Online Hustings Q3. How to end austerity?

Since 2010 first the coalition and then the Conservative government have followed a policy of ‘austerity’. The annual budget deficit has fallen but is still higher than before the financial crisis of 2008, and total government debt has increased2. This has led to significant cuts in public services and there is no sign of this ending. How do you (and your party) intend to move the country out of this unsustainable position?

Please leave answers and comments using the box below.

2. Public sector current budget deficit (excluding public sector banks): 2010 = 97.124bn; 2016 = 22.431bn. Public sector net debt (excluding public sector banks): 2010 = 1136.0bn; 2016 = 1710.8bn

5 thoughts on “Online Hustings Q3. How to end austerity?

  1. Our public services need better funding. Liberal Democrats plan to put a penny on income tax to raise an additional £6 billion pounds per year for the NHS. £1 billion of this would be earmarked for mental health services.

    Liberal Democrats plan to invest £7 billion in education and triple the Early Years Pupil Premium to £1000, giving children from disadvantaged backgrounds the best start in life.

    We aim to build many more homes, with 300,000 houses a year by 2022, with more garden cities and direct build by government. This would create affordable homes and social housing which is needed so desperately. We will allow councils to levy up to 200% Council Tax on empty homes and ‘buy to leave empty’ investments from overseas.

    We will take 13,000 children out of poverty by letting both parents earn before their
    Universal Credit is cut. Liberal Democrats will scrap the unfair Work Capability Assessment. We will protect pensioners by guaranteeing the Triple Lock until the end of the Parliament.

    Since the Liberal Democrats left government, the Conservatives have been making devastating cuts to social security. We would undo this damage. This includes reversing cuts to the Employment and Support Allowance, removing the Benefits Cap and scrapping the two-child limit benefits.

    We plan to boost the economy with a major programme of capital investment aimed at stimulating growth and would expand the British Business Bank. We will control the national debt by eliminating the day-to-day deficit and only then borrow to invest. We would double innovation and research spending across the economy in the long term. Liberal Democrats would ensure fair taxation by reversing a number of the Conservatives’ unfair and unjustified tax cuts, including to Corporation Tax and Capital Gains Tax; by taking tough action on tax evasion and avoidance by introducing a General Anti-Avoidance Rule; and by reforming business taxation.

  2. I would love to see a candidate break from the fallacious beliefs most politicians and media have over government finances.

    The government has no control over the deficit, it only has control over expenditure. Tax revenues are a function of economic activity vs saving in the economy, they are ex post rather than an input or source.

    “Fully costed” spending is thus an utter fallacy, it is plain to see that last 5 years of government have occurred with £107 Bn of “unfunded” spending.
    But zero consideration or discussion of this by the current political and media players!

    One should be able to see that key reason austerity is self-defeating is because government spends its own income, and for a government issuing its own free-floating fiat currency, the limits to spending are not tax revenues but the resources that are available for it to buy.

    Furthermore, the national debt, rather than being a burden, represents the cumulative private sector surplus, it is better described as tax-payer equity. So conversely, a government running a surplus represent the net appropriation of private sector assets – hardly a Right-wing or Liberal policy.

    In summary:
    Austerity is purely a political decision for the UK, not an economic one.
    The current debate is falsely framed in a conservative manner to the huge detriment of progressive politics.
    I’m not holding my breath for any candidate to grasp the evidence from the accounting and economic data and stick their neck out.

    1. I’m not disagreeing with your general argument Danny, I just wonder if in para 2 the fact that governments can raise or lower taxes needs to be factored in and acknowledged. I’m no economist but I don’t imagine a hike in, say, capital gains tax, or the ‘Robin Hood tax’ which Labour are publicising, is matched by a drop in economic activity which exactly cancels out any tax revenue increase.

  3. Changes in tax rates do affect spending patterns in the private sector. In fact your point leads me on to statement that I was hesitant to make since most people find it very counter intuitive; namely that ultimately all government spending will be recouped in taxation. If you think about spending transactions; Say an extra nurse is employed at the JR (immediately the government gets tax back in NI and Income tax), the nurse spends some of their income in the Headington shops the retailer gets income and the government gets tax back as VAT. The retailer spends its income on wages (NI and Income tax), the worker then spends their income (again liable for tax). You get a chain of transactions (commonly known as the multiplier effect) until the original amount of expenditure is recouped in tax. Money may be saved (remain in a back account unspent) along the way but no money will be saved for ever.

    What an increase in tax rates does is speed up the rate the government recoups its expenditure, it does this by reducing the number of transactions before the initial outlay is eaten up by tax. The reduces the opportunity for people in the private sector to receive income and the overall effect is to reduce total spending/income.

    Thus you can (rightly) conclude that raising tax rates is the most effective way to deter spending in specific areas of the economy and combat inflation.
    The wrong conclusion would be raising tax rates is a necessary precursor to the government spending more into the economy,

    If you are economically minded see here:

  4. It is clear that the programme of austerity – embarked upon by successive Conservative-led governments – has failed to encourage sustainable growth. Their supply-side stimulus of reducing certain taxes drastically has failed to stimulate growth and has threatened crucial public services as a result.

    The Green Party would immediately stop the harmful benefit sanctions which have devastated innocent people. The previous government has used bureaucratic means to prevent claimants from receiving their due – we would remove the Benefits Cap and eliminate the Work Capability assessment.

    By investing in housing (and social housing in particular) we would fight to reduce the price of accommodation in high-demand areas like Oxford. This would empower people to spend more on essentials like food and clothing, and would therefore stimulate spending in other industries. To the same end, we would introduce a levy on unoccupied homes and thereby discourage the maintenance of second homes in areas of high demand.

    The Green Party would launch a significant round of government investment in the sustainable economy. We would empower local communities to invest in green energy projects; we would promote credit unions and cooperatives to strengthen local businesses. Importantly, we would support investment-led growth to increase tax revenues and reduce the public spending deficit.

    Our promises to reverse cuts to the Corporation Tax rate (currently by far the lowest in the G7) and introduce a broadly more progressive tax regime would restore desperately-needed funding to public services such as health and education. Combined with our investment programme, this would allow us to preserve necessary services and, for example, avoid the government’s NHS Sustainability and Transformation Plans (STPs) – a vehicle for cuts. In tandem, we would sustain locally-provided social care as a means to relieve pressure on more expensive centralised services.

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