Pre-budget report wish lists

Oliver Letwin, Conservative shadow chancellor

The reason Labour is borrowing, spending and taxing so much is simple: Gordon Brown and the Labour government do not "get" value for money.

Labour have increased taxes 66 times but every third child leaves primary school unable to write properly. Taxes have risen by ?5,000 a year for every family but 5,000 people a year are being killed by infections picked up in dirty hospitals.

Four million more people are paying income tax but 1 million young people are not in work, education or training; 1 million people are stuck on NHS waiting lists, 1 million children are playing truant and 1 million violent crimes are committed every year

Conservatives believe the key to getting better public services without raising taxes is by getting value for money. This means taking tough action to remove ?30bn a year of excessive and unnecessary bureaucratic activity. We want to see the following happen to ensure taxpayers' money is not wasted:

1. A freezing of civil service recruitment. The civil service has grown by 64,000 staff in five years. Our freeze would only apply to the civil service, not police, doctors, nurses or teachers

2. The scrapping of the strategic health authorities and removal of more than 30,000 administrators from the NHS, freeing ?1.75bn a year that can be spent on cleaning up our hospitals.

3. The removal of ?1.16bn of the education bureaucracy that is currently causing 12 pages a day of directives to land on the desks of headteachers. This will save ?158 a pupil to be spent on restoring school discipline

4. Savings of ?1bn a year by adopting the Australian-style quota system of controlled immigration, enabling the Home Office to fund an extra 5,000 police on our streets each year.

By thinning down the costs of fat government, the Conservative value-for-money action plan can liberate funds for frontline services and avoid another round of Labour's stealth taxes. It will set Britain on the path to combining the two things that people want: better public services and lower taxes.



Vincent Cable, Liberal Democrat Treasury spokesman

Gordon Brown can no longer get away with setting the fiscal tests and marking them himself. What is needed is the economic equivalent of an Ofsted inspection. The chancellor must now restore credibility in fiscal policy and open it up to genuine independent evaluation of the fiscal rules by a body accountable to parliament such as the National Audit Office.

Despite the chancellor's rhetoric there is little scope for ambitious new public spending commitments. Now is the time for the chancellor to be prudent - and it is not the time for the American-style "tax cuts" that the Tories will promise.

Tough choices have to be made in public spending to ensure that priority programmes such as pensions, policing and education are supported. The Liberal Democrats have therefore set out specific areas where state spending on low priorities will be cut for high-priority areas. These include the ID card scheme, whose costs escalate by the day, the baby bond scheme and the big growth in spending envisaged in the DTI.

Under this Labour government inequality of income and wealth is as bad as, or worse than, under Mrs Thatcher. Nothing has been done to reform the regressive council tax, which needs to be abolished and replaced with a tax based on ability to pay.

The chancellor has added to the complexity of the tax system with his tinkering. This has resulted in a large number of pensioners and hard-working families facing marginal tax rates of well over 50%, yet he condemns this as excessive for high earners.



The TUC

We believe the chancellor will stay within his fiscal rules. This gives him an opportunity to focus on areas of specific need.

For example, the manufacturing sector continues to struggle, dragging down the overall growth rate. Optimistic employer surveys have so far not translated into actual output. There is no end in sight to the decline of jobs in manufacturing, which stands at 85,000 over the past year.

The government deserves great credit for bringing us closer to the historic goal of full employment. The challenge that remains is to bring the 1.9 million "economically inactive" people of working age back into the labour market.

The government needs to address welfare-to-work and the needs of manufacturing. We suggest an increase in the number of Pathway to Work pilots for incapacity benefit claimants along with extra money for a second round of StepUP projects as two practical ways to help those who want to get into the labour market.

The government is an important customer in its own right, spending ?109bn annually on goods and services, buying everything from biros to battleships. Intelligent procurement could help our hard-pressed manufacturers.

Action to help UK companies win more orders within EU rules has been discussed and any initiatives to promote this policy in the pre-budget report would be welcomed by union members and businesses in industry.

Finally, those working hard, whether contributing to the economy or bringing up their children, are entitled to dignity in old age. We know there will be no major reform of the pension system until next year, when the Pension Commission's final report will be published.

However some small, practical, low-cost measures could be of great help to women pensioners, who are more likely to retire into poverty. These include ending the 25% rule, which means that those who have made fewer than 10 years' national insurance contributions get no pension.



The CBI

During this economic cycle, which the Treasury has suggested will end in 2005-6, the CBI believes the government will either just meet the golden rule or miss it by "a negligible amount".

But it worries that the next cycle will start with a budget deficit of some ?34bn and little prospect of an underlying improvement in public finances without government action. With the economy close to full capacity - with high employment and a tight labour market - there will be little scope for the faster-than-average growth that would start to close the deficit through the next cycle.

This suggests any government would have to raise taxes or constrain spending to meet the golden rule in the next pariament. The CBI's current estimate of the amount is ?7bn a year. Ian McCafferty, its chief economic adviser, has said: "The chancellor's management of the fiscal position has so far been very sound. Even if we do technically miss the golden rule this time round, there would be little damage done in terms of economic impact.

"But there is a significant problem brewing for the next cycle and for after the general election, if there were one next year. The government will have to pull in its horns, and business cannot be expected to dig it out of a hole when profits and investment are under so much pressure. "

Charcol mortgage broker

Ray Boulger, senior technical manager, says: "We hear frequently that the government is keen to remove all inequality in the tax and benefits systems, but actions speak louder than words and the current structure of stamp duty land tax is grossly unfair. Abolishing this tax is clearly a non-starter and so Charcol would like to see it reformed to reflect the way income tax is structured. With income tax, the higher percentage rates of tax are only payable on the amount of income over certain thresholds. However, with stamp duty land tax, once you reach a certain level, borrowers are forced to pay the higher percentage on the total amount.

"Stamp duty has become more of a key issue for many potential first time buyers. The proportion of loans made to first time buyers has been steadily falling for five years. In 1999 first time buyers accounted for 47% of all loans, according to figures from the Council of Mortgage Lenders. However, this figure has since fallen sharply, and this year is under 30%. A lack of first time buyers reduces liquidity in the market and addressing this issue should now be a priority for The chancellor. Less liquidity means fewer transactions and fewer transactions means less tax for the chancellor. For many potential first time buyers stamp duty land tax is one burden too many in preventing them from buying their first property and this unfair tax is ripe for reform.

"Although abolishing stamp duty land tax for first time buyers up to a higher limit than for other purchasers may at first sight appear to be the simplest way to help this beleaguered species, the practicalities of identifying genuine first time buyers would make such a scheme difficult to police. The simplest and fairest solution, which would help all purchasers but would help first time buyers the most, would be a combination of substantially increasing the thresholds to reflect property price inflation and making the tax fairer."