Home > Laughable Lib Dems, Terrible Tories > Are the Tories anti-investment and anti-social?

Are the Tories anti-investment and anti-social?

I’ve just been re-reading the Compass’ think-report entitled In Place of Cuts: Tax reform to build a fairer society. It postulates some very heavy hitting criticisms of two of the three major parties (formerly known as both major parties) on the level at which tax will be important in reducing the deficit until 2014-15.

It also makes some keen observations, very relevant today; namely, private investment’s dependency on aggregate demand from public investment and public consumption. Rightly the report notes that balancing the budget in the way the coalition is – in break neck speed – will shrink aggregate demand.

The report also puts forward some tax proposals that only few “orthodox” economists are pushing for today: they include a 50% tax rate for earnings of £100,000 – securing, to their estimates, a minimum of £4.7bn (compared to the saving made, introducing the same tax rate for those earnings at £150,000, which they estimate would be at a mere £2.3bn).

The report recommends a change of the definition “tax residence” and a tax on all financial transactions at 0.1% which would secure £4.2bn, among other measures set at achieving a total of £47bn – this revenue reducing the burden on cutting at the public sector.

As it is, cuts to the public sector mean 490,000 jobs will be cleared – just like that – and as many as that will shift in the private sector, for as Compass suggests, much of the demand comes from public investment and public consumption; take these away and the private sector suffers its own shrinkage.

Furthermore, take this many people out of taxation, then you reduce the amount of revenue drawn from that pot – not to mention the welfare payments that’ll have to be dished out as a consequence.

Most of this has already been spoken about, and indeed most people know this already. But what has been less spoken about is the severity of tax revenue being lost. As it stands, over the next four years the government intends to cut in the public sector and rely on taxation at a ratio of 80:20. But seemingly, that 20 will reduce in value as more jobs are lost, and, as is inevitable, the private sector becomes totally incapable of replacing them.

How long will it be before even 80:20 is no longer affordable on the grounds that the 20 is not drawing enough revenue? What’s more, when we cut at jobs and demand too hard, we fail to invest and grow – that’s obvious.

The context of Labour’s spending throughout its three terms was a previous Tory government who left behind a historically low level of spending and long term under-investment. With plans as they are, the Tory-Lib Dem coalition seems intent on doing the same thing to investment as it is cutting without growing (or only hoping, against ALL odds that growth will appear through magic).

At what point, really, do we just accept the Tories are anti-investment and anti-social?

I’m sure stranger, less logical, things have happened, but if we do invest and grow in the next five years, it will be a magical fluke. What’s for sure is there is no imagineable plan for growth that is anywhere near orthodox in its economic strategy – the mind truly boggles.

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  1. John Steinsvold
    November 5, 2010 at 3:36 am | #1

    An Alternative to Capitalism (which we need here in the USA)

    The following link takes you to an essay titled: “Home of the Brave?” which was published by the Athenaeum Library of Philosophy:

    http://evans-experientialism.freewebspace.com/steinsvold.htm

    John Steinsvold

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