Tag Archives: fiscal policy

Economic dishonesty, political irrationality

Ahead of the Autumn Statement the Financial Times quoted former Chancellor Philip Hammond as saying: ‘the politician who is honest about the situation probably gets voted out.’ Jeremy Hunt was less dishonest than the irrational right-wingers on the benches behind him who called for substantial tax cuts, but he gestured towards them in the ‘cuts’ he offered, his reiteration that ‘Britain is a low tax country’ and his claim that cuts in taxes (and therefore in public investment and services) is the surest path to economic recovery.

There’s a remarkably wide gap between our partisan debate and what expert economists and think tanks (apart from the Tufton Street standard-bearers of economic liberalism) are saying about the UK’s economic and political priorities. The Institute for Government Public Service ‘Tracker’ for 2023, just published, states bleakly that we risk spiralling down a ‘doom loop’ of cuts, unable to reverse ‘the consequences of successive governments’ short-term policy making, with decades of under-investment in capital having a serious impact on the productivity of public services… and many services are experiencing a full-blown workforce crisis.’ The Institute for Fiscal Studies and the Resolution Foundation have pointed out that Hunt’s future ‘headroom’ on which he rests his case for some tax cuts now implies future cuts in public services that no government would be likely to approve. On the business pages CEOs insist that an increase in public investment is needed before businesses will increase their domestic investment rate: the private sector needs better public infrastructure to invest, particularly in our poorer regions.

Posted in Op-eds | 10 Comments

Tory “Wafflenomics” and the Expected Macroeconomic-fiscal Costs of NO DEAL

In my last piece, I outlined the expected consequences of a depreciating pound and that a looser fiscal response was the only feasible short-term policy response that would be available to deal with the massive macroeconomic shocks that are likely to ensue (an uncoordinated) NO DEAL Brexit.

Three and a half questions follow:

  • What is the Boris math for the litany of fiscal promises issuing since his “inauguration”?
  • Are these spending promises feasible & credible in terms of the macro-fiscal context the UK will face in a NO DEAL scenario?
  • What should our response as LibDems be to unpick if not defenestrate the Tory Wafflenomics in the run-up to October 31st? The half-question I leave for another occasion, what should be our policy response to deal with the after-effects from November 1 should a No Deal actually take place.

Math on Boris’ Fiscal Promises and projected values

(…mind you we’re just a few weeks in..)

  • 20,000 new police officers: £1bn (one-off)
  • Rise in 40% tax threshold from £50k to £80k: £10bn
  • National Insurance contributions at higher trigger: £11bn
  • Schools: reversing cuts in Education envelope: £5bn
  • Health: Unclear but: 20 New hospitals £1.8bn + wooing female voters £2bn + ??promised £350m per week: £3.8bn – £20bn
  • social care: £10bn
  • new railway Manchester – Leeds: £2.1 – £3.6bn depending on sources, assume £3bn
  • Help to farmers: £0.5bn (but is this just for the Welsh lamb?)
  • No-Deal Planning: £2.1bn (let’s assume £100m no-deal advertising part of this budget line)
  • Unbudgeted thus far: other sectors e.g. Fisheries, medicines, food shortages, …you get the picture…cost of increased policing…

Totting these figures gives £42bn excluding the £350m/week which alone would imply a further £18bn…and per year if the red bus promise is to be kept strictly. Large numbers in absolute terms (a billion has nine zeros) but not in relative terms as the UK economy is £2 trn in value (a trillion has 12 zeros), meaning that £42bn equates to around 2% of GDP or 5% of the current budget and therefore chunky but not a huge fiscal expansion…of itself..

Posted in Op-eds | Also tagged , and | 10 Comments

Opinion: Fiscal consolidation and the Liberal Democrats

Newly minted coins by James Cridland james.cridland.net
Over the past few days, questions have emerged about the Liberal Democrats’ proposals for fiscal consolidation. Liberal Reform felt it would therefore be helpful to clarify what the challenges are, to explain how some of the figures are derived and to help people understand what the scale of the problem is.

Which deficit are we cutting and how much does it cost?

All three political parties have committed to eliminating the budget deficit over the next parliament. There are two things that divide the parties, however:

  • The speed of the consolidation – in what year will the budget be balanced
  • The definition of the “budget deficit.”

The Liberal Democrats have committed to eliminate the budget deficit by 2018-19. The Labour Party have postponed consolidation to 2020 and the Conservatives are being vague about when in the next parliament the budget will balance. The Lib Dems position reflects current government plans.

Posted in Op-eds | Also tagged , and | 33 Comments
Advert



Recent Comments

  • Peter Martin
    @ Steve, "Might it help.if our party were to assertively oppose Neoliberal socio-economics...." Of course it would. It's unlikely any establishm...
  • Mary ReidMary Reid
    @Graham Jeffs - I don't know where you live but people in our target seats, and some others, will have a very clear idea of what we stand for by now. At constit...
  • Graham Jeffs
    If only the public knew what we stand for other than a list of policy promises! We still lack definition. Not being the Conservatives isn't enough. We need to b...
  • Steve Trevethan
    Might it help.if our party were to assertively oppose Neoliberal socio-economics, which is a root cause of the problems outlined above, and commit to taxation r...
  • Mary Fulton
    I have been involved in working with families which suffer from poverty and other issues for most of my professional lives and what I find most concerning is th...