21 April 2009

What I'd like to see in the Budget

There's a long list of useful things that could be in the Budget this year. Unusually, the desperate circumstances the economy finds itself in means that some of them might actually get implemented. The main thing I want to make a case for is a big additional fiscal stimulus - a lot bigger than anything we've seen so far - otherwise the economy is going to flush down the toilet even quicker. Many, including Bank of England Governor Mervyn King, have said we can't afford it. Bollocks - we can't afford not to. It's true that UK government borrowing is ballooning to huge levels, and there is a possibility - down the line - that the cost of financing the debt may become so prohibitive that the UK government becomes insolvent. But an effective stimulus should actually reduce this likelihood because the worse the recession, the more likely it is that tax revenues will reduce further and land us deeper in the public finance hole. The alternative is to go the way of Ireland - slashing public spending and benefits, sticking with the same strategy that created the Great Depression in the 1930s while penalising the poorest and most vulnerable people in society.

The Child Poverty Action Group has calculated that a £7.5 billion package of increases in Child Benefit, Child Tax Credit and Jobseekers Allowance would enable the government to meet its 2011 target to reduce child poverty to half of its 1999 level - as well as creating around 200,000 extra jobs when multiplier effects are taken into consideration. That's a more than worthwhile investment.

There are other useful things that could be in the Budget - a supertax on high earners, new suport for green technologies, wealth taxes (especially on parasites like Fred Goodwin), a complete ban on the employment of management consultants in public services... but the fiscal stimulus is what we need above all else. Ex-MPC member Sushil Wadhwani has been making the case for further stimulus very effectively. Let's hope someone in the Treasury is listening.

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