Where are cost savings in P&R’s tax options?

Far more attention needs to be given to saving costs.

If the tax debate has shown anything, it is that there is no taxation solution which does not have significant downsides for our economy. And there are none which would provide a magic bullet to solve our financial problems. We might like to think that GST would provide a longer term solution but, without proper attention to cost savings, any extra revenue from GST will soon be swallowed up like all the rest of our taxes.

The immediate problem of the current deficit is only a tiny part of the overall problem. In fact it’s clear that the very real problem which we really do have to address is the huge increases in the size and scope of the welfare state throughout the 20th century and into our own century – compounded of course by the ongoing demographic changes and the scope and cost of all the amazing medical and surgical advances.

And the States are squandering money on all sorts of subsidies which may be individually small, but taken together all add up.

This has all got to the stage where the cost of public spending is becoming unsustainable by our economy. Spending is out of control, and unless taken in hand will only become increasingly unsustainable in the future. Yet both politicians and the electorate are unwilling to start letting any of it go.

The UK is in an exactly similar situation.

We may like to feel that we are being compassionate in trying to hold on to the whole of our welfare state, but what we are actually doing is pushing an ever growing problem through to the future for somebody else to solve.

And if we try to sustain the entire present welfare state through increasing taxation alone, we will be taking on an impossible task, because no amount of taxation is ever going to come anywhere near meeting what has become an ever-increasing and insatiable appetite for funding.

All we will do with more and more taxation is to damage our economy to the extent that it will not be able to provide even what we have now in taxable revenue.

It’s a vicious circle and would be a vicious downwards spiral.

We need future planning which works out in detail how we are going to save enough in costs to keep our welfare and other expenditure within a level of taxation which will still enable our economy to prosper. This has got to be done in detail, taking full account of projected demographic and other changes, and by people without a vested interest in the results. It’s by no means an easy task, and will require political courage to get it done and to implement the results. It won’t be universally popular by any means, and it’s not something that we would want to have to do if we had access to unlimited funding.

But we can’t afford not to do it, as the alternative just doesn’t bear thinking about.

BOB PERKINS BA., FCA (retired)

Les Corneilles

Rue de la Ronde Cheminee

Castel

GY5 7GD