Historically, incoming “new” administrations raise taxes in their first year to get the pain of fiscal discipline out of the way as soon as possible. This is the widespread expectation ahead of chancellor George Osborne’s summer budget today. It is also widely expected that he will give details of the government’s debt and deficit reduction plans and in particular some £12 billion of cuts in welfare spending. It is very unlikely to be popular. But chancellors have greater responsibilities. And this certainly applies now.
It is argued in Scotland that the Chancellor has no mandate to reduce welfare benefits and impose further austerity. This will almost certainly exacerbate tensions between Westminster and the SNP. But this budget follows a general election in which voters changed the government and gave the Conservatives a small but significant overall majority. This was preceded by a referendum in Scotland in which voters rejected the option of independence. The “no mandate” argument founders on these two voter verdicts.
Nevertheless, the Conservative majority is small. And the chancellor needs to proceed in a manner that does not unnecessarily inflame opposition. Deficit reduction should not be a burden unfairly borne by the less well-off. Further measures to clamp down on tax evasion together with a capping of pension tax relief for those on incomes of £150,000 and above should form part of the deficit- reduction programme.
We need no reminder, given dramatic events elsewhere, of the need to get government debt and deficit under control. Without action, annual debt interest will continue to rise and consume ever more billions of pounds of resources we would rather see spent on health, education and infrastructure spending.
But the budget is also about welfare reform. Here’s one statistic to consider: more than half of all UK households now receive more from the state than they pay in taxes. For a modern economy claiming to be the sixth most prosperous in the world, this cannot be right.
Meanwhile, the richest fifth of households in 2013/14 paid an average tax rate of 34.8 per cent of their gross incomes. The poorest fifth of households paid 37.8 per cent. This cannot be right, either. Lifting more low income households out of tax would attract broad support.
The government has boxed itself in, first by ringfencing many areas of spending and by ruling out changes to income tax and VAT. It is always tough – and unpopular – to cut back on benefits that have been allowed to grow with little constraint over many years. The result is a debt-to-GDP ratio that has risen from 30 per cent in the early 2000s to 80 per cent now. A sense of proportion is needed if we are not to bury economic growth under ever more debt.
A good start, but a lot to do on teenage pregnancy rate
Not all that long ago a depressing characteristic of life in Scotland was the country’s stubbornly high teenage pregnancy rate. It was the worst in western Europe, and seemed resistant to change.
But change has set in – and very much for the better. Latest figures show a continuing decline in the incidence of teenage pregnancy across the country.
Statistics for 2013 released this week show that pregnancy levels among under-20s have dropped from a peak of 57.7 per 1,000 population in 2007 to 37.7. This translates into a decrease of almost 35 per cent over the period. It is the sixth year in succession that the rate has fallen.
This improvement is wholly to be welcomed and for a range of reasons. Teenage pregnancy deepens problems such as child poverty, and makes it difficult to break out of the cycle of deprivation. And as public health minister Maureen Watt pointed out, reducing levels of pregnancy in young people helps to increase the choices, opportunities and well-being available to them throughout their lives.
However, there is disappointment over the difference in levels between deprived and more affluent areas. Education will almost certainly have played a major part in the decrease, but there is clearly much still to do to reduce the disparity of experience across income levels. Girls from the poorest areas are around five times more likely to become young mothers.
The administration has reaffirmed its desire to push teenage pregnancy rates down further and a new draft strategy on the issue will now be able to build upon the encouraging reductions achieved thus far.