Thursday, 20 November 2008

Need for a "fairness stimulation package" in the PBR

We are led to believe that the Government is planning to announce tax cuts as a key component of the Pre Budget Report fiscal stimulus package on Monday. We are also reliably informed that the Government is to focus these tax cuts on the lower paid. So we are to see what most champions of redistribution could only dream of – tax cuts for the poorest in society. Notwithstanding that any tax cuts would be temporary and will almost certainly be reversed once the recession has eased, some interesting ironies spring to mind.

Here are a couple:

The Government is briefing that the justification for cutting the taxes of the less well off is that this sector is more likely to spend the extra cash, will spend it more rapidly and will spend it on goods and services which will provide a boost to the real economy. This is doubly ironic. Not only is it incredible that the solution to a recession itself caused in part by imbalances caused by excessive, debt-driven consumer spending, is to seek to stimulate even more spending.

But more noteworthy is the reasoning offered for this strategy by the Government. Their reasoning is not that cutting taxes for the lower-paid is morally the right thing to do (as they are less able to cope with a downturn caused in large part by the risk-taking of the excessively paid in the City), but that these lower-paid people will spend more. I would have thought that we in the Labour Party should be purposefully extolling the virtues of assisting the lowest-paid at a time of crisis, rather than basing our arguments on some Treasury computer model which has deduced that the measure will provide a shot in the arm to consumerism ahead of Christmas.

I’m not much of an economist, of course, but then economists haven’t had a great run recently. Perhaps now is time to inject a “fairness stimulus package” into the economy. One through which ordinary, hard-working people on modest incomes will receive more assistance from the Government and yes, receive more respect. I hope the days when the political class fawns at the feet of the highly paid are well and truly over.

This doesn’t mean that the Government is misguided in seeking to do what it inevitably will do next Monday. Far from it. I support them and I oppose the Tories, who are willing to allow the ravages of a recession to inflict pain on ordinary people rather than take the necessary remedial steps. I would just like to hear some more human voices rather than the voices of the economists, the bureaucrats and the technocrats, for whom tax-cutting for the poorest in society looks more like the mechanical flicking of a switch designed to resurrect the happy days of obese consumerism, rather than something which should happen because it is right and it is fair.

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