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.