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Check your sums, guysBritain still faces big fiscal challenges.
The Conservatives have the wrong planfor dealing with them The
Economist , November 29 th 2014
TODAY, we take decisive action to deal with the debts we have
inherited. Sodeclared George Osborne, Britains chancellor, in 2010
when announcing hisplans to close Britains structural budget
deficit by 2015. He did indeed takedecisive action, but it did not
deal with the debts. When Mr Osborne delivers hisfinal Autumn
Statement of this parliament on December 3rd, he will be less
thanhalf way to achieving his goal.
The problem is no longer growth, which is roaring ahead at an
annualrate of around 3%, nor spending cuts, which have largely gone
to plan , butincome-tax receipts. They were meant to grow by 11
billion this financial year,but have managed only an eighth of
that. Thats mostly because many higher-paying jobs have been
replaced with lower-paying ones, and tax cuts for lowearners have
therefore left the Treasury short. As a result borrowing, which
wasmeant to fall in 2014-15 from 108 billion to 96 billion, has
risen by 4 billionand debt will grow as a percentage of GDP this
year. At 5.3% of GDP, Britainsdeficit is bigger than those of
France, Italy and even Greece.
The Conservatives latest plan is to deliver a surplus by 2020.
DavidCameron, the prime minister, says that if the Tories are
re-elected next year,they can do this easily in the next parliament
and cut taxes by 7 billion to boot .
This is nonsense. Mr Cameron is fiddling the figures by
comparingdifferent measures of spending and inexplicably excluding
cuts at either end ofthe next parliament. Closing the deficit by
2020 would require cuts togovernment departments of roughly equal
size to those already imposed. Such cuts would needlessly put the
recovery at risk when global growth isslowing and interest rates
are pinned near zero, and would further savagedepartments that have
already suffered. A ring-fence protecting health, schoolsand
foreign aid shields a third of spending from cuts. Departments
outside thering-fencesuch as justice, transport and defencehave
already seen averagereal-term cuts of 15% since 2010. A further 21%
cut is required between now and2020 to balance the books . And as
the easiest cuts have already been made,the Tories plan is tougher
than the numbers imply.
The good news is that Mr Osbornes plan is tighter than
necessary. Thechancellor wants to balance the entire budget,
including both day-to-dayspending, such as public-sector salaries,
and investment spending oninfrastructure and capital projects. But
investment spending is special: it often
pays for itself by producing assets such as roads or research
labs, whichcontribute to productivity and growth. Exempting
investment from the target as advocated by the opposition Labour
Partywould obviate the need for 28billion of cuts (about 4% of all
spending). Total British investmentpublic andprivateis the lowest
in the G20. Beginning to rectify this would hardly cause acrisis;
it would probably be welcomed by the bond markets .
This still leaves a 56 billion gap to close. Instead of
massacring servicesor welfare, the government should trim state
pensions, which are up 14%, or
1,100 a head, since 2010.The British state pension is not large
by international standards, but the
payment11,800 a year for a coupleis nearly twice what a jobless
working-
age couple gets. Under its particularly generous uprating
formula, the proportionof national income that it consumes will
increase, for the so-called triple-lock
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means they rise by the rate of inflation, wage growth or
2.5%whichever ishighest. And pensions go to the poor and wealthy
alike. For the top fifth ofpensioner households, who have an
average private income of 65,000, the statepension pays for
holidays and golf-club fees.
The state pensions defenders argue that cuts are unfair as
retired people
have saved via past tax contributions. This is a myth. Working
peoples taxes payfor pensions, so young couples earning 28,000 are
paying for oldies on 65,000.Ending this anomaly by withdrawing the
state pension from the top fifth ofretirees, while abolishing the
triple-lock and capping rises to 1% for two years(the treatment Mr
Osborne has already given working-age welfare) would save
18 billion by 2020, and mean cutting only 11% from
non-ring-fenceddepartments.
Britains fiscal problems are partly the result of over-generous
spendingon the old. They should pay off some of the debts instead
of passing them all on tothe young.
Questions
1. Write out, in full word form, all of the numbers/figures
inparagraphs 2 (The probem is no longer growth ) and 8 (TheBritish
state pension )
2. Find synonyms for all bolded terms. Write the pronunciation
ofed endings for underlined words.
3. Explain the title, Check your sums, guys.4. What does the
writer mean by, The good news is that Mr.
Osbornes plan is tighter than necessary. (paragraph 6)5. Why
does the article talk about pensions if its about taxes?6. In
paragraph 8, on page 2, what does the writer mean by triple
lock.
