Government economic policies don't add up

dynamick

The programme for government includes:
1. No welfare cuts
2. No public sector pay cuts
3. Put minimum wage back up to 8.65 from 7.65
4. No income tax rate rises or changes to bands or tax credits

It appears that the first three of these measures will lead to higher unemployment as these measure makes it more expensive to employ people.

Yet they plan to cut a 19bn deficit in 4 years

And they have no alternative but to comply with the IMF plan as nobody else will fund the state for the next 4 years.

The IMF plan requires that an extra 1.5bn be raised in taxes next year. The plan says that this will be done by raising income taxes, carbon tax, introducing property tax, reduction in pension tax relief. If the government sticks to its commitment on income tax they will have to find this money in other taxes. The programme for government has no financial plan so we don't know what this will be.

The IMF requires that 2.1bn be cut from government spending in the next budget. They suggest three areas: welfare cuts, voluntary public sector redundancies and capital budget. I don't know how they can possibly reach 2.1bn in cuts without cutting welfare rates. Maybe they will keep the rates but put time limits on welfare schemes.

For 2011, it's OK because the budget has already been set and they're not going to change it. But what happens in December this year when a new budget must be set which the IMF has outlined?

Labour will be faced with the dilemma of either
* putting through massive welfare cuts and tax rises having promised not to and having spent the year injecting capital into the banks
or
* collapsing the government and appearing to have no ballls

I suspect that the 2012 budget will go through but that by 2013, they will call it quits. FG might coalesce with FF at that stage.

ferike1

All I know is that no economy has ever come out of recession by raising taxes, all that does is stifle growth. Any policy that includes tax increases is flawed already. Cut taxes to encourage spending.

mlumley

Government economic policies don't add up



They NEVER do, why are you so shocked?

cson

I think they're hoping for a good Cheltenham to be quite honest.

RichardAnd

ferike1 wrote: »

All I know is that no economy has ever come out of recession by raising taxes, all that does is stifle growth. Any policy that includes tax increases is flawed already. Cut taxes to encourage spending.

Raising taxes most certainly does not work. In the 80s, incomes were taxed heavily and it did not lift the country out of the slump it was in. Sadly, with Labour in power I can only see taxes going up. Of course, these taxes will be introduced on a "tax the rich" policy so worry not

Finnbar01

RichardAnd wrote: »

Raising taxes most certainly does not work. In the 80s, incomes were taxed heavily and it did not lift the country out of the slump it was in. Sadly, with Labour in power I can only see taxes going up. Of course, these taxes will be introduced on a "tax the rich" policy so worry not

And when they start taxing the rich the poor end up getting hurt.

gigino

dynamick wrote: »

The programme for government includes:
1. No welfare cuts
2. No public sector pay cuts
3. Put minimum wage back up to 8.65 from 7.65
4. No income tax rate rises or changes to bands or tax credits

It appears that the first three of these measures will lead to higher unemployment as these measure makes it more expensive to employ people.

Yet they plan to cut a 19bn deficit in 4 years

Do not worry, the IMF / EU will rightfully impose cuts where they are needed before its all over, as the present situation is not sustainable.