Dear Members,
John Maynard Keynes believed in spending taxpayers’ money, to put cash into the economy and stimulate growth. Growth matters because because all sources of revenue increase with growth. It provides a feelgood feeling that we are getting ahead, both personally and compared to our international competitors which is usually reflected in higher exports.
But there’s a catch. More cash in the economy increases demand, which pushes up prices, the creating inflation that erodes our savings, requiring higher interest rates to cool the economy, which generally costs jobs. This is boom and bust, instigated by government spending.
Jim Callaghan knew this. He was the only politician to hold all four of the Great Offices of State.
“We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that, that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.“
Jim Callaghan (Prime Minister 1976 – 79) 1912 – 2005
In this budget they have increased both borrowing and taxation to previously unknown levels. This is short termism in the extreme. The reality is that wages will fall, there will be fewer jobs, private sector investment will fall, and growth will stagnate, at the expense of pensioners lives, and our children being put ever further into debt. There is a very unhealthy short term, self interest being played out here. It is neither in the interests of our people nor our economy.
Further the money that they do spend will not transform the Health service, or improve our roads, these are management issues, which unfortunately are concepts they do not understand.
We need to think more carefully about who we elect and pay to solve these problems.
Nick
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