Tuesday, 26 June 2012
Whither the taxes?
We are running very hard to go nowhere at all it seems. The only good news is that the continuing low gilt rates means that higher borrowing can be absorbed more easily than expected; but as the Government's headline goal is to shrink the deficit, this will be seen as failure.
Not that even more spending is going to help boosts tax receipts. Hopefully this goose is cooked once and for all. More Government spending is not helping boost the short-term economy substantially and payments made to pensions and benefits are a drain. An argument should be made for more capital investment as this should stimulate the economy - but with such opposition to HS2 and Heathrow expansion the Government is scared of large infrastructure programmes.
So how do we raise tax receipts - the contrarian view would be to lower taxes. Less taxes means more spending which in turn stimulates the economy and also increases consumption taxes like VAT. With such as high tax burden coupled with no return on savings people are not spending but trying to save and deleverage. Lower taxes would help to speed up this process and so bring forward eventual economic recovery. We need an emergency budget to start making some radical changes and probably a new Chancellor too.