Cutting government spending, as the Tories have been (saying they’ve been) doing for the last seven years, merely means there is less money travelling through the UK economy – making it impossible to clear our debts because the tax take cannot bridge the gap.
In fact, it seems more likely that the Tories have been using austerity as an excuse to shrink the state – providing fewer, and lower-quality, government services – and provide tax cuts to the extremely, obscenely rich.
That’s not because they need the money, but in order to deny ordinary people the benefit of the services for which they have paid, throughout their lives, in taxes.
The only way to expand the economy is for government ministers to stop sitting on their thumbs and take an active role, investing wisely in economic movers and shakers that put more money in the hands of the poor.
Simply because the economic multiplier for every pound is greater, the more hands it passes between; if you give a pound to a very poor person, by the time it gets back to the Treasury in the form of tax it will have generated many more pounds worth of benefit to the economy.
But you have a government that does not understand economics. Philip Hammond would rather put money directly into Conservative Party donors’ offshore bank accounts, I expect, thereby taking it out of the economy altogether.
That is why the deficit is behaving as the BBC reports here:
Government borrowing increased last month after the state was forced to pay higher interest on its debt.
Public sector net borrowing, excluding state-owned banks, rose to £6.9bn in June, up £2bn from a year earlier.
The government’s debt costs jumped by more than a third in June from a year earlier after rising inflation pushed up interest on index-linked bonds.
For the financial year to date, borrowing is up £1.9bn to £22.8bn, the Office for National Statistics said.
The Office for Budget Responsibility (OBR) – the fiscal watchdog – has forecast that borrowing will be £58.3bn during the current financial year. In the financial year to March 2017, borrowing was £46.2bn according to the latest estimates from the ONS.
The national debt has risen by £128.5 billion in the year from June 2016 to June 2017, though. Don’t ask me why the deficit figure and the debt figure are different – visit the Office for National Statistics’ report on the government website, which is likely to be far more illuminating.
Labour has responded to the new figures in exactly the right way.
John McDonnell, shadow Chancellor, said:
“These figures reveal the continued failure of Philip Hammond and the Conservatives. Seven years of Tory cuts have left our economy weaker with falling wages, yet the deficit has not been eliminated two years after they claimed it would be, and the national debt continues to rise.
“The Chancellor should stop handing out massive tax giveaways to big businesses and the super-rich, and instead give our hard-pressed public sector workers a pay rise; so we can end the travesty in our country of nurses having to rely on food banks.
“Only a Labour Government will set out a serious plan for the public finances with strategic investment underpinned by our Fiscal Credibility Rule, to help build the high wage, high skill economy of the future for the many not the few.”
That’s right – an end to tax giveaways for the fantastically rich and a shift to investment in the real movers and shakers in the UK economy, meaning the people who do all the work and spend most of their money.
Some might tell you it’s the economics of the “loony left”.
In fact, it’s common sense.
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