What is Inevitable?


Death and taxes, it has been said, are inevitable but not much else. Eliminating the structural budget deficit in the term of a Parliament is not inevitable but desirable, all else being equal, because it would lower the cost of paying interest on the  public debt and free resources for other, and more desirable ends. Other things are not equal. The more the deficit is cut the less money there is available for public services which we all value and benefit from. It is not possible to cut over £80 billion from revenue expenditure over 4/5 years without extreme damage to key public services and neither can an expansion of  voluntary efforts prevent this damage occuring. Cutting the structural budget deficit would be easier if more of the deficit was eliminated by taxation but higher taxes act to reduce economic growth as well. In the past deficits have always been tackled by raising taxes but to do so is contrary to the Tory credo. Either way, whether by cutting  taxes or reducing expenditure , or some combination of both, will reduce economic growth and increase unemployment from levels that would otherwise be achieved over the four year period and so reduce taxes  and increase the deficit.

There are two other things that must be made clear in this analysis. Britain does not exist in a glass bowl. If other countries follow the example of the Coalition, as Boy George urges,  the growth of the world economy on which the level and growth of  British exports depends will slow down further reducing employment and tax revenue here.

And secondly, there is a Coalition gibe that is badly answered by Labour, What about Labour cuts if there was a Labour Government? Is it not true that the previous Labour Government was proposing cutting  expenditure by £40-50 million.? Yes it is true, but £40-50 billion is along way short of £80 billion (rise to the top of the class that boy!) If we have an autumn budget statement it will be an opportunity for Labour to spell out exactly what it would do.

Here we have a delicate matter of public economic judgement. Can’t we cut the crap and have a grown up discussion? To do too little would be risky and damaging BUT to do too much is, in my judgement, the greater risk. A macro-economic judgement about the scale of cuts  is not an issue of inevitablilty, you pay your money and make a choice. What you cut and how you do it are matters of political and ethical judgement. We need to be clear about all these matters. The size of the state is not an  issue. The state should be no greater than is required to enable society and the individuals who constitute it, to realise their potentialities and that of society as a whole. Personally, I believe in an enabling state that  assists people to do their best in a fair society.

So can we have an end to the  phoney debate and decide as grown ups to have a real one. Very little is inevitable but there are painful decisions to be made in an effective manner that can command the support of us all.

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Filed under Alan Budd, BBC, Big society, Cameron, Coalition Government, Conservative Home, Deficit, Financial Times, George Osborne, Guardian, Labour Blogs, Lib Dem blogs, Politics, Treasury

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