British Manufacturing

British Manufacturing
British Manufacturing

Saturday, 29 February 2020

Cutting income tax - again

Sajid Javid has told how he would have cut income tax had he presented the forthcoming budget. Labour proclaimed in their manifesto that they would increase taxes for the rich.
Who is right?
Well, look around at our public services: hospital waiting times, schools closing early to save money, the disappearance of sure start, the number of people without homes, the growth in food banks...the list goes on.
The point is very simple, if we want public services we must pay for them. Mrs May was right, there is no magic money tree. However, JM Keynes was also right that governments can borrow to pay for infrastructure which in turn will provide income to workers who will spend and so increase economic activity and hence tax revenue. Wealth spread widely is like manure, it aids growth without killing the young plants.
The choice of project is important. Green energy rather than a third Heathrow runway; better rail links in and to the north rather than HS2. Council houses, schools and hospitals, rather than roads.
The knock on from infrastructure spending alone will not cure the crisis in public services, but in the long term it would help. The answer is simple albeit unpopular, most of us need to pay more tax.
There are lessons from history. The UK led the world in the 19th century, but then had to meet the cost of two world wars massively increasing public debt. The banking crisis didn’t cost lives, but, by bailing out the banks, government debt increased as if there had been a war. UK Government responded with austerity; it could have borrowed to finance infrastructure as the US did under Obama. Will it now? Adair Turner, writing in 2015, still has much of the answer.