Tag Archives: economic policy

We need to be careful with our responses to the government’s economic policy. We had been calling for a freeze of the energy price cap, and wanted it to be at the April level of £1,971. The government has frozen it at £2,500 a year, saying this will cost £31 bn, up to April 2023. They also responded to widespread demand to provide similar support for businesses at the cost of £29 bn for the six months they are providing it.

So we are broadly in favour of these policies, as with the government’s reversal of the National Insurance increase, which costs £16.96 bn over a full year.

Our own policy is to cut VAT by 2.5% for a year, which will cost £18.75 bn more. We have said that this cut would increase economic growth, perhaps in the region of 0.4%.

We have to consider priorities now, and we believe our first aim must be to protect the poor and campaign against a further rise in poverty. We wish to spend about £7.5 bn in a full year restoring the £20 a week uplift to Universal Credit and extending it to all legacy benefits. Unlike the Labour Party we do not support the proposed one pence cut in the basic rate of income tax, since we are still talking about the need actually to increase the rate by a further penny to pay for social care.

In paying for its proposed new taxes, expected to cost about £43 bn more, the new government is contemplating savings in welfare benefits and in local government essential services, all of which we need to resolutely oppose. We should point out that if tax cuts are paid for with public expenditure cuts there can be no increase in economic growth. Our own proposals to spend around £40 bn on capital spending on green growth and growing our regions outside London and the south-east are far more likely to promote economic growth.

The Tory financial mismanagement which is leading to thousands of home-owners now facing the prospect of having to pay hundreds of pounds more in interest payments on their mortgages means that there will be much discontent among the population at large, already struggling with the cost of living increases including the energy costs which were already greater than a year ago. But protecting the poorest may not seem a priority, if people also dwell on the massively increased borrowing costs the government is now incurring to pay for their tax cuts, although defending education, health care and social care spending remains popular, and wage claims because of high inflation often seem not unacceptable.