Strengthening Public Finances

1. Over time VAT should be increased to 17.5% on domestic fuel and power** and there should be a phased introduction of VAT on all food** with the exception of organic produce and fresh fruit and vegetables. Up to 50% of the revenue should be used to increase all state benefits and to reduce introductory rates of income tax and national insurance with the aim of removing disincentive 'poverty traps'. The net effect would benefit the poor, increase work incentives, lead to healthier diets and increase energy efficiency. Generous capital grants would be available for home insulation and compulsion would be used to bring all houses to an acceptable level of energy efficiency.

**The current situation of not having full VAT on these areas represents a totally unjustifiable subsidy to the high income groups who have the highest absolute expenditure on these products.

2. A temporary freeze on public sector pay; recent increases have addressed the most significant pay issues for key groups of workers. [Click here for full proposals on public sector pay]

3. Outside of key roles and departments, public sector recruitment will be frozen so that employment levels fall through the normal process of staff turnover.

4. Tuition fees should be retained but the expansion of higher education should also be suspended. Top-up fees will be limited to £2,000 per year and limited to only elite institutions who implement measures to broaden access. (Students from low income families will be exempt from paying tuition fees or top-up fees). Students will be able to add fees to their maintenance accounts. Their maintenance accounts will be repayable across their working lives (40+ years) using a small percentage of their income (above a certain level). There will be an incentive to make earlier lump-sum repayments.

5. The roads programme will be limited to improving junctions, making short stretches of hard shoulder available at peak times (below 50mph) and implementing congestion charging. Road widening will be limited to a handful of key motorway routes that experience severe congestion; the extra lanes will be funded through tolls and the private finance initiative. All other road building projects will be cancelled.