A letter* in Yesterday's (16th September 2024) Financial Times from Lord (Gus) O'Donnell, a former cabinet secretary, Oxford Professor (emeritus) Simon Wren Lewis and several other eminent economists called upon the government to revise its "fiscal rules" to permit massive public investment in order to repair our existing broken public realm and create a new and sustainable future energy supply.
They claim that:
"To follow through on [current] plans would be to repeat the mistakes of the past, where investment cuts made in the name of fiscal prudence have damaged the foundations of the economy and undermined the UK’s long-term fiscal sustainability."
You have to feel sorry for the Labour government. Where-ever you look you find vital services crying out for extra expenditure to make them minimally functional, never mind spanking new and worthy of the sixth richest economy in the world.. The most obvious currently in the news are:
The Health Services (see Lord Darzi's report, and top of most people's list)
The Care Services (don't really exist, despite Johnson's claim to have had an "oven-ready" plan)
The justice, prison and probation services (to deal with the rioters, and the 1 700 existing prisoners released early to make room for them)
The Universities( many about to go bankrupt)
Just about all local government services.
Provision of social housing
Schools built of crumbling concrete, with teachers leaving in droves.
Potholed roads.
. . . .and plenty more .
The GO'D letter, with its suggestion of a revision of the fiscal rules, implies that we should finance the "decade of renewal" promised by Sir Keir Starmer by fixing all of the above through government borrowing.
Fine.
But if that isn't acceptable, why not finance it out of taxation?
The latest statistics I can find show that, were the UK's national income shared equally between every man, woman and child, we should receive £33, 260 each per year. In other words a family of four would receive £123,040 a year.
I give these figures not to suggest that that's how the national income should be divided (talent, enterprise hard, long or unpleasant work should all be rewarded,) but to show that we really are very rich. There is no shortage of resources. We can afford it.
Nor does our government already take too much of our incomes. On average it is 33.5% of the National Income The German and French governments take more. They are not exceptions but typical.The governments of the EU's 14 largest and most developed economies take on average 39.9% of their nations' incomes - over 6% more than the UK.
So there's plenty of room for an increase.
Unfortunately the Labour Party, desperate to win the election, boxed themselves into a corner by promising not to raise the principal taxes, income tax, NICs or VAT. But there are plenty more (as Gordon Brown discovered when he became chancellor in 1997 - some of which most of us have never heard of.)
Professor Richard Murray of Sheffield University has a list. Let's hope Rachel Reeves is studying it ready for the 30th of next month
Either way, via revised rules or additional taxation, it is vital that the government finds ways of investing in the public realm now. The alternative of waiting for "growth" to provide additional finance is a nonsense.
If we don't invest the growth won't come.
* I tried to give a link but when I pressed he button instead of the URL all I got was this:
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Hoity-toity.
