How the Coalition should deliver fairness
The Coalition Agreement proudly declared that the new government would govern by the “values of freedom, fairness and responsibility.” But what is fairness? Most people have some vague idea of what fairness means to them, but few actually know the true definition. The Oxford English dictionary states that fairness is “treating people equally without favouritism or discrimination”. Can the Coalition government really deliver fairness while making such huge cuts in public spending?
The problem with “fairness” is what seems fair to one person may seem equally unfair to another, and this is exactly why fairness can in reality never be the predominant governing tenet of the Coalition. Thankfully the Coalition is tackling the main problem at hand which is the deficit, and this is undoubtedly its main priority. How does fairness fit into this?
The Coalition has taken big steps to bring down the deficit because, at least in part, it is arguably not “fair” to saddle future generations with huge amounts of debt, when it was our generation’s profligacy which created this mess. The only way the Coalition can do this is by cutting public spending, and they are doing just that. Admittedly the government has had to make tough decisions, which in normal circumstances it wouldn’t have wanted to make, but circumstances dictate that those tough decisions can’t be avoided due to the legacy of the previous Labour government.
One of the more regrettable things the Coalition has had to do is increase tuition fees by a substantial amount. Now, in an ideal world I would like to see no tuition fees at all, but there simply isn’t the money available so tough choices have to be made. The Coalition has decided that it is fairer to spend £2.5 billion on the pupil premium rather than spend it on higher education. After all, higher education is a rational choice made by the individual taking into account the costs and benefits. Many would argue that it simply isn’t fair to expect those who don’t attend university to pay for those in university when they won’t receive the financial rewards obtained from a degree. Of course, you could equally argue that it isn’t fair to encourage 50% of 18 year olds to attend university when you know full well that 25% of them will drop out in the first year. But that’s another story...
The Coalition must tackle the problem of welfare reform if it truly wants to deliver fairness. There are millions of people up and down this country who work hard and pay their taxes, but barely have any disposable income left at the end of the month. This section of society has been branded “the squeezed middle”. They don’t feel as if they are being treated fairly. When they see someone half way down their street with numerous children, a house paid for with their taxes and seemingly more luxuries than they could ever hope for, they get angry. Understandably. Iain Duncan Smith and the Coalition appear to recognise this and Duncan Smith’s welfare reforms appear, on first sight, to be a genuine attempt to restore fairness to a system which is so patently unfair. But we all know words are easy and delivery is the real challenge.
The plight of the “squeezed middle” has also been recognised in another area of government - taxation. It is clearly wrong, and unfair, that some of the lowest earners in society are paying the highest proportion of tax. It’s something the LibDems, in particular, have been highlighting. Over the term of a parliament, the government will increase the tax free personal allowance to £10,000. This will help make work pay and at least give the illusion of making the tax system fairer. In truth, it is impossible to create an absolutely fair tax system for everyone, but you’ll never hear a politician admit that.
The Government is also delivering fairness by capping housing benefit. That may seem an odd thing to say when there will be many poorer people who are worse off. And yet fairness doesn’t just apply to the poor – it is something craved by the very people who pay the taxes which fund housing benefit. It is patently unfair that some families are receiving more than £75,000 a year in housing benefit. Of course government has a duty to help people when they fall on hard times, but when the housing benefit budget increases by 50% within five years, it’s clear something is going horribly wrong.
Business taxation is another area for the Coalition to take action. There is a growing perception that many businesses are not paying their fair share in tax, and therefore people view that as another inherent unfairness which needs to be tackled. David Gauke, the junior Treasury Minister, has sought to introduce measures which most people would see as fair, but also won’t drive business out of the country. Cutting business taxes can also be seen as fair. In the budget in June the Chancellor, George Osborne, announced that he would cut corporation tax to a record low of 20% for small businesses. Tax cuts are an excellent way for the coalition to deliver fairness because not only do they reduce the burden of tax on business, but they also act as an incentive to others to start up a business. The more businesses that start up, the more tax they will pay and the more funds will be available to fund expanded public services.
Let’s not kid ourselves. The Coalition can never fully deliver this rather abstract idea of “fairness” even though the commitment is explicit in the Coalition Agreement. In fact, the best way for the Coalition to deliver fairness, while making spending cuts, is to reward those who work hard, take risks and create wealth, by getting out of their way, and by cutting both regulation and taxes.
