Interesting that the IMF says that another £20 billion of spending cuts will be needed. That’s roughly how much Hunt wants to cut spending on the NHS.
The long game of 100% privatising the NHS – bringing with it rationing, post code lotteries and American-style health care approaches, appears to be nearing its conclusion.
As regards harmonising VAT at its higher rate – currently 20% – this would mean a 15% VAT increase on heating costs, all food and drink, charitable fundraising, equipment for disabled people, water, materials to insulate homes, boilers, children’s clothes …. the full list is here:
“Taxes will have to rise if the government is to balance the books by the middle of the next decade and the NHS may have to be privatised, the International Monetary Fund has warned.
Property taxes, the removal of preferential VAT rates for goods such as pasties, and higher national insurance contributions by the self-employed need to be considered if Britain is to have any chance of eliminating its budget deficit by 2025 because spending cuts have gone about as far as they can, the global economic watchdog said in its annual review of the UK.
Weak productivity and the increasing care demands of an ageing population will make deficit reduction harder. Public services such as the NHS may have to be scaled back or privatised, it added.
The warnings are a reminder of the persistent problem of Britain’s public finances almost a decade after the financial crisis caused borrowing to soar. National debt is 87 per cent of GDP and spending on public services exceeds revenue from taxes by more than 2 per cent of GDP.
“Continued deficit reduction is critical to create further room to respond to future shocks,” Christine Lagarde, managing director of the IMF, said. “There is not much space for additional spending cuts and the revenue side of the equation has to be looked at.”
Britain is already forecast to be paying 34.3 per cent of GDP in tax by 2022, more than at any time since the 1950s, but economists estimate that at least £20 billion of extra austerity will be needed to hit the government’s target of balancing the books.
Ms Lagarde said population changes were adding to the problem. “Population ageing is expected to lead to material increases in spending on healthcare, pensions and long-term care, while productivity growth has been slow. And a slowly growing economy means fewer resources will be available to meet increased spending,” she said.
The public spending burden will soon make Britain face some hard choices, the IMF added. “The UK may face difficult decisions about the desired size of its public sector, as well as the mode of delivery and financing of public services. Brexit-related effects may exacerbate the challenge.”
To address the problem, Britain needs to boost productivity. Ms Lagarde welcomed the chancellor’s £31 billion fund for infrastructure investment and focus on technical qualifications because “the UK underinvests in infrastructure and falls short in human capital development”. But she said that more needed to be done “such as easing planning restrictions and reforming property taxes to boost housing supply”.
As well as introducing a land tax, the government should harmonise VAT for goods that get preferential rates and better “align the tax treatment of employees and the self-employed”. Both proposals have proved a poisoned chalice for chancellors. George Osborne tried to harmonise VAT rates for hot food in his “omnishambles budget” and Philip Hammond had to backtrack this year on raising national insurance for the self-employed. The IMF also recommended “reducing the tax code’s bias towards debt” and scrapping the triple lock on state pensions.
John McDonnell, the shadow chancellor, said: “The IMF has played the role of the ghosts of Christmas past, present and future to remind the chancellor that seven years of Tory failure is undermining our economy.”