The New Economics Foundation (NEF) has written about rebuilding the tax base – after the pandemic.
Here we have, unfortunately, a basically progressive organisation, which thinks we have to renew the tax base, because Covid- 19 suggests we’ve spent it all, and got nothing left.
They mention that tax take is likely to be reduced – of course if you crater your economy then tax take goes down, not up – as Osborne found.
But my reason for mentioning NEF at all is they that they come to the right conclusions whilst continually operating from the wrong premises. So they suggest:
.. it will be important to repair the tax base strategically. This will include higher tax rates on concentration of wealth and income among families and companies, as well as through an investment-led recovery in public services and new zero-carbon infrastructure.
Which is spot on.
.. the government should not be raising taxes during a crisis. More than anything, the economy needs money in people’s pockets — especially the very poorest, who most need the cash and are most likely to spend it. Instead, now is the responsible time to borrow.
Quite so – although with the proviso that the borrowing is really to pacify and indeed largely to encourage pension investors. The tax on the wealthy should ensure that incomes on investments are treated as ‘unearned income’ (as opposed to income gained, like most of us, from work) and should be taxed more.
I certainly agree that:
The huge and costly mistakes from the last decade must not be repeated.
They think, like me, that ‘New Statesman’ article on why austerity must not on any account be repeated, is important.
And indeed, here, Robert Sidelsky suggests:
First and foremost should be a recognition of the state’s vital investment function. It is the duty of government to provide the community with its necessary public goods and services – things that domestic private enterprise lacks the incentive or capacity to supply.
Contrary to Thatcherite wisdom, there are “essential” goods and services that a community needs, most of which have to be “home grown”. The crucial ones are transport infrastructure, health and education services, and social housing. These should never be run down, or forced to rely on unreliable foreign sources.
… Second, government responses to private sector downturns should be not to reduce their spending but to increase it. Austerity at the Treasury is fine when the economy is booming, but can be catastrophic when it is shrinking. ..
The question of finance is secondary. The goods ordered by the government will be financed anyway, down to the smallest penny.[**] What is important, as Keynes put it, is to arrange the financing in such a way as “to prevent the social evils of inflation now and later; to do this in a way which satisfies the popular sense of social justice; while maintaining adequate incentives to work and economy”.
The rest of the ‘New Statesman’ article is certainly worth reading, but I suggest that what Robert Sidelsky, (previously both a Conservative and Labour Lord – and now a Crossbencher) has expressed [**above] is the key: government spending creates money.
Yet I do really wish that his prose would be more overt – when government spends, it creates money…
That is what NEF still has, unfortunately, yet to take on board