NO! NO! NO! to this madness

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The FT has reported that “the new government [must] make £30bn-£40bn of cuts in real terms to halve the deficit”.

It then adds:

An online simulator, developed by the FT using government figures, suggests a saving of that scale would require all of the following:

  • a 5 per cent cut in public sector pay;
  • freezing benefits for a year;
  • means-testing child benefit;
  • abolishing winter fuel payments and free television licences;
  • reducing prison numbers by a quarter;
  • axing the two planned aircraft carriers;
  • withdrawing free bus passes for pensioners;
  • delaying Crossrail for three years;
  • halving roads maintenance;
  • stopping school building;
  • halving the spend on teaching assistants and NHS dentistry;
  • cutting funding to Scotland and Wales by 10 per cent.

NB I’ve bullet pointed the list to make clearer what it says.

Note why it says this must happen though:

Packages of measures such as these are already under consideration in the Treasury and will be needed if further big tax rises are to be avoided as the next chancellor seeks, at a minimum, to halve the deficit by 2014 — a goal to which all the main parties are signed up.

I have added the tow highlights, for good reason.
First it is clear that this package is designed with one aim in mind: to prevent tax increases. But notes who it hits most: the elderly and the young in state education. The former are the poorest sector in society, the latter are our future.

Who else does it hit? All on benefits. And pubic sector workers — who despite all the misinformation from the Tory press are underpaid for their level of qualification.

So, to avoid tax increases the FT wants to massively increase injustice in society.

Note the second condition: that we must halve the deficit. This package will completely fail to do that. The deficit is of course a ratio of government spending to national income. It is not spending that has gone wrong. It is national income that has done wrong. And as Keynes proved, and which anyone with an iota of sense must agree, you can’t improve national income by making what will, in effect, be millions of people redundant and cutting the spending power of tens of millions more. You can only reduce national income by doing that. In that case the deficit does not reduce as a proportion — indeed, there is every chance you’ll increase the deficit whilst making every one worse off in the process, which makes this a massive economic suicide note for everyone bar the bankers who, like Goldman Sachs appear to do daily, exploit these situations for their own gain.

For this reason I utterly dispute the FT claim that:

The public is braced for this looming era of fiscal austerity, but the case for spending cuts is yet to win over the public sector workers likely to be among the worst affected.

I do not think there is a person in the country braced for this. None of them think it will happen.

And it need not happen. The alternative exists.

There is £25 billion of tax avoidance to tackle in this country.

There is a £28 billion pile of unpaid tax.

There is £70 billion of tax evasion.

None are being effectively tackled despite the FT report today that:

Probes into the tax affairs of large companies generated £12.6bn of additional tax in the last four years, making big business the most profitable target for the Revenue's compliance effort, according to figures that will fuel the debate over the Liberal Democrats' promise to raise big sums from cracking down on avoidance.

They’re not being tackled because the revenue insist on sacking their staff who can recover this tax .

This is the real economic madness in this country. The madness that can be reversed. And if it was a significant part of the deficit could be closed.

And as I and my colleagues showed here, the rest could be closed by tax increases on those with the capacity to pay.

This is the only viable option we have. The reality is we have never made cuts of the sort noted. Thatcher did not do it. No one has. I dispute that anyone can.

This is why the FT are wrong. There are three ways out of this crisis:

1) Spend to create growth

2) Then increase tax rates

3) Throughout this period invest heavily in tax collection

This is our way out of crisis.

What the FT wants is a depression.

Put that way, there really is no choice.


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