Western Mail Essay – Emergency Budget

Budget day: not just a matter of reining in the household expenses
- Jonathan Edwards, MP for Carmarthen East & Dinefwr

Tuesday’s Emergency Budget by the new Con-Dem coalition will be a dark day for many families as the UK Government continue their efforts to take an axe to our public services.

Of course, even before the excuses come out of 11 Downing Street, everyone knows that the outgoing Labour Government left the finances of the UK, individuals and families throughout the whole UK in a complete mess.

Economic growth over the Labour years was largely based on consumption, supported by government policies which resulted in house price inflation and personal debt bubbles.

It is Labour that must take the responsibility for the fact that, between 2001 and 2010, public spending increased by 78% but the Government’s income only increased by 36% in nominal terms.

Now however the problem lies in the new Con-Dem Government’s approach of comparing the budget of the State to that of a private household.

It is blatantly simplistic, if not reckless.

In a household, there is no direct link between income and expenditure. If you’re spending more than you’re earning – then clearly it makes sense to cut back on spending.

When it comes to the State, though, cutting back on expenditure can lead to a reduction of income as well. Putting people out of work with no other job to go to leads to increased unemployment, a loss of tax revenue, and an increase in spending on benefits.

The new UK Government’s core policy of basing deficit reduction on scorched earth cuts is therefore naïve and very dangerous, indeed basing deficit reduction on excessive cuts could actually lead to an increase in the deficit.

As David Blanchflower, a former member of the Monetary Policy Committee and economics professor at a College in the US, has warned this could lead us into a death spiral, more cuts leading to fewer jobs and no economic growth at all.

Therefore, until there is clear evidence of sustained growth in the private sector, providing jobs and support, the large scale public sector cuts currently being threatened should not take place.

Perhaps with the likelihood of increased unemployment in the regions of the UK, it would be no surprise if the UK Government aims their axe at the social protection budget. The costs of rising unemployment will be offset by making it more difficult to receive entitlements and freezing payments.

The reality is that the policies being proposed will disproportionately affect those parts of Wales which are more reliant upon public expenditure.

We already know that Wales will be hit with disproportionate cuts – the outdated Barnett formula, the way in which Wales is funded, means that Wales already loses out by at least £300million every year. The desperate need to reform Barnett has been knowingly, if not criminally, kicked into the long grass by the new government.

On top of this, the effect of cuts to the welfare budget will affect Wales more because of our historically higher unemployment levels – and our more infirm population due to our after legacy of heavy industry and poor housing.

The UK Government is right to target waste and excess, but to try and portray their cuts agenda as one that is based on so called ‘fair and just efficiency savings’ reeks of spin and is very misleading.

Deficit reduction has to be considered on the basis of striking the best balance between economic growth, tax increases and spending cuts. The most important element, of course, is sustained and long term economic growth.

This needs to be part of a wider strategy to encompass rebalancing the economy geographically, and to be less reliant on the financial sector.

Fiscal policy needs to ensure sustainable economic growth; developing the industries of the future – the green economy; and delivering individual, social and national fairness.

As a Plaid Cymru MP, it is all of those things that I will be looking for in this emergency budget and which I will be highlighting in my response.

Unfortunately, it is clear that once again we have a UK Government which treats the needs and economy of Wales as an afterthought.

2 Responses to “Western Mail Essay – Emergency Budget” [latest first]

  1. These people in power at the moment are just doing a hobby, it means next to nothing if they fail.

    All this throwing things up in the air is not required, especially at the moment. Stability of thinking and to keep things ticking over is required, and not throwing things out and bringing in another set of ideals.

    When it blows up in their face, they will not give two hoots – they will retreat to their French country houses and just sip their inherited wine and talk about the weather that today.

    Ah well.

  2. The increase of Labour spending, though, was when it was condusive to do so, to try and stimulate regions of Britain and Northern Ireland to economic activity, so stimulate entreuprenasimism(!) in those communities, international manufacturing export stimulation confidence main aimed at.

    But do such people appreciate and compremend like Cleggeron from the South-East Nonsense England understand or empathise with that? Don’t think so somehow – their brain is stuck in making sure their personal bank doesn’t lose their inherited millions.

    ‘Pensions? – what the eff do I care’, I hear them say.

    PS. if Clegg thinks he will get back in in Sheffied Hallam, which I hope it will be this October, after a decent loss of confidence vote, then he is in dreamland. He is hoping to move in five years to use his several tongues in somewhere else in Europe. He is no Brit , at ALL! couldn’t give two shhhh… hoots.

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