Getting away from the Dark Side

What alternatives are there to the depressing drag and the dark forces of austerity? The fact that there are likely to be no more well nigh useless tax cuts does not mean that all sensible options are closed. The negative economics of Darth Vader need not prevail!
But it is evident to almost everyone in this country - except of course the government - that more does need to be done urgently to save the economy. The alternative is continuing to bump along the bottom in the face of the widespread imposition of the Vaderian austerity that has spread like bird flu amongst gullible and subservient governments.
In the first place, no matter what LEPs say about enabling and agitating etc in yet more strategies supposed to produce growth, what is actually needed is real resources. These, and a government that is committed to providing them, rather than contradicting itself. It should be positive and get involved directly in projects that improve transport infrastructure, power generation and housing (but not just housing alone) to name but a few. But short of a booming directive from the sky this will not be happening with the present dark forces in Westminster. But there are other things that could be done if the will and the sense were there.
Returning to the positive power of a Keynesian position, I would like to draw attention once more to the concept of the ‘balanced budget multiplier’. This is where, in a broadly neutral overall financial context, spending power is moved towards those with a higher propensity to consume. In other words smaller deductions from the pay packets of lower income earners and higher taxes for the rich - and here I mean the seriously well-off - not the loyal, tax-paying middle classes picking up the bills again.
One way to achieve this would be to smooth out National Insurance contributions, making them a flat percentage of earnings with no limit on the range. Also, to achieve financial balance, the top rate of tax should go up from the recently reduced 45% rate back to where it was at 50%. Alongside this, the 10p rate could be reinstated.
If the flat rate of National Insurance contributions was set at a level that brought in a greater total this would free resources for increased support for manufacturing industry and public works projects. This would come out as around 7% so that the marginal take from the richest group would be 57%. This is less than the 60% that the wealthy were overjoyed to receive from Sir Geoffrey Howe and would be at the same level as in Sweden which has an enviable social market economy.
I doubt if there is a local Authority in the country that does not have ready to go engineering schemes especially after the impact of the prolonged winter on the roads that are thwarted by savage budget cuts and ever-increasing demands on the social care front. Two additional bands to council tax would add to the possibilities for investment without increasing borrowing.
And there are other fiscally neutral measures that could be taken both at local and national level. Here I refer to the procurement of goods and services. The Government must ensure that as much of its purchasing goes to domestic producers - from major defence or construction projects to the cars provided for ministers. Government departments must be made to see the bigger picture, with the negative impact of placing orders abroad far outweighing any saving on departmental budgets.
And there are ways of framing conditions for bids that would not contravene the letter of Euro legislation that can help domestic producers. You can be sure that certain other European countries do this - and more - already. The same goes for contracts from Local Authorities. There is a ‘multiplier’ of around 4, so that when a contract for, say, £250k is awarded to a local business, there is a total benefit of around £1m to the area as that firm and its employees spend and the beneficiaries of that spend also spend and so on.
So there is considerable policy latitude remaining – and I have not even mentioned the recreation of Municipal Banks! Perhaps it is just another forlorn hope, but maybe an element or two of this kind of effective and stimulating Keynesian thinking aligned with the force rather than the dark side of austerity will filter its way through even the Westminster bubble as the next general election approaches.