Wednesday 15 September 2010

A fellow traveller

Last month a reader and fellow Liberal Democrat, Phil Pavey, sent the following letter to the Guardian. Unfortunately the paper did not print it so at Phil's request I publish it here instead.

25 August 2010

Dear Editor

As a long standing member of the Lib Dems I have been waiting for someone prominent in the party to state the obvious about the government. But no-one has, so I will do it. The coalition’s budgetary policy of cuts, quite apart from its dire social effects, is economic lunacy. It is cutting off your nose to spite your face. It is sawing off the branch on which you are sitting. It is applying leeches to an anaemic patient.

Let us be clear. Pleasing though it is to score a point off New Labour, it is clearly not the Brown government’s profligacy that caused the deficit, but the banking crash. This had a direct impact on the government’s finances through the bail out (to save our savings) and an indirect one from the resultant recession, which of course cut tax receipts and increased benefit payments. Our economic problem is 2.5 million unemployed people (thought to be an obscene figure when I was young) being financed by the government, and contributing much reduced tax. On the Treasury’s figures the cuts will add another 1.3 million people to the scrapheap. So while the cuts will cut the deficit today, tomorrow they will widen it again.

To assert that the private sector will somehow magically expand in the ‘space’ created by the shrunken public sector is just saloon bar baloney. Private firms are shedding labour due to reduced government contracts, and they certainly don’t invest when unemployment is rising so that demand for their products is slack. And an export led recovery is hardly on the cards when other countries are also busy cutting consumer demand.

In practice some cuts may be necessary to satisfy those holders of our national debt who are economically illiterate that this is the best way to safeguard their investment. But it is a psychological case not an economic one. The way forward is to stimulate demand to get those millions back to work, saving billions on benefits and paying billions more in tax. If borrowing seed corn to do this is too frightening then there are projects, like universal property insulation, that would pay all those extra wages from the savings they achieve.

Like those Labour people who stuck on despite the enormities of Iraq, ID cards, 28 days etc, I do not intend to forsake my party but to strive to bring it back to its true tradition of Keynes and Beveridge. My fear though is that not only will the cuts shatter the party but, what is even worse, put the country through the avoidable agony of a 1930s depression.

Yours sincerely PHIL PAVEY

I can add only "Hear hear!"

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