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Labour's alternative strategy - borrow more money

I have linked to the debate as to Labour's alternative. They proposed on Wednesday a "temporary cut" in VAT (which implies they have changed their policy on VAT such that the permanent rate is now 20%).

This would increase borrowing in the year.

I asked a number of Labour MPs who they would borrow the money from and how much interest they would pay. It shows a considerable ignorance of economic policy relating to those who spoke in this debate.

The link gives the debate:

John Hemming The hon. Gentleman’s party’s solution is to borrow more money. From whom is it going to borrow it and how much interest is it going to pay?

David Anderson My party’s policy is not to borrow more money—it is to increase taxes on bankers and make those people pay.

John Hemming
Does the hon. Gentleman acknowledge that Tony Blair said in his memoirs that it was the Labour Government who did it?

Chris Evans No, he did not. This debate would be far more honest if we said that it was the banks.

Tony Blair - Memoirs p679 onwards This is incredibly difficult Of course, the key factor in our economy as elsewhere, is the global economic crisis and all nations are having to cut back and adjust. However, we should also accept that from 2005 onwards Labour was insufficiently vigorous in limiting or eliminating the potential structural deficit. The failure to embrace the Fundamental Savings review of 2005-6 was, in retrospect, a much bigger error than I ever thought at the time.


Aneliya said…
Of course the _point_ of a VAT cut is not to increase borrowing (though this is an effect) but to boost consumer spending. There is a danger of becoming a flatlining Japan if the UK can't get a lift out of _something_. However the biggest threat to discretionary consumer spending down the line seems to be pension increases.
john said…
And why?

People ignore resource limitations at their peril.

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