From the TUC

Government needs a Plan B

26 Jan 2011, by Guest in Economics

Yesterday’s dismal growth figures and the Governor’s revelation that ordinary people are paying a heavy price for the government’s economic policies, on top of huge cuts in vital services, make a plan B even more necessary.

In his budget the Chancellor must change course.

Above all the government needs a growth strategy that can get people back to work and the tax receipts flowing again to close the deficit.

Companies and consumers will not invest or spend if they expect the economy to go from bad to worse, and confidence will have been hit for six by yesterday’s growth figures.

Restoring confidence to business and consumers will require bold action.

The Chancellor should reverse the VAT increase. We were worried it would choke off recovery, but now we find the government has managed to do that even before the VAT hike has kicked in.

He needs to call a halt to spending cuts that depress growth and take demand out of the wider economy.

Next the Chancellor should end the public sector pay freeze. Holding back pay when inflation is rising is hitting the living standards of millions of low paid workers and depressing the wider economy. As a priority the Chancellor should ensure the government’s stated policy of a flat rate increase for low paid workers is made a reality.

Ministers should also ignore the siren voices calling for the stripping away of basic employment rights at work. If people are even more fearful of losing their job or suffering pay cuts then that will harm the economy.

Ministers are fond of calling their critics deficit-deniers. This is completely untrue. The problem is that the Chancellor fails to get the most basic lesson of 20th century economics – that the way out of a recession and depressed growth is by increasing demand in the economy. In the words of Nobel prize winner Paul Krugman, he’s a demand denier.

Lastly the Bank’s MPC needs to build on Mervyn King’s strong defence of low interest rates by making even more clear that they are here until jobs and growth have been secured.

One Response to Government needs a Plan B

  1. Tweets that mention Government needs a Plan B | ToUChstone blog: A public policy blog from the TUC —
    Jan 26th 2011, 6:57 pm

    […] This post was mentioned on Twitter by Kieron Merrett, Max . Max said: RT @TheRightArticle: Government needs a Plan B. You'll be lucky – >> good line "demand denier" (re. Osborne the posh) […]