LETTER: Silly gimmick

Readers letter Web Only - Tax Cuts
Readers letter Web Only - Tax Cuts

It is quite disappointing to see that our MP does not seem to understand his economics. He says the charter of budget responsibility ‘commits governments to acting responsibly and keeping the public finances in surplus during normal economic times’. Professor David Blanchflower, former member of the Bank of England’s Monetary Policy Committee, called this a ‘silly gimmick’ with no basis in economic theory. No future government could be bound by this curious parliamentary measure, which is really a Tory PR stunt.
In market-based economies recessions can and do occur – he should know, his government has unnecessarily prolonged this one, which is now seven years old, and was originally caused by an international banking crisis (Lehman Brothers), on the back of the US (sub-prime) property bubble, and not by a UK government investing in socially useful assets.
It is not always ‘responsible’ to maintain a surplus. There are times when it is wise to borrow to invest in, for instance, houses, roads, schools, hospitals and flood defences. This is especially true when (the threat of) recession gives rise to low interest rates and high unemployment. Such constructive investment stimulates the economy, creating more proper jobs, not zero hours contracts. This work also generates more tax revenue, which provides the quickest route out of deficit and back towards surplus, and the most positive way to avoid or shorten any recession.
The MP claims that the opposition ‘would always borrow more and more money’. Two points on that. First: it is not true; no-one has said that, and the ‘counter-cyclic’ economic strategy always focuses investment into the period of recession. Second: the Shadow Chancellor, John O’Donnell has always said that the deficit and the debt do need to be tackled, but not at the expense of the lowest paid, the disabled and the young; this Tory approach is not only morally wrong (eg food banks), but also economically counter-productive, prolonging the downturn.The difference between Labour and Tory policy is that under the Tories the ‘rewards’ of austerity go to the wealthy, eg QE was used only to rescue the banks, while the punishment is being meted out to the working poor. Under Tory austerity, even those not facing redundancy are still facing poverty, now through the massive cuts in their tax credits. ‘By their fruits you shall know them.’

David Kerr

High Peak Borough


Stone Bench Ward