Stop Digging, Darling!

The trouble with Socialists is their contempt for history, and their pathetic belief that half-baked left-wing ideas can be made to fly.  Tony Blair seemed to think that 1997 was Year Zero, and despite his spin about his respect for Margaret Thatcher, he ignored her principles.
 
If only Brown and Darling would go back and see what former Labour PM Jim Callaghan said.  “You can’t spend your way out of recession”.  And as many have added, “You can’t tax your way to prosperity”.  Stimulating the economy on borrowed money is like pulling yourself up by your own bootstrings.
 
Nor can you raise revenues by raising tax rates, generally speaking.  Indeed overwhelmingly the experience goes the other way — cutting tax rates increases revenue.  Counter-intuitive it may be, but it has worked over and over again.  By reducing rates, you reduce the incentives for avoidance and evasion; you make work and investment more attractive; at the margin, you bring more people into employment, and persuade more people to transfer out of the black economy into the mainstream.  And you make the country more attractive to inward investors.
 
Brown says he’ll raise two billion by increasing the upper tax rate to 45% on salaries over £150k.  No chance.  This is mere gesture politics: these high earners will simply hire smarter accountants, or go elsewhere.  On the other hand, the “cost” of his VAT reduction is likely to come in below estimate.  After all the whole point of it is to increase sales and economic activity, which will increase the tax take.  (But with retailers already offering juicy discounts, it is difficult to see two-and-a-half percent off VAT as a big deal).
 
It is the banks’ profligate lending (at least in part) that has created our problems, but the government bullies them to lend more.  It is Gordon Brown’s manic tax-and-spend, in good times and bad, that has led to this crisis, and his solution is more of the same.
 
So what should we do?  Bank rate is coming down, which is good.  Tax rates need to come down, and more than a trivial gesture on VAT.  I liked the idea of Dr. Madsen Pirie of the Adam Smith Institute, who proposes raising the personal income tax allowance to match the minimum wage, at around £12,000.  This would put money into the pockets of those most likely to spend it, while ending the folly of the tax-credit merry-go-round, where low earners both pay tax and receive benefits. It would also be seen as fair and helping the least well off.
 
But the third essential component is government spending.  It musty be cut, and the cuts must fund the fiscal boost.  Now of course the lefty economists come forward and tell us that cutting spending into a recession will cut jobs at the worst possible time, and make the recession worse.  But we have to face the fact that we are going to see higher unemployment no matter clever and creative we are.  If we cut government spending to finance a fiscal stimulus, then some of the job losses will be in the public sector, fewer in the private sector.  Under Darling’s plan, all the pain will come in our shrinking private sector, and the privileged public sector workers will be protected against redundancy just as their public sector pensions are protected against the rigours of the market.  Labour has been growing the state sector at the expense of the wealth-creating sector for years: Darling’s new plan will finally kill the golden goose.  He’s in a hole, and he should stop digging.
 
So which schools’n’hospitals will we close?  None.  Estimates of government waste range from a modest £20 billion right up to £100 billion.  Let’s cut the ID card programme.  Let’s cut the plan to store and examine e-mail and mobile phone records of our citizens.  Let’s scrap the failing NHS computer system.  Let’s cut all those politically-correct non-jobs advertised in the Guardian, and all those local council environmental awareness officers.  This is an emergency.  There are billions to be saved without touching basic services.

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1 Response to Stop Digging, Darling!

  1. Malcolm Edward says:

    Too right Roger.
    Gordon Brown and NuLabour seem to take every opportunity to undermine our country. They caused our financial crisis – and their “remedy” is to defer the day that borrowing is brought under control, masked by unsustainable giveaways. It won’t work and matters will continue to get worse.
    What have we done to deserve such a debased government.

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