Look at the facts. This year’s budget deficit is just under £150bn. The government is borrowing almost £20m per hour just to finance ongoing expenses. And we’re spending £120m per day paying interest on existing debt. Without cuts, Britain would face the same kind of fiscal meltdown as Greece and Ireland.
The claim that cuts could be avoided by cracking down on tax avoidance is based on an absurd idea: that multinational companies should pay UK tax on any money they make, anywhere in the world. Such an approach would decimate the economy and cost countless jobs.
High taxes won’t work either. They discourage wealth creation, force profitable businesses overseas and deter investment – precisely what you don’t want. Raising taxes now would be utterly counter-productive.
I’m amazed people still cling to the idea of ‘fiscal stimulus’. Evidence suggests stimulus spending has no impact on growth in countries with open economies, floating exchange rates and high levels of accumulated debt. Hardly surprising, since the whole concept is illogical – the government can’t inject money into the economy without first taking it out.
It’s worth remembering that the coalition’s plans aren’t that radical. Adjusting for inflation, we’re only going back to 2008 levels of spending.
Published in Shortlist here.