The Institute of Economic Affairs (IEA) has recently highlighted the UK government must take serious/urgent action to avoid a tax bomb. The report suggests that due to an aging population in the UK public spending must be slashed to reduce the UK government debt to a reasonable amount. However what is a reasonable amount? Put simply the UK government has debt from several sources to pay such as, debt that interest is paid on annually, as well as undated debt such as the civil service, NHS pension.
The most radial form of thinking by the think tank is that UK workers must be forced to delay retirement or accept the abandonment of state pension. One question that comes to mind is why are we then paying national insurance contributions? Surely, if there is to be little or no state pensions in 30 plus years, then why should those working hard today have to pay 12% national insurance on the bulk of their earnings?
Most alarmingly, the IEA suggests to fill the black hole tax needs to rise by 14%. This means someone earning below the higher rate band will be paying 34% tax and 12% national insurance; therefore 46% of everything one earns will go in tax.
So what are your thoughts as readers? Do you think our politicians should keep their heads swiftly buried and let matters get worse or should they impose action for the betterment of generations in the future? The view of many individuals in my industry as financial advisers/planners is that the UK government needs to get strict. The view of many advisers is that the government should curb the growth in pensions for NHS staff such as doctors. This may seem harsh, but many of you will not be aware a large proportion of doctors will walk away with pensions possibly equal to 50% of their current salaries; whereas someone working in the private sector may suffer a drop of 70% plus of their income at retirement age.
Many within the industry of finance believe that the government should stop wasting public cash, and the government should be more responsible with public money. I know of many individuals including clients who are struggling to make ends meet who feel that it is harsh families where both parents have to work to make ends meet only have one or two children, but those on benefits with no parent working have four or five kids, and have near enough the same amount of money coming in.
What are your thoughts? Do you feel tax should be raised to ensure the country carries on as it is, or do you think its time England had a reality check? What are your thoughts on benefits, and do you think the level of benefits/social bills paid in the country are too high?