Cap ISAs and scrap pensioner benefits, think-tank

George Osborne should bring forward £15bn of unidentified austerity measures and use the savings to stimulate the economy and cut unemployment, think-tank Social Market Foundation has said.

In a report titled Osborne’s choice, the organisation points to several policies which it claims contribute little to economic growth, such a blanket winter fuel allowance and higher-rate pension tax relief.

It argues for these policies to be cut, with money instead redirected into transport and energy infrastructure projects. According to the think-tank, this would boost the economy by £10bn annually for three years without altering the current deficit reduction plan.

Cuts called for by the SMF include: halving higher tax relief on pension contributions; capping maximum ISA holdings at £15,000; rolling child benefit into the existing tax credits system; cutting winter fuel payments and free TV licenses to better-off pensioners; and scrapping free bus travel for over-60’s.

Ian Mulheirn, director of the SMF and author of the report, said: “The political debate on the economy has become unhelpfully polarised, with the future strategy presented as a choice between sticking to the status quo or borrowing more in pursuit of growth.

“But the Office for Budget Responsibility’s game changing assessment last November that there will have to be a further £15bn of cuts by 2016/2017 creates opportunity for a potent growth strategy withing the existing borrowing plans.

“By changing the composition of government taxation and spending, rather than altering the size and speed of cuts, the chancellor can make his existing plan much more growth-friendly.”

Earlier this month, the Building Societies Association criticised Osborne’s plans to cap high loan-to-value mortgages to prevent borrowers from over-spending.