Friday, 31 October 2008

Solutions all around

George Osborne has accused Gordon Brown of planning a "spending splurge" that will saddle two generations with debt.

The shadow chancellor told the BBC attempts to "spend your way out of a recession" would only lead to "huge debt" and higher taxes in the future. Instead the Tories would "target" tax help such as freezing council tax and payroll tax for small firms.But he was attacked by Labour and Lib Dem opponents for being "confused" and "out of his depth" in his analysis. Instead of boosting spending to speed-up the economy, Mr Osborne said the Conservatives would "put money direct into people's pockets" by freezing council and business taxes.

I'm not too sure I follow his reasoning either. The government gets its financial backing on the basis of the sort of income streams investors reckon will get them their money back - with interest. To reduce that income will reduce confidence. Giving money into people's pockets is basically just what happened over the last few years and got us into the current mess anyway. If there is insufficient money moving about, banks will lose their income streams and we would have to bail them out once more.

The Keynesian approach is dangerous. The money splurge could end up as some super-PFI 'let's all rob the government' exercise or the works planned ill-chosen. It will again put money into people's pockets. I work, I get paid, I go out and spend. Seems simple enough to me. Depriving councils will merely lead to them making cut-backs. Rubbish removal once a month anyone? If I am a refuse worker and am made redundant I have no money to spread and will look for government help - from a government that has had no benefit from business tax.

I am surprised that no one has yet broached the subject of a referendum as to where we go next.

As for the two generations being saddled? Well, that does not have to be the pay back period.

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