5 radical ideas to balance the UK budget

By Lord Wei of Shoreditch on 6 November 2022
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With our new PM in place the focus shifts from supercharging growth to finding short to medium term savings to balance the books. In truth as we have found dramatically already, the one measure is needed to enable the other:  the interest cost of our debt has reduced because the markets have confidence that the current government will better identify cost savings and possesses the fiscal responsibility needed to deliver them. This in turn could provide the headroom potentially for a pre-election boost to help people feel more positive about their finances, and by extension vote for the Conservative Party in 2024/5.

 

But this development also highlights that as we seek to find savings we must also consider measures that we might otherwise overlook, where indirect impacts or even the perception of smart government action can lead to reduced costs. We saw this most powerfully through the accelerated introduction of vaccines, which, costly as they were to develop, led to the ability to open up the economy faster. A similar logic could be applied to furlough, which arguably flattened a recession and reduced the risk of mass unemployment - though personally I think we ought to have encouraged companies to have harnessed furloughed worker time to focus on R&D, developing new products and processes to boost future growth to help supercharge our subsequent recovery.

 

Building on this idea that some measures could be taken with major indirect fiscal impacts than just pure departmental cost cutting alone, here are five potentially killer ideas to help save not just the government money, but which could help citizens as well and enable them to build assets, thereby ensuring the state does not have to spend quite as much on supporting them in the coming decades:
 
  1. Keep the triple lock but make it conditional on affluent pensioners providing housing for others in return: it is important as a party that we look after pensioners, not just because they vote for us, but also to honour the sacrifices they made in working and paying taxes over their lifetimes. At the same time there is a growing generational divide since through their pensions combined with NHS services the elderly disproportionately receive more from government than the young, who increasingly will see less value financially from the State and ultimately vote the Tories out. One way to address this is to look into how to make the triple lock conditional depending on whether the pensioner is living on their own or not. For those affluent ones whose pensions are above a certain level, one could say that the triple lock will be varied and the lowest of the triple rates paid if they live on their own in a home with more than three rooms, and the highest rate if they lived in a home with others occupying all but one spare room. This would encourage empty nester pensioners, of which it is estimated there are up to 4 million in the UK, to provide housing for relatives, or friends, or lodgers, which would reduce the burden on the state to have to house as many people as is currently the case. Much of the administration for tracking bedrooms already exists through the social housing spare rooms or housing size criteria rules - it would be just a case of applying these to homes owned by pensioners.
     
  2. Change the rules so those provided accommodation as part of their general employment or in any arrangement made with a host pensioner can have the value of the free rent count towards minimum wage calculations as long as they are not asked to work or serve for more than 2 days a week - the current rules only allow you to offset £60.90 a week in minimum wage calculations for housing provided to workers as a benefit in kind and so many arrangements never get put in place or end up being grey legally, essentially stifling economic activity: this measure would likely save the government money from having to provide less care, and enable hard pressed families to access live in helpers who could support them domestically with cleaning, childcare, babysitting, admin, and other services, enabling them as well as the hosted individual to work more productively outside the home (paying thereby more tax)

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  3. Enable people in certain industries with labour shortages to work a day a week tax free if it is spent earning or paying down the loan on a business asset; this would be particularly useful in industries where people don't currently work a fifth day due to the cliff edge effect of higher tax thresholds, or where they are choosing to reduce hours for tax reasons; this would enable them to reduce costs and serve more people - whether it was for a van or vehicle or a machine for diagnostics in healthcare and over time help reduce inflation; example professions this would most help include trucking where it does not make sense to work the fifth day tax wise given current rates of pay, and being a GP or senior health professional given both the squeeze on pensions allowances and being a highest rate tax earner. Work would be needed to be done to survey workers to check what would assets would most incentivise them to work the extra day but tax wise this should be beneficial since those concerned are not paying tax on the fifth day in the first place
     

  4. Harness technology, data science, and embedded sensors to reform how government operates particularly with regards inspections or where more information could reduce the cost of services: right now a sizeable chunk of the money we spend on government is on middle management or regulators who essentially box tick, whether you are OFSTED, or the environment agency or the various financial regulators; workforces in each of these many regulators and quangos should be cut and limits on salaries of data scientists and tech experts raised to employ nimble high performing teams who can put in place the same functions or more using smart processes and analysis that leads to overall cost reduction; a simple example such as putting sensors in household bins to reduce the amount of collections needed (with waste collection workers redeployed to collect profit making commercial waste for councils) has been successfully piloted in a number of Northern towns, showing the art of the possible: such sensors combined with the smart use of satellites and forensic data analysis could massively reduce cost without any major loss of services delivered
     

  5. Charge banks to deposit money with the Bank of England unless they have consistently low mortgage rates that track the base rate in a timely fashion: right now banks get a very sweet deal for depositing funds with the Bank of England, despite there being talk of that privilege being removed; one compromise might be to charge those banks which do not lower their mortgage rates in line with the bank base rate within a reasonable time frame given the speed with which they increase rates and any delay in lowering them when rates go down is essentially a source for the banks of free money; this measure alone would not only massively increase government revenues if banks behave badly but also lower mortgage rates which in turn will stimulate the economy through the greater availability of disposable income

 

Longer term beyond these measures it would be worth, as many have argued, the government doing a zero based budgeting exercise in which all outcomes government produces is analysed and the question is asked whether it could be done radically differently for much less, or even whether government should be doing it at all. The public could be harnessed to find innovative and simple solutions with a series of prize incentives. Civil service promotions should be dependent on how well the senior post holders shrink their departments using these and other innovations and reduce bureaucracy.

 

It is always a risk, as experienced Treasury officials will tell us, to try to make savings indirectly. Better they would argue to just slash spending and increase taxes even if that negatively impacts the economy in the short term because indirect measures are hard to quantify and predict. But given we can assume they will try to do this anyway, these five and other similar measures above are worth also exploring so that any harder and potentially harmful tax measures or cuts can be tapered off later and not retained permanently if they are found to be damaging for the economy or government - for with careful monitoring and review we may find the proposed indirect methods would work better both to keep the economy and households resilient without having to cut to the bone.

 

As with human surgery any kind of procedure always entails some risk. But perhaps the kind of keyhole measures proposed here might help the patient recover faster and have a better quality of life, so that we can avoid simply amputating or cutting out parts of government that we may find to our cost we need still need in some form later.