JEREMY HUNT: Reform the public sector or tax the life out of the economy? It's not difficult to work out which is best for Britain

Much of the Budget speculation has been about tax rises. Families and businesses are bracing themselves after what happened in the last two Budgets. People with mortgages are worried their rates will go up if there is a bank tax.Economists estimate that more than half the £22billion Budget headroom that Chancellor John Healey inherited from Rachel Reeves has been wiped out due to soaring borrowing costs. If there's anything left, markets will want him to leave it as a buffer. That means money for new things – defence, social care, council housing or support for rough sleepers to name just a few of Andy Burnham's promises – will have to be found from spending cuts or tax rises.I, for one, am praying he does not choose to hike taxes. The first rule of any Chancellor should be 'Do No Harm'. And real harm is exactly what Labour's tax rises over the past two years have done to numerous businesses.People who have painstakingly built farming and other family businesses over generations are now making plans to sell up rather than pass them on to the next generation. The hike on employers' national insurance has meant fewer jobs for young people – helping to push the number of Neets (those not in education, employment or training) to around one million. Economists estimate that more than half the £22billion Budget headroom that Chancellor John Healey inherited from Rachel Reeves has been wiped out due to soaring borrowing costsWhy such vindictiveness against entrepreneurs and risk-takers? Because the taxes Labour promised not to raise – VAT, income tax, National Insurance or corporation tax – account for three-quarters of tax revenues. Business taxes are a big chunk of what's left – but hiking them would kill off the little growth we have.And there is absolutely no need to do so – if the Chancellor looks imaginatively at the £1.4trillion spent by the British state. That extraordinary sum of money amounts to about £47,000 for every household in the country. Some of it is necessary but too much of it is wasted. A proper plan to tackle waste could fund all our defence needs without levying a penny of extra tax.Let's start with the Civil Service, which has gone on a hiring spree in recent years. Covid and Brexit were used to justify the expansion – but did it need to grow by a third in the last decade? As Chancellor under Rishi Sunak, I had a plan to bring it down to 2019 levels, which would have saved £2.9billion a year. That plan was scrapped by Labour within two weeks of coming into office. Instead, they have added 10,000 more civil servants to the headcount.Then there's the spiralling welfare budget. I happen to believe the triple-lock needs reforming but by far the biggest savings are in the working-age benefit bill. That's because we are recklessly signing off an additional 1,000 people every single day as not having to look for work.Most cite mental health as their reason. But doctors say such people need social contact, so why are we condemning them to the isolation of a life at home? Instead of parking people with anxiety and depression on benefits, we should be offering them NHS treatment at a much lower cost.Most of these issues have taken hold since the pandemic. If we got the benefit bill back down to 2019 levels (in today's prices), the savings would be a massive £58billion a year within five years.As part of that we should ban benefit assessments by telephone to help tackle the £9.3billion of annual benefit fraud and error identified by the Public Accounts Committee. Shockingly that number also includes people claiming fraudulently from overseas. It's something Mel Stride and I made a start on in the previous Tory government. Sadly, most of our reforms were jettisoned by Labour. Money for defence, social care, council housing or support for rough sleepers – to name just a few of Andy Burnham's promises – will have to be found from spending cuts or tax rises Cracking down on abuse of the student finance system could also save us a few billion. My Conservative colleague Neil O'Brien recently revealed how the post-Brexit scheme was being exploited. Despite the deadline to apply for settled status passing five years ago, the Home Office was continuing to grant late applications – resulting in Britain losing up to £2billion a year on student loans offered to non-UK nationals.But the biggest opportunity is to make the public sector more efficient. It accounts for 20 per cent of our economic output. We have long had a productivity problem in the British economy. Why don't ministers tackle it by concentrating on the part of it over which they have the most direct control?Instead, one of the first decisions by the Government was to award £9.4billion in pay rises to the public sector with no strings attached. The pattern has continued: in August, under threat of strike action, the Government announced an inflation-busting 3.6 per cent pay increase for Avanti West Coast train drivers. It included up to £720 extra just for working a five-day week – without appearing to include a single productivity improvement.I challenged ministers about it in the Commons last month but met a brick wall, perhaps because so much of Labour's funding comes from public sector unions. Surely if they were going to put country before party, they would announce that above-inflation pay rises will only be agreed if they are funded by equivalent productivity improvements.Another way would be for the State to get smarter about buying things. When I was health secretary, a big part of my efficiency drive was procurement.NHS trusts are responsible for their own purchases, which meant some hospitals paid £12 for a syringe when others spent just £4. Some spent £66 on a box of toilet rolls that cost another hospital just £30. By putting the NHS's huge spending power to better use, we now save around £300million a year on such purchases – but numerous NHS trusts are still not making use of NHS Supply Chain. The Government could also be better at abolishing or cancelling things. Jeremy Hunt is a Conservative MP who served as Chancellor of the Exchequer from 2022 to 2024During Labour's first year in government, according to the Public Accounts Committee, there were £6.6billion of losses relating to projects that were cancelled or written off. The biggest offender was the Ministry of Defence, which incurred a £1.6billion loss from cancelling projects – including those vital to modern warfare.There was also the £472million flushed away by cancelling eight road projects, including the A303 Stonehenge tunnel. Or, most egregiously, the £290million wasted on cancelling the Rwanda scheme, after which the Government decided it did want to look at offshore processing of migrants after all.Then there's the ill-fated plans to close down NHS England. It's a big quango and I don't oppose its demise, but redundancy costs are expected to reach £1.3billion. And the Department of Health and Social Care doesn't know what to do, because it can't afford to pay the salaries of some of the people it wants to keep.Reforming the public sector isn't easy. I lived through a junior doctors' strike that was nearly a year long in the 1970s. But when the alternative to doing so is taxing the life out of the economy, it isn't difficult to work out what would be better.Making the public sector just one per cent more efficient every year would save £6billion annually, a big chunk of what is needed to get defence spending up to three per cent.Who wants to go back to the 1970s? As a certain Tory leader at the time famously said, 'There is no alternative.'DAILY MAIL COMMENT: As John Healey unveils his first Budget, the prospect of even more benefits is adding insult to injury READ MORE: Chancellor to duck welfare reform in today's Budget and boost handouts to 10 MILLION people READ MORE: Labour's £1billion back-to-work scheme fails to hit even half its target as long-term jobless refuse to sign upREAD MORE: Business backlash over plans to hike the minimum wage as firms say jobs will be at risk Here's where I fear Labour could strike in the Budget: JEFF PRESTRIDGE on the steps to take NOW to protect your savings, pensions and wealth