another telling example is the colossal tax break that allows firms to write off payments on their borrowing against taxable earnings. This again is perverse. Before the financial crash in 2007-9 governments in Europe, including the UK, were spending 3% of GDP in foregone tax revenues in cheapening the cost of debt, more than on defence or on all its policies to help the poor. It isn’t even sensible. It encourages people to borrow more to buy property than they otherwise would, raises house prices, and encourages over-investment in real estate rather than in productive industry or services. It has reached the point where corporate financial decisions are motivated more by maximising tax relief on debt than on the needs of the underlying business. Nor would it be difficult to phase out these tax breaks for debt at the present time if it were done alongside the major lowering of the corporate tax rate that has occurred.