How do we get ourselves out of a recession, without borrowing any more finance to fund tax cuts or extra spending? The answer is quite simple, according to the IMF; balanced budget stimulus is the solution. And it is quite easy to do. All is required is for the Treasury to analysis the entire UK budget and divide it into two categories – growth and no growth.
Any item of expenditure, that does not create growth, should be canceled and placed into areas of growth or tax cuts. For example, the government spends the following (based on fiscal year 2012 spending);
- £2.2 billion on cultural services.
- £4.1 billion on broadcasting and publishing services.
- £0.1 billion on R&D Recreation, culture and religion.
- Another £0.1 billion on Recreation, culture and religion.
- £13.3 billion on ‘general government.
- £3.6 billion on R&D Economic affairs.
- £1.6 billion on Recreational and sporting service.
Those items of expenditure are not involved in the main spending areas; education, health, welfare and pensions. £25 billion in total and, if I had more time, I’m sure I could locate several more budgets that could be stopped or cut. ‘Other spending”, which contains miscellaneous expenditure, is £44.7 billion; the Treasury could easily cut £50+ billion of waste and redistribute the savings into areas of growth-driven budgets or fiscal stimulus.
What could £50 billion do?
- Prevent the social housing budget being cut by £5.8 billion.
- £12 billion can reduce the 20p rate of income tax down to 16p.
- Cutting VAT by 2.5% (costs £12 billion)
- Add £2 -5 billion to the governments Youth Contract.
- Add £1 billion to the Youth enterprise loan scheme.
- Triple the funding of the Green Investment Bank to £9 billion
- The remaining £16 billion to be allocated to other growth projects (such a infrastructure)
The above is only a list of examples; the government could just spend £50 billion of savings cutting taxes across the board. It worked in Sweden extremely well. Either way, there are plenty areas of waste in the budgets, which the government has not assessed or does not have the political stomach to abolish. Ashame.
good posting! it is becoming increasingly clear that the government lacks the gut to articulate a proper economic strategy to bring britain back to growth!
(although coming a little late to the party…) Another way to look at it is that £50billion is the additional resources not covered by taxation and therefore should not take place.
I find it interesting that we still believe that its the governments job to form an economic strategy or ‘get us out of recession’ in both cases the amounts wasted can still crowd out effective investment by private interests.
Another aspect is the ratio of immediate expenditure to ongoing expenditure, whilst most of that £50bn may be spent on an ongoing basis that should be substituted for the ongoing basis of your expenditure items.
A final concern is that there is little to be guaranteed by your ‘growth’ list in the same essence why not divide the £50bn by x of the population and see what happens.