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Coalition Government's £100 Billion Economic Gamble Supported By "No Reputable Economic Theory"

Politics / UK Politics Sep 18, 2010 - 09:08 AM GMT

By: Submissions


Today Compass has launched a report which reveals the extent of the Coalition Governments reckless gamble. It is calculated in this new report by the leading left of centre pressure group Compass that the government is making a £100 billion gamble on growing while cutting which is supported by "no reputable economic theory".*

If the Coalition loses this gamble then nearly £100 billion could be lost from the economy over the course of just one Parliament.

The report argues that: "Everyone is agreed that growth is the only way out of this economic situation, but the government's hope is that this will come about by simply creating 'space' for private initiative. It has an agenda for cuts but not for growth.. A preoccupation with reducing the budget through cuts is not an economic necessity; it is an ideological political project"

The economic recovery is still fragile and the cuts agenda of this government will ensure we experience a lost decade - much like Japan did in the 1990s.

Chancellor George Osborne argues that the state is the problem, that we must deal with the deficit immediately, that if the state is cut back the private sector will flourish and that cuts can be progressive. On all of these fronts, the report shows that Osborne is fundamentally wrong.

The report contests each of these with economic facts and evidence showing that opposition to the cuts is essential and that there is an alternative involving a renewed fiscal stimulus to encourage growth and a long term fiscal policy designed to reduce the deficit through a fairer tax regime which could include:

50% Income Tax band at £100,000 £2.3 billion
Uncap NICs and make them payable on investment income £9.1billion
Introduce minimum income tax bands £14.9 billion
Reintroduce 10% tax band and 22p basic rate ?£11.5 billion
Abolish tax havens and tax 'non-doms' £10.0 billion
Introduce a sterling Financial Transactions Tax £10.2 billion

Public sector Cost cutting measures (Trident/Titan Prisons) £5.3 billion

Total £40.3 billion

Chuka Umunna Labour MP for Streatham says: "The coalition government claims its cuts agenda is an economic necessity, when it is really a political choice. They are peddling a myth that Labour do not care about the deficit when the reality is that while the deficit can and should be reduced in the long term in the short term deep cuts will prove self defeating as more and more economists are saying. Cutting deeply now is likely to increase unemployment, and will not stimulate private sector growth. This Government has a strategy for dogmatic cuts - but not for growth"

Neal Lawson, Chair of Compass says: "The Coalition is making a virtue out of a necessity over the cuts. But cuts like this aren't necessary and there is no virtue in them. By shrinking the state they will simply shrink the economy"

Zoe Gannon, Compass Research Coordinator, says: "Over the medium to long term a credible plan to reduce the deficit is necessary. This should balance sensible spending reductions in non-desirable public expenditure with growth-inducing investment in long-term green infrastructure, and a fair rebalancing of the tax system. However, right now the economic recovery is not secure and by focusing obsessively, almost recklessly, on the deficit this government risks damaging potential green shoots and private sector growth. A severe double dip appears unlikely - but if the government cannot secure strong growth they will be sentencing this country to high unemployment and an increasingly stagnant economy"

Compass is the UK's most influential political pressure group with over 40,000 members and supporters across the UK. Together we campaign for a more democratic, equal and sustainable society.

For further information contact Zoe Gannon on 07944915312 or

© 2010 Copyright  Compass - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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