[email protected]: Vince Cable – My Budget to revive Britain’s ailing economy

Over at the Daily Mail, Lib Dem deputy leader and shadow chancellor Vince Cable oultines his plans to get the British economy back on track. Here’s an excerpt:

What can the Government do in the Budget to help avert an unemployment crisis? The panicky VAT cut, designed to get consumers spending again, was not a success and very expensive for the Government.

It would be better now to redirect the remaining £8.5billion set aside to public works projects which provide jobs and leave taxpayers with a useful asset at the end of it.

The obvious priority is affordable housing. Private house building has ground to a halt, as developers have gone bust, construction workers are being laid off and there is a great need, which is growing, as house purchasers lose their homes.

Public transport is also a top priority. … Instead of the Government’s proposal to use taxpayers’ money to bribe motorists to buy a new car – 85 per cent of which are imported – surely it would make much more sense to order new, better, British-made buses to ease congestion on the streets? …

If I were delivering the Budget, I would also make sure proper attention is given to pensioners who are becoming the quiet, forgotten victims of this crisis. While the authorities (rightly) worry about the threat of deflation – falling prices and wages – most pensioners still worry about inflation, especially the rising cost of food. Many are also baffled that having saved carefully for their retirement, they now receive next to nothing on their savings deposits. … I would concentrate on removing the crippling penalty on pensioners with modest savings at or near the level for means-tested benefits. …

Since the Government budget is under a lot of pressure, there is little scope for overall tax cuts or spending increases. But the Government can and should cut income tax for the low-paid. There are millions, particularly part-time workers, whose annual pay is less than the minimum wage. Many are carers looking after elderly or sick relatives and children. They should be lifted out of tax. The cost should be borne by those on top incomes, including those who milked the City bonus culture for years, who enjoy generous tax reliefs.

In particular, the Government must crack down hard on the personal and corporate tax dodgers – including the banks – who are being supported by the public but who have managed to route their income or profits through some tropical tax haven. …

But there has to be an exit strategy from the crisis, including a plan to bring the public accounts into balance without unleashing inflation and without crippling new taxes. …

We must hack away at the thick forest of quangos which the Government has created to oversee the NHS, education and local government. … Nor, as I have argued in this column before, can we in all honesty appear to offer half the next generation an expensive university education when the need is for more practical vocational skills. Nor can we continue to afford to posture on the world stage as a global military power.

We can argue about the detail. But the central point is that we can no longer duck the need for a grown-up debate on the painful, difficult choices which have to be made in public spending. To make our public finances sustainable, we have to cut unaffordable commitments – not pretend green shoots will soak up the red ink.

You can read Dr Cable’s prescription in full HERE.

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3 Comments

  • “Sometimes Vince’s take on economics causes me to wonder where his reputation for brillance comes from.”

    Because he said that:
    1) People were taking on too much personal debt
    2) The banks were lending too much to people who couldn’t afford it

    Neither point required a great deal of economic genius. What Vince is reaping the benefit of is having been plugging away saying these two very obvious things for years before they came to actuality.

    “one cannot have both inflation and deflation.”

    Isn’t it possible that we could, briefly get “official” (ie RPI measured) deflation due to the massive falls in mortgage interest rates, but “real world” inflation with increasing food and utility prices (ie CPI). In rough terms a negative and falling RPI but a positive and rising CPI.

    That could have significant consequences for pensioners relying on interest based returns but who have expenses largely based on food & utility bills. And significant impact when one measure is used for uprating wages and benefits.

    (Didn’t classical Keynesians used to say you couldn’t have stagnation and inflation until the 1970s.)

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