Prepare for currency wars
The Institute for Fiscal Studies released its Green Budget this week. This is an annual survey of the state of public spending in Britain. It usually makes for miserable reading. This year, I’m sorry to say, it is even more depressing than usual.
It tells us that public spending in 2014-2015 will be £64bn higher than originally hoped; that despite the endless talk of benefits cutting, social-security spending will rise from 28.5% to 32.5% of all public spending by 2017-2018; and that the overall effect of the tax and benefit changes being introduced in the next tax year will not be a fall in spending, but a “small net giveaway”.
It also reminds us of the utter mess that is our tax system. Take the raising of the personal income-tax allowance. This has cost £9bn and involved much crowing about taking low-income people out of the tax system. But it has, of course, done nothing of the sort – low-income earners still pay national insurance (an effective income tax) at 12%. Here, says the report, as elsewhere, “a genuinely coherent tax policy is still lacking”.
• Read the full editor’s letter here: Prepare for currency wars.