“balanced budget multiplier”
In this week’s budget what we urgently need is a budget which supports the government in rolling out a growth strategy. That strategy must also incorporate a new industrial strategy which enables regions and sectors of the UK economy to play to their strengths whilst stymying the ability of companies and rich individuals in their abuse of the tax system. The budget must also give Iain Duncan Smith and DWP the flexibility to reduce the drain on the Treasury by tracking benefit cheats whilst simultaneously addressing the inherent fraud and error in the benefits system*.
If DWP can be supported in this way, DWP should also be penalised if it fails to reduce the unacceptable levels of error in its processing
Yes, I know… it’s a tall order… That’s not all, we also need….. well.. let’s leave that for another day..
The notes below will not even attempt to fully address these but we can offer one gem of an idea.
As part of yesMinister’s yesMinister-news-monitoring-service we review all the daily papers and news: whilst perusing the Sunday papers for our clients I happened upon this neat idea. Have you heard of the ‘balanced budget multiplier’ ? Well if the answer is no, here is the general idea mapped out.
The principal of the balanced budget multiplier is that national income can be automatically increased pound for pound as the government boosts its spending. The boost comes by the government increasing specific taxes.
It sounds painful I know but the types of tax increases which could be used to stimulate growth include the much trailed Mansion tax, the tycoon tax, bankers tax on bonuses and taxes on transactions. Other options presented is an increase of 1p on employees National Insurance which has been projected to raise £4.5bn and also a penny increase on income tax raising £9m in total.
If you – as the reader of this blog – were happy to pay a penny more and your employer happy to pay a penny more and if the Chancellor were happy to respond; then under a ‘balanced budget multiplier’ we would not only reduce the budget deficit but we would also stimulate the economy by balancing extra spending with extra taxes.
*£3.2bn; this is 2.1% of the total benefit expenditure, which was £153.4bn in
2010/11. See more here or type Fraud & Error into the search of this site
