Saturday, 25 April 2015

Sadly, austerity-lite is completely necessary

Labour's plans of fiscal responsibility and some cuts in public services (although possibly not much, according to the IFS) are completely necessary.

People often use the example of the US to say that a massive deficit is fine. This argument isn't very helpful for the UK. Essentially, the entire world is dependent on the US (which was the main creator of both the Great Depression and the Great Recession) and vast swathes of the world use currencies pegged to the dollar. If the US goes under, then the world goes under (although the rise of China is lessening this potential impact). Hence the US budget deficit doesn't matter because the world is happy for the US to keep afloat on its back.

The same isn't true of the UK. We provide some financial services...and that's about it. The pound is nowhere near as ubiquitous as the dollar and we don't have anywhere near as many massive companies based in the UK as there are in the US. The UK is nowhere near as powerful as the US politically either.
Cancelling austerity might improve growth, tax receipts and employment, but not enough to actually offset the increase in spending (according to most). It's too much off a risk.

You can't just borrow indefinitely, once the world starts to realize that the UK has no intention to pay off its debts then its credit rating will fall. During a recession, countries won't find it attractive enough (or, maybe, they won't actually have enough money!) to lend to the UK even though we need to increase spending even further.

As 'anti-socialist' as it may seem, we have to continue with 'austerity-lite' (and, a Lab-SNP-Lib bloc might be able to stop cuts after 2016 if they go with what the IFS says) so that we aren't in a massive mess when a recession comes along.

Just borrowing more and more thinking that you never have to pay off your debts is incredibly naive.

It should be stressed that the SNP does have a somewhat valid argument that increased spending will result in increased tax revenues. However, it is highly unlikely that for every £1 spent there will be over £1 received in tax, unless if the economy does far better than predicted. Also, Labour are allowing for increased investment spending because that really does make returns. However, increased welfare payments, as harsh as it may sound, doesn't - and non-core-investment spending probably won't pay for itself very quickly.

Labour are making the hard compromise between fiscal responsibility and compassion. The SNP are inadvertently dodging it and kicking the can down the road which won't help any of us at all when the next crash comes along. Vote for the party that is compassionate and knows what they're doing. #VoteLabour

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