The banking system - policies in detail
- Regulate the financial sector more strictly, preferably at the international or EU level, but if necessary just in the UK. In particular, separate retail from investment banking.
- Support new institutions like a green investment bank and local community banks in the financial sector, and new ways of investing in the green economy, such as green national savings bonds.
- We support a special tax on bankers’ bonuses, though we would make it permanent.
- Also, no one in one of the wholly or partly state-owned banks should get a bonus of more than £25,000.
- Crack down on tax havens and other methods of tax evasion and avoidance, raising £10bn in 2010 rising to £13bn by 2013.
- In particular press for a transparent international accounting standard that requires companies to report on a country-by-country basis so that their profits can be located and taxed.
- Our programme has to be paid for, and we accept that the Government borrowing of 12% of GDP is unsustainable. Like the Government, we would aim to more than halve the deficit by 2013, and the programme of taxation and spending in this manifesto is designed to achieve that.
- Raise taxation from its current very low level of only 36% of GDP – for example it exceeded 40% in all Mrs Thatcher’s years in office. The fiscal gap is not caused by too much public spending but by taxation dropping to unacceptably low levels.
- Abolish the upper limit for National Insurance contributions, raising £9.1bn in 2010.
- Help lower earners by raising the lower National Insurance limit to the personal allowance rate (which is £6,475 a year, or £124.52 a week), costing £3.9bn.
- Help lower earners by reintroducing the 10% tax band and the 22p basic rate, costing £14.9bn.
- Increase the main rate of Corporation Tax from 28% back to 30% and reduce the small firms rate back to 20%, altogether raising £1.4bn.
- Raise the Capital Gains Tax rate from 18% to the recipient’s highest income tax rate (that is 22%, 40% or 50%), raising £1bn.
- Reform inheritance tax, so that the level of taxation depends on the wealth of the recipient rather than that of the deceased, raising £3bn by 2013. This will encourage people to distribute their property widely.
In summary terms ,our plans, compared to those of the Labour Government (as announced in the Budget Report 2010), are as follows (all in 2010 real terms):
We would freeze basic Government spending at £704bn.
Our programme of additional spending and selected cuts would add £72bn in 2010 rising to £80bn in 2013.
We believe that the Government’s projections for GDP growth are too high, and that tax receipts on existing policies in 2013 will be only £603bn, £14bn less than the Government’s assumed £617bn.
On Government spending we have first of all a modest programme of savings totalling £20bn in 2010 rising to £28bn in 2013. We would save £8bn on defence in 2010 falling to £6bn in 2013 (including cutting Trident), £1bn initially rising to £3bn on road-building, £2.5bn on ID cards and £0.5bn rising to £1.5bn on prisons. We believe modest cumulative annual efficiency savings of 0.5% on 60% of Government spending are possible, saving £2.3bn in 2010 rising to £9.4bn in 2013. In addition our minimum wage policy would save about £6bn a year on tax credits throughout the period.
Apart from Citizen’s Pension we have a programme of additional expenditure totalling £52bn rising to £64bn in 2013.
The major items are a £20pw rise in Child Benefit (£14bn), investment in public transport (£4bn, rising to £5bn), social housing and right to rent (£4bn), elderly care (£3bn in 2010 rising to £8bn by 2013), renewables and insulation (£5bn rising to £10bn in 2013), an increase in the aid budget (£3bn in 2010 rising to £4.5bn), training and community programmes for the unemployed (£5bn, but unnecessary by 2013), investment in waste management (£3bn pa), abolition of higher education fees (£1.8bn in 2010, but £3.6bn in later years), and about £9bn rising to £12bn for the 14 smaller commitments, all of which involve £1bn or less in 2010.
In terms of public expenditure, Citizen’s Pension will cost an extra £40bn rising to £44bn, so the overall increase in public expenditure will be £40bn (Citizen’s Pension) plus £52bn (gross cost of manifesto) less £20bn (public expenditure savings), or £72bn. The comparable figure for 2013 is £80bn.
On taxation our proposals are set out in our manifesto, where it is clear that together with the tax changes on Citizen’s Pension these proposals will add £73bn in 2010 and £112bn in 2013.