Osborne speech: The details
What will Britain look like under a Conservative government? Today’s speech by the shadow chancellor – akin to a shadow Budget – gives us a good idea.
Pensions
An updated review of the state pension age will be conducted, as recommended by Adair Turner’s Pension Commission. The review will consider whether the increase in the pension age from 65 to 66 should be brought forward from 2026, but starting no earlier than 2016 for men and 2020 for women.
A renewed commitment to re-link the state pension to earnings growth will be established in the next parliament. This is intended to ensure a decent standard of living for all in retirement, halt the spread of means-testing and restore incentives to save.
Once the pension age for both men and women increases by a year there will be a saving of around £13 billion a year, Osborne claimed.
Cost of government
There will be no headline increase in pay for any public sector workers in 2011, except for the lowest-paid one million, who will be protected. Military personnel on active service overseas will receive twice as much operational allowance, bringing it to an average of £4,800 for a six-month tour of duty. Mr Osborne’s estimates suggest this will reduce government spending by £3.2 billion a year from 2011 onwards, or more than £12 billion over the next parliament – equivalent to protecting more than 100,000 public sector jobs.
Plans will be set out to reduce the administrative costs of Whitehall bureaucracy and quangos by at least a third. This would reduce government spending by £3 billion a year by the end of the next parliament, or by more than £7 billion over the parliament, Tories say. Efficiency cuts are notoriously difficult to achieve and this figure should be taken with a pinch of salt.
The biggest government pensions, including those for senior civil servants, local council executives and quango managers, will be capped. This cap should prevent any taxpayer-funded increase in senior government pensions already worth over £50,000 a year, and stop all taxpayer-funded pensions for these groups in future exceeding £50,000 a year. This would reduce the growth of public sector pension liabilities by hundreds of millions of pounds over the next decade.
Benefits
Child trust funds for better-off families will be scrapped. Disabled children and the poorest third of families will continue to receive both new child trust funds at birth and top-up payments. This would save £300 million a year or £1.5 billion over the next parliament, according to Mr Osborne’s figures.
There will be no more tax credits to households with incomes over £50,000. This will be achieved by starting to means-test the family element of the child tax credit at a lower threshold. The Tories say this would save £400 million a year or £2 billion over the next parliament.
Benefits for anyone currently receiving incapacity benefit who fails a new work test will be cut by £25 a week by moving them to jobseekers allowance. This would save more than £1 billion over the next parliament, of which £600 million should be used to help get the unemployed back into work, Tory officials have pledged.
Tax burden
The new 50p tax rate and associated changes to the taxation of higher earners will be kept until the end of the public sector pay freeze.
If new international rules on bankers’ bonuses don’t work the Tories reserve the right to take further action, including using the tax system.
