Reducing spending should be about growth too

February 01, 2011 12:51 PM

This morning we heard some MPs calling on George Osborne to cut taxes now – and this would do much to help businesses and families in the recovery. Cutting the deficit by reducing spending can make tax cuts possible. But as 2020 Tax Commission Chairman Allister Heath says in City AM this morning, the Government’s plans are framed entirely in the context of a deficit reduction scheme; the implication being that they would have maintained those levels of spending if times were good.

But yet more academic literature has been released saying that high spending impedes economic growth. TaxPayers' Alliance research last year looked at another three academic analyses: using one performed by the European Central Bank, we worked out that GDP in 2010-11 is already £111 billion lower than it would have been without the increase in spending since 2000. That is equivalent to over £4,000 per family. The case for reducing spending from 51 per cent of GDP to cut the deficit is strong, but it should be about economic growth too, and this needs to be articulated by the Government.This morning we heard some MPs calling on George Osborne to cut taxes now – and this would do much to help businesses and families in the recovery. Cutting the deficit by reducing spending can make tax cuts possible. But as 2020 Tax Commission Chairman Allister Heath says in City AM this morning, the Government’s plans are framed entirely in the context of a deficit reduction scheme; the implication being that they would have maintained those levels of spending if times were good.

But yet more academic literature has been released saying that high spending impedes economic growth. TaxPayers' Alliance research last year looked at another three academic analyses: using one performed by the European Central Bank, we worked out that GDP in 2010-11 is already £111 billion lower than it would have been without the increase in spending since 2000. That is equivalent to over £4,000 per family. The case for reducing spending from 51 per cent of GDP to cut the deficit is strong, but it should be about economic growth too, and this needs to be articulated by the Government.

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