Wednesday, 5 October 2011

Mr Chancellor, you have plenty of room for manoeuvre

Now, where was I? Oh yes, that's it, economic policy and our ever-chancier edge towards the financial abyss.

As I've said here, again and again: politics is about choices. And the main choice the UK Government has made is to emphasise austerity. Cuts. Spending reductions. Talking down the prospects for growth. Talking up the 'crisis'. Saying that government and public sector debt are the problem - as David Cameron did again today, in his leader's speech to the Conservative Party Conference.

That's one of the reasons for the Prime Minister's near-disastrous flirtation, over the last 24 hours, with telling voters what they should do as regards their own personal finances. The more the nation's finances are compared to a 'maxed-out credit card', his political calculation goes, the more voters will sympathise with his plight as a harassed, over-borrowed head of household. Turns out people don't like being told what to do. What a surprise.

In fact, quite a lot of good news has been rolling in for some time - as you can see from the chart above (courtesy of some Economist calculations). Click on it if you want. Scroll back to late 2009, and those dog days of the bitterly divided Brown administration, and the Treasury was predicting that the year just ended would see the gap between government spending and government revenues reach 12 per cent or so of Gross Domestic Product. Since then, the gap has shrunk, and shrunk, and shrunk some more. Now nine per cent seems more like it. This despite the fact that the economy has slowed very rapidly in the last eighteen months or so - which should have forced the deficit as a proportion of national wealth up, not down.

Three per cent of UK GDP equals (I reckon, draws on paper) about £30bn. That's a lot of money. If I were Chancellor, I'd spend some of it. It would provide, for instance:

Free University tuition for everyone across the UK;
A doubling of regional industrial and business assistance;
A 2.5 per cent cut in VAT;
More movement on Income Tax thresholds;
A corporation tax holiday;
More road and rail spending;
An enormous dowry for a Green Investment Bank...

...and so on. And on.

Want to know where growth might come from? Instead of finding small change down the back of the sofa for 'credit easing' (whatever that is), or to empty people's bins every week, I think you can find it here.

In the breaking of the piggy bank. I'd rather go over the brink splurging, and trying to save the economy, than just drift over Niagara in a barrel. Because that's what the present policy amounts to.

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