Letter: Budget that achieves the worst of two worlds
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Sir: It is appropriate that Lord Lawson should be urging a tax rise on the Chancellor. Lord Lawson after all caused our present problems by cutting taxes so much that the fiscal gap has become almost permanent. The projections in the Red Book make this clear; even after sustained growth for three years the PSBR will still be around 4 per cent of GDP. Thus, howsoever burdensome the present Budget proposals, it is going to require much more drastic overhaul of the tax structure to alleviate the problem of the fiscal gap.
I would take issue with Christopher Huhne however about the spectre of Keynes (17 March). What has been done especially with regressive taxation is hardly Keynesian. It has been a common fallacy among commentators to identify Keynesian policies with those that increase the budget deficit. There is after all something called the balanced budget multiplier. In the present case, the need is for a boost to expenditure on employment-generating activities matched by a tax increase, so as to leave the PSBR position unchanged.
The Chancellor did not take this option. He is under the delusion that by having a neutral budget this year but increasing taxes next year he will not jeopardise the recovery. He must think that people have even less ability to see ahead than does the Treasury. By not helping the recovery but forewarning about future taxes, he may have achieved the worst of both worlds. Spending will be postponed further by the consumers and the Emarkets will restrict the room for further cuts in interest rateTHER write errors.
Yours faithfully,
MEGHNAD DESAI
Director
The Centre for the Study of Global Governance
London, WC2
17 March
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments