This perverse, and failing, policy is matched by another perverse policy which will also fail, but which has not as yet had time to evidence that fact.  This is the policy of cutting corporation tax in the belief that this will increase both growth and employment, which is central to Osborne’s policy of cutting the mainstream corporation tax rate from 28%,  which it inherited from Labour, to 23% over a period of four years.

It is argued by many, including academics  and the OECD that there is, indeed, a relationship between growth, employment, and low corporation tax rates. However, new research that I’ve undertaken for the TUC, published today, leads me to seriously doubt this.

Using sample data  from OECD, EU  and other sources,  and considering a long time period, from 1997 to 2010   I found that whilst it is true that  there is some  limited correlation between falling tax rates and increased growth and employment, those links were so weak that other factors must explain the causation of the relationship, and that  changing corporation tax rates do not.

In fact,  applying  statistical analysis to the data,  and making sure that obviously dissimilar countries to the UK, like Ireland, Luxembourg, Italy and Japan in the case of growth (because the first two are both small states and tax havens,  and the last two  have suffered such low rates of growth that they cannot be compared to the UK) and Greece, Italy and Spain with regard to employment (because their employment patterns are so different from the UK’s), suggests that  just 7% of growth can be explained by the enormous range of different corporation tax rates offered by the countries surveyed, and only 6%  of the significant variation in employment rates can be explained by  differences in corporation tax rates.

That is significant: if comparison is made with countries like the UK, rather than making comparison to all countries, then it becomes very clear that changing corporation tax rates has almost no impact upon either growth or employment, and well over 90% of any difference has to be explained by other factors, which might well include the level of public spending in the country.

This research makes clear as a result that these cuts in corporation tax are likely to provide almost no return to UK economy, They are, on the other hand, guaranteed to make large UK companies richer. As a consequence, the gap between rich and poor in this country will increase whilst the resources available to the government will be reduced.

The research makes another very important point though, which is that is that the claim that these cuts in tax rates are necessary because the UK is uncompetitive is also wrong. The U.K.’s current corporation tax rates were already at or below international averages, and there is no reason to reduce them as a consequence. In addition, because well over 90% of all UK companies pay tax at the UK small companies rate, which is currently 20%, and this is vastly lower than the average corporation tax rate across most OECD and EU countries, we do in fact already have an extremely generous corporation tax regime in the UK, Despite that the obvious observation has to be made that it is not apparently delivering growth at this time. Why cuts should therefore suddenly deliver growth when low rates are not already doing so is hard to work out.

The reality is this policy of cutting corporation tax, just like the policy of expansionary fiscal contraction, appears to have no logic in fact: it appears to be entirely driven by dogma. That dogma is based upon a dislike of government and public services, and the desire to increase corporate profits at the expense of all other sections in society and parts of the economy. The resulting policy of tax cuts for companies, when almost everyone else is seeing tax increases, is further indication that we are not all in this together.

Indeed, the exact opposite is the truth: whilst my report shows that the government expects tax yields from income tax, national insurance  and VAT to increase significantly over the next few years corporation tax takes will, having taken inflation into account, flat line. There is, as a result, just one sector in the UK economy that is being favoured by the policy of cuts, and that is big business. Even small business will not benefit in the same way, its corporation tax cut is being cut by just 1%, whereas the cut for big businesses is 5%.

The implication is clear: this government is running an economic policy for the boardroom’s of big business, for bankers, international financiers, tax avoiders and those with significant wealth. Everyone else is having a tough time: for this elite though things have never been so good. And it is important to stress, there is no logic to this: this is political choice, designed to deliver gain for a tiny proportion of society at cost to everyone else.

However, all is not as it seems. In the TUC publication The Missing Billions published in 2008 we showed that the effective rate of corporation tax paid by large businesses in the UK was no more than 22%. Subsequent data from HM Revenue & Customs published on their own web site has confirmed this estimate as generous – they show an average rate of 21% and that some large companies pay much less.

That however is not true of small businesses. Most of them claim few allowances against their tax bills, and do not use transfer pricing or offshore to avoid their obligations in this country. Indeed, in many cases they actually pay tax at a rate, when expressed as a percentage of their profit that is higher than the published rate of corporation tax for small businesses.

So we’re going to end up before this parliament is out with the extraordinary situation that after offset of all the allowances and reliefs large multinational corporations enjoy they might have an effective tax in his country of somewhat less than 20%. And that rate is lower than the basic rate of income tax, lower than the rate of VAT and lower than the rate of tax charged on small companies.

What an extraordinary outcome that is: when everyone else is going to be squeezed to pay for the deficits that banks caused their effective rate of tax will be lower than that of any real live living person enjoying anything but the most basic of incomes in the UK.

Where is the justice in that?

As part of an approach to develop sustainable responses to avoidance risk, the Government intends to examine whether the option of a General Anti-Avoidance Rule should form one element of strengthened defences. This will be part of wider work on improvements to the tax policy-making process.

There had to be some good news in amongst the gloom today. This is just a small sliver of it. Undoubtedly in the notice to appease the Lib Dem coalition partners such a measure is something the TUC has long argued for – and which is is credited with having promoted in recent years – even inside HM Treasury.

It’s an important announcement if followed by action because a General Anti-Avoidance Rule does two things. Firstly it should stop artificial tax planning by basically outlawing it and secondly it should cut down enormously on the amount of tax legislation needed – allowing time to be devoted to more pressing issues of tax reform.

No one should be counting chickens about this as yet, but it is a start.

But at the same time there was no reduction in the annual allowance for the tax – which at over £10,000 per annum is far more generous than that for income tax, especially as it is, in effect, completely transferable between married couples and civil partners. And entrepreneurs – the funders of the Conservative party – get a massively increased exemption so they can make £5 million during their lifetimes and pay this tax at only 10% on it.

Will this close the whole raft of tax avoidance problems highlighted by the TUC in The Missing Billions and now acknowledged to exist by George Osborne? The simple answer is no, it won’t. The incentive to tax avoid – especially between married couples will be increased by these measures because there are now higher and lower rates for the tax. And the opportunity to raise tax at higher rates has been foregone.

Osborne claimed that was because he’d been advised that if the capital gains tax rate was as high as 40%, the tax yield would go down. This is the first ever claim by a UK Chancellor that the Laffer effect exists in UK taxation at rates below 30%. Laffer said as tax rates rise total tax collected falls. But Osborne’s wrong. There’s no doubt at all that, having allowed for recessionary impacts, there is no Laffer effect to be found in UK CGT yields after previous increases. In that case the politicisation of the tax system continues as a result of this announcement.

And that is really worrying because it now makes clear that whenever think tanks yell “Laffer” in the future their call will be heeded. This government did at a stroke indicate that it has no appetite at all to tax the richest and most able to pay in our community. It’s hard in that case to see how this could ever be called a progressive budget.

The UK economy remains in crisis. It is still in recession. Any recovery, when it comes, will be fragile. The capacity for a foreseeable disaster to become a nightmare depression still exists.

Two things could precipitate the crisis that creates depression. The first would be any serious attempt to cut government spending at this moment. If this were to happen the fall in demand would leave unemployment spiraling, government debt escalating and deflation a significant probability. When that combination occurs the chance of getting out of depression is limited.

The second crisis that could cause depression would be international failure to cooperate on tackling this issue. Attempts to restrict trade at this moment, to impose tariffs or to simply rely on the action of others to stimulate the economy could all create the inertia that tips the balance downwards.

Both possibilities exist: because of the threat of a Conservative government dedicated to slashing public services irrespective of the social and economic consequences for the people of the UK, and elsewhere, the risk of the former outweighs the latter by some way right now.

The Green New Deal seeks to tackle these issues, but does something that few other strategies offer: that is an integrated short and long term view of the way in which the economy should develop.

There is no doubt what needs to happen in the short term. In classic Keynesian fashion the government should, during the current period of serious unemployment and under-employment (the latter being disguised inactivity within self employment and absence from the job-seeking register) spend more to create the demand within the economy that is the only way of getting us out of recession.

Two things follow from this observation. Firstly, spending pays for itself. As I have shown, this can almost be true in terms of taxation alone. But there is, of course, much more to it than that. The result of keeping a person in work is that their spending helps keep other people in work. The more people kept in work the less the demand on government to fund unemployment and other benefits and the more cash is receives in taxation to reduce debt. The evidence is unambiguous: in situations where there is less than full employment increased government spending both reduces debt and creates little or no risk of inflation as there is excess capacity in the economy to absorb any price pressure.

Second, this policy works best, by far, if appropriate spending is chosen for the money injected into the economy. Subsidising consumption makes no sense at all. Firstly, quite a lot of that consumption spending will immediately flow overseas. Whilst any recovery package must be international, for reasons noted above, it is clearly beneficial for the process of democratic accountability if the impact is kept as close to home as possible. Second, keeping the impact as far as possible within the UK both ensures that revenues will be collected as a result of the stimulus that reimburses government for the spend and the impact on the value of sterling will be restricted, which is an important part of the economic equation.

For all these reasons we suggest that the spending of money into the economy that is essential if we are to restore demand to a point where full employment is created (which we think a basic requirement of economic management in a democratic society) should be spent on three things.

The first is on carbon saving. There is an extraordinary amount of ‘low hanging fruit’ where relatively small amounts of spending can deliver high carbon saving, and in turn save on future energy bills which provide the means for paying back the investment and which also protect the future value of sterling exchange rates by reducing future requirements for foreign exchange to pay for energy imports. The spend in question is on simple things: loft insulation, cavity wall insulation, double glazing and new boilers. All these create new jobs, almost no planning lead time is involved and the payback is the highest available in carbon reduction. Releasing a ‘carbon army’ of people to do this work could stimulate our economy better than anything else available in the short term.

Second, we promote mass roll out of programmes such as smart metering and local energy generation which encourage the turning of ‘every building into a power station’. This is possible and desirable.

Third, in the longer term spending on permanently greening the economy is needed. We must invest in new energy technology, new generating capacity, efficient local energy grids, combined heat and power schemes, wind, solar, wave and other energy systems and more besides. This takes time. But given that few think that there is any upside in prospect in our economy right now and that the best we can hope for is long term stable unemployment we not only can but must think about the long term.

And staggeringly, this will cost us nothing. Keeping people in work will provide the payback on government spending – it always has and it always will when there is significant unemployment – and the investment pay back yields on all these types of investment are short: they are all economically viable and yet create long term benefit for us all.

And if we get back to full employment? Then we need an entirely new type of saving – in locally raised carbon indexed bonds to fund the long term investment and carbon reduction our economy needs – and to provide the long term investment returns our pensions require.

That’s the beauty of the Green New Deal: returns now and in the future in terms of employment, saving, carbon and a better quality of life all of which makes complete economic sense.