New battle lines have been drawn. Mr Brown says the difference between the two main parties is between Labour’s Age of Opportunity and the Conservatives’ Age of Austerity. The true battle lines are between a Conservative party which grasps that there can be no sustained recovery without controlling the deficit, and a Labour party which believes it can go on printing,borrowing and spending without limit as if this would produce a recovery.
One of Labour’s biggest problems with this spin line even to get through to the election is they cannot explain why the UK economy did not recover when others did, despite all the borrowing and printing. If we look at past sustained recoveries – after 1981, after 1992 – they both followed tough action to control the deficit. If we look at past Labour mismanagement, in 1964-6 and in 1974-5 spending and borrowing too much then led to a worse crisis, followed by the need for cuts and austerity imposed by overseas money lenders and by the financial markets.
If we do not control the deficit, the deficit will control us. Already, despite the excessive money printing, the cost of government borrowing has risen. If we allow the cost of government borrowing to surge by being careless about the additional amounts we need to borrow, the country could become locked in a debt trap. The deficit would keep on rising and the accumulated debt would soar, simply because the interest burden kept on increasing. When you have borrowed this much already, you need to be careful about future borrowing, to try to keep the interest bill down. On present policy the public sector hoovers up all the available extra cash, starving the productive sectors, especially small business, of the money they need to expand and to create jobs.
The deficit has to be cut by cutting spending. We have often looked at how to do this on this site, and found that technically it is easy to do. The politicians just need to learn how to do it by following what many businesses do automatically -not cutting front line or valued services, but cutting the rest strongly. We should rule out all tax rises on earning and saving. We need to do more of both. We may need to cut rates on earning and enterprise, to encourage more of it. We need to work our way out of this debt mess. That willl require an Age of Opportunity for the wealth makers, the job creators, the savers, the hard workers and the doers. It will also require an Age of Austerity for the bureraucracy, after its excesses of the last few years.
All governments rely on more income tax receipts. The best way to speed those up would be to cut the higher rate of tax Labour proposes from next year. Whenever the UK has cut income tax rates in ther past the rich have paid more tax and paid a higher portion of total income tax. The Conservatives have promised to cut the Corporation Tax rate. This is the way to generate more tax revenue, by getting more successful people and companies to come here,. to stay here, and to create jobs here.