Monday, 21 November 2011

Official: Austerity and Tax Cuts are a Recipe for Disaster

I found this article – – by Conservative MP Nick de Bois confusing beyond measure.

It was touted on twitter by @MrJacHart – a fierce right-wing tweeter whom I would be terrified to cross – as proof that ‘confidence in the economy is not just a matter for the City, but a matter of economic life and death’.

But when you read it, it says to be saying anything BUT that.

A ‘buried’ report and its implications
Mr de Bois starts by lifting the lid on a CBI report which has been ‘buried’. Bless him for resurrecting it, because it’s dynamite ammunition for the TUC and the left, but why…?

Anyway, according to Mr de Bois the business community is in despair, with three quarters saying their view of the economic outlook had worsened considerably since the summer, and three out of five business leaders preparing to alter their business strategies in consequence. It is very honest of a Tory MP to blog this news, but it’s hardly a ringing endorsement for the success of Tory policy, is it? It is telling us that Labour was correct, that austerity DAMAGES the economy, reduces demand, and harms industry. This isn’t just some left-wing blogger saying so – it’s the CBI (recycled by a Tory MP)!

What hit me most about Mr de Bois’s comments was his revelation that 38% of firms surveyed by the CBI are planning to lay off staff. (And I presume the ‘altered business plans’ also include downward pressure on wages.)

What strikes me about this is that – whether the economy succeeds or fails – it seems that I suffer.

If the economy fails, says the right, many of you will lose your jobs and things will be BAD! That, apparently, is why we are implementing austerity measures.
But what Mr de Bois is telling me is that, under austerity, many of us will lose our jobs and things will be bad ANYWAY!
So what’s in it for me?
It strikes me that the government is wanting us to support an austerity programme primarily so the rich don’t have to suffer like we, the ordinary people, are going to have to suffer … whatever.
Forgive me, but I just can’t seem to work up a great deal of enthusiasm for such a policy.

The failure of Tory tax measures
The next thing, Mr de Bois addresses is the tax issue, saying that Tory fiscal measures had ‘set the right direction; by reducing corporation tax more money was left in the hands of businesses which could then be reinvested via spending on goods, services and crucially staff.’ This, we know, is the Tory mantra for economic growth. If we let the firms
the 'wealth-creators' make bigger profits, those firms will be able to expand and the economy will prosper.
However, Mr de Bois then goes on to tell us that:

‘Venture Finance, having surveyed 500 small and medium enterprises business owners and directors, found 47% have cash reserves but are unwilling to invest it in their business because they feel the economy is too uncertain.’

Hang on. So let me get this right… What Mr de Bois is telling me is that, given the Tory economic policy of austerity for the poor and tax reductions for the employers, the poor are going to get hammered ANYWAY … and the employers are just pocketing the tax break.

The answer is tax, not austerity
Elsewhere on this blog I have argued fiercely that the economic problem is not so much government overspending, as inadequate tax revenue. Mr de Bois believes sincerely in the government’s economic strategy, but NOTHING he has told me convinces me that it is not steering us inevitably towards disaster.
As Mr de Bois blogs:

‘The strategy of building up the bank balance whilst waiting for clearer economic horizons could fast become a vicious cycle, sending everyone back into economic stagnation.’

I would only demur at the word: ‘could’.

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