While the Governor of the Bank of England’s recent statement advising caution in respect of further economic stimuli is understandable - indeed welcome in some respects (lessening the 
chances of any more tax cuts of a useless variety) - this does not mean that all sensible options are closed. However, can I say that it is no great surprise to me that (as per previous postings) there is little risk of price deflation (as most shoppers for basic items will confirm). I should also like to say that more does need to be done to save the economy in the face of the global financial crisis that is corroding the real economy. The question is, how can this apparent circle be squared?
If I can return to my Keynesian position I would like to draw attention to the concept of a
balanced budget multiplier. This is where in a broadly neutral budget 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 somewhat higher taxes for the rich - and I mean rich, not the 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 balance over a longer period, the top rate of tax could go up from the presently proposed 45% to 50%. Alongside this, the 10p rate, so rashly abolished by Mr Brown, 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. In the latter respect 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 relatively harsh winter on the roads) that are thwarted by budget constraints and ever-increasing demands on the social care front.
Speed of action is important too; with the glacial progress of assistance to vehicle manufacturers a dismal example of dilatory policy implementation in the case of Jaguar / Land Rover and
apparent lassitude and passivity in the case of LDV. Elementary mistakes are best avoided too - such as whacking up business rates and discontinuing business rate relief schemes in the teeth of a recession and in flat contradiction to other declared policies of national support for business.
And there are other fiscally neutral measures that can be taken both at local and national level. Here I refer to 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. There are ways of framing conditions for bids that do not contravene 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 business there is a total benefit of £1m to the area (as that firm and its employees spend and the beneficiaries of that spend spend too.)
So there is some policy latitude remaining. Perhaps it is a vain hope, but maybe an element or two of this kind of traditional Keynesian thinking will filter its way through to the forthcoming budget. We shall see.
chances of any more tax cuts of a useless variety) - this does not mean that all sensible options are closed. However, can I say that it is no great surprise to me that (as per previous postings) there is little risk of price deflation (as most shoppers for basic items will confirm). I should also like to say that more does need to be done to save the economy in the face of the global financial crisis that is corroding the real economy. The question is, how can this apparent circle be squared?If I can return to my Keynesian position I would like to draw attention to the concept of a
balanced budget multiplier. This is where in a broadly neutral budget 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 somewhat higher taxes for the rich - and I mean rich, not the 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 balance over a longer period, the top rate of tax could go up from the presently proposed 45% to 50%. Alongside this, the 10p rate, so rashly abolished by Mr Brown, 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. In the latter respect 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 relatively harsh winter on the roads) that are thwarted by budget constraints and ever-increasing demands on the social care front.
Speed of action is important too; with the glacial progress of assistance to vehicle manufacturers a dismal example of dilatory policy implementation in the case of Jaguar / Land Rover and
apparent lassitude and passivity in the case of LDV. Elementary mistakes are best avoided too - such as whacking up business rates and discontinuing business rate relief schemes in the teeth of a recession and in flat contradiction to other declared policies of national support for business.And there are other fiscally neutral measures that can be taken both at local and national level. Here I refer to 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. There are ways of framing conditions for bids that do not contravene 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 business there is a total benefit of £1m to the area (as that firm and its employees spend and the beneficiaries of that spend spend too.)
So there is some policy latitude remaining. Perhaps it is a vain hope, but maybe an element or two of this kind of traditional Keynesian thinking will filter its way through to the forthcoming budget. We shall see.
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