Taxing issue of making cuts palatable

In George Osborne's blinkered and headlong rush into savage public spending cuts (your report, 28 May), there are some fundamental truths that our new Chancellor of the Exchequer should remember.

First is that the very financial institutions baying for the cuts are the self-same institutions whose greed and excess got our country into this mess in the first place. Second, no matter how much is cut, the savings will be woefully insignificant in comparison to the mountain of national debt incurred in bailing out the banks. And third, the British public has no real appetite for the type of spending cuts Mr Osborne espouses.

There is not as much "fat" in the public sector as the Chancellor thinks, and he should therefore dwell long and hard on the suffering that will be inflicted on ordinary, hard-working people and public servants before imposing further cuts.

There is also a very real risk of wholesale social unrest of the type not seen in this country since the early 1980s.

What is required is a credible long-term plan that gradually eases public spending and manages the national debt over the entire (ten year-plus ) economic cycle. Most big businesses manage their capital investment on such a basis, and there is no reason why the government can't do likewise.

In his headlong rush into wooing the financial markets, our new Chancellor should be mindful of two unspoken truths of the world economy over the past 20 years. One is wholesale manipulation of the financial markets and hijacking of government policy by speculators – I'm talking here of the forcing of Britain from the ERM in 1992, the "dotcom bubble" and millennium bug, the spike and sudden dip in commodity/oil prices in 2008, and the current pressure on the euro.

The other is the collapse in the credibility of financial experts, due to their abject failure to spot the inevitable and predict even basic cause and effect.

In any event, the government would do a much better job of "selling" cuts to the British public if it showed a convincing degree of empathy for the hardship it is about to unleash and could demonstrate that all reasonable alternatives to cuts have been considered.

DR MARK CAMPBELL-RODDIS

Pont Crescent

Dunblane, Perthshire

Since the coalition government wants to reduce waste, simplify benefits and take low earners out of the tax system, it would seem that combining the capital gains and income taxes would fulfil these objectives.

Income from sales of property, shares etc is income just like revenue income from dividends, work etc. Profit on these capital items is at the moment separate from income tax. It means that someone using both has a tax-free potential of 6,475 from revenue income and 10,100 from capital gain profit meaning that they can "earn" 16,575 without paying tax. Also the different tax rates mean that very high earners can avoid 40 and 50 per cent tax rates by redefining revenue as gain.

If we combine both with an allowance of about 10,000, then the aim of taking low earners out of the system is achieved. Whether it is employment income, dividends or profits from capital sales these earners are treated fairly. High earners would automatically fall in all the tax rates on all income. Once the original cost of an item is removed, then remaining money is due for tax.

This would save bureaucracy by simplifying the tax system saving on public sector costs and making it easier for taxpayers to complete their returns.

BRUCE D SKIVINGTON

Strath Gairloch

Wester Ross