Afternoon:
15°c
My pal, a businessman, is in clover — his main house is in west London, no mortgage, house in France that he rents out, two sons growing up. He and his wife both have highly paid jobs. Lucky chap, I hear you say.
Even more fortunate, now that he's 60. “I can't believe it, I get a Freedom pass giving me free travel anywhere in London, a winter fuel allowance and £300 off a new boiler. I don't need them. It's like child benefit. We've never spent a penny of it. We put it away and give it to the boys in a lump sum when they reach 18 to help them through university.”
Madness. He isn't hard-up. He doesn't require anything off the Government. In five years' time, he'll receive a state pension which he could also easily do without.
No wonder, he says, the country is in the financial mess it's in. He was telling me this yesterday. As it happens, the CBI thinks the country's generosity is crazy, too. Earlier this week, the employers' organisation urged ministers to find billions of pounds of extra savings. How? By mean-testing those very benefits that my comfortably-off friend receives.
The CBI said research from the Reform think-tank showed that £4.8 billion of child benefit goes to families on “above average incomes” and £45 billion of cash benefits are paid to “the top 60 per cent of households by income”. Means testing for “child benefit, incapacity benefit, winter fuel payments, disability living allowance ... could raise £10 billion,” the CBI said.
Concessionary fares, which include my friend's Freedom pass, are budgeted separately, said the CBI, and means testing them would yield a further £1 billion.
This was contained in the CBI's submission to the Coalition's spending review. But what was just as significant was what the business body said the money must be used for. The additional savings, said the CBI, should be redirected, across to roads, rail and building projects. This way, the Treasury's target of eliminating the budget deficit by 2015 would remain intact, while the components were put in place to get the economy moving again.
Ian McCafferty, the CBI's chief economic adviser, said not going forward with capital improvements posed “a real risk of damaging Britain's growth potential and the competitive position of the economy for years to come”. Here, by means-testing benefits, was a solution that would allow those vital enhancements to go ahead.
Of course, introducing means testing is a political hot potato. The higher earners are already complaining of being squeezed — now some of the few perks they receive from the state would be removed or reduced.
However, the CBI argument is representative of how the business community thinks and is thinking, and it is bound to be aired repeatedly as the Tories hold their conference next week. It's also what David Cameron is likely to hear more of in private as he strengthens his line-up of business advisers with luminaries such as Sam Laidlaw, chief executive of Centrica, and Andy Street, John Lewis managing director (the group already includes Andrew Witty, chief executive of GlaxoSmithKline, and Paul Walsh, chief executive of Diageo).
The business approach is straightforward and cares little for PR niceties. Some, from outside business, might say it is callous. On the one hand, there is illogicality in the system, the lack of means testing; on the other, there is a desperate hole in spending. It doesn't take rocket science to marry the two. In the corporate world that is what would occur — money saved from here is spent on something there.
To commercially minded people, there is no argument: the sense is crystal clear. They recognise the overriding ambition to bring down the deficit but they're also increasingly worried that there is not enough imperative being applied to where future GDP growth is going to come from. As well as infrastructure, the CBI has identified what it calls “knowledge assets” or research and development, and “human capital” or education and skills, as the areas of priority.
Too much attention, they fear, is being paid to cuts. The Government needs to move “hard and fast” on those, said a senior executive from one of our biggest corporations. “We understand that. But they must be looking beyond the cuts, to how they are going to develop the economy in the years ahead.”
Business hopes that Cameron and his senior colleagues will begin to tilt the balance next week, that a more positive note can begin to be injected into proceedings. Because that is what also concerns them. They fear there is simply too much negative sentiment around, that the UK is in danger of becoming mired in anti-business, anti-City rhetoric fuelled by the politics of envy.
The business audience is not stupid. They know the discussion about cuts must be had, that the coming raft of public sector announcements are going to be extremely painful to bear. But the commercial approach, tough as it sounds, would be to make those cuts quickly and decisively, and to move on. It's how the process occurs in boardrooms: when the grim decision is taken, a company's management is simultaneously planning ahead. Better still, if, as the CBI proposed, a company can publicly justify a reduction in one place in order to fund expansion somewhere else.
Business is desperate for the nation to lift its mood. Executives moan about taxation and red tape but what concerns them just as much is vision and attitude (on taxation, 18 developed nations now have lower corporate rates than ours. So we should not be surprised if firms continue to leave). They want to feel the Government is business-friendly, that ministers have a plan for expanding the economy.
“The need for economic growth, not the noise of the loudest voice, should determine where cuts are made,” says John Cridland, the CBI deputy director-general. “The Government must improve the efficiency of public services and focus the limited public money available on areas that do most to galvanise growth.”
Difficult as it may seem, with a deluge of negativity about to be unleashed, the country has to find the strength to focus on the future.
Because if it does not and does not stimulate growth and guarantee prosperity, incredible as it may appear, the consequences will be far worse.
Reader views (1)
We could deprive people who have paid a top rate of tax from what they are due as a right, or we could stop sending our desperately needed money overseas in aid to corrupt third world countries who end up calling us all racists, imperialists or who even bomb us on the streets of our capital.
There is nothing noble about turning our country into a third class society in the vain attempt at trying to help people whose own governments have no interest in.
Perhaps India needs a few more bob for it's space programme?
- Frank, Home Counties, England., 30/09/2010 15:03
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