Wednesday 27 June 2012

Two more budget failures

1.  Nick Clegg writes to me ("Dear Peter," although we've never actually met):

" As Liberal Democrat Leader I was proud to be putting our long-held environmental beliefs into practice by leading the UK’s delegation ( at the Rio+20 environment summit))and arguing for ambitious targets and agreement."

Meanwhile back at the ranch, as it were, our coalition partners have caved in to the motorist and road haulage lobbies and "postponed" the scheduled 3p rise in fuel duty. The fact that, in his budget speech, George Osborne seemed to be sticking to his guns on this one was  one of only two good feature of his  April budget. (see post of 23rd March) If we are serious about reducing our carbon emissions and dependency on oil we really do have to bite the bullet on this.  Conservatives are ideologically dedicated to the price mechanism and so should use it to "nudge" us away from our cars for personal travel, and from roads to railways and canals for haulage.  The alternatives are petrol and diesel rationing, or leaving our children a planet depleted of resources and poisoned to boot. 

2.  Figures released yesterday by the Office of National Statistics show that public borrowing in May this year was almost £3bn higher than in May 2011.  This is explained by a fall in tax revenues (by just over 7%)and an increase in government expenditure ( by 8%), largely as a result of increased welfare payments:  exactly what any A-level economics text book predicts in a recession. To achieve the coalition's aim of actually reducing public borrowing the government needs to revive the economy through the Keynesian policy  of initiating public works which will then have a multiplier effect through the private sector.  Then, as employment rises and unemployment is reduced, tax revenues increase and welfare payments fall.  QED. 

Perhaps Mr Osborne should take a six months course in one of Mr Gove's traditional schools so that we don't have to re-live the 1930s - or, as a short cut, listen to Krugman, Stiglitz, Wolf, Keegan, Elliot  et al, not to mention Keynesianliberal, who have already learned the lesson.

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