Labour Urges Stimulus, Tax Relief to Promote Growth
Britain’s shadow chancellor Ed Balls says growth is the way to reduce the deficit.
Labour’s shadow chancellor Ed Balls advocated tax cuts as well as stimulus spending on Sunday as an alternative to the government’s austerity policies which he believes have hurt Britain’s economy.
“The reason the deficit is going up, the reason families are under so much pressure, is because the economy is not growing,” Balls said on the BBC’s The Andrew Marr Show.
The British economy contracted .3 percent in the fourth and final quarter of last year and is still 3.3 percent smaller than during the first quarter of 2008, before the financial crisis. Despite a one million increase in private-sector jobs since they formed a coalition government, the Conservative and Liberal Democrat parties appear to have failed to revitalize the island nation’s economic prospects.
Chancellor of the Exchequer George Osborne, a Conservative who is set to unveil his budget for the next fiscal year on Wednesday, said on the same program that Britain should stay the course, insisting there is no “miracle cure” to make up for the “hard work” of reducing the deficit and improving economic competitiveness.
Osborne has reduced the shortfall by a mere quarter, however, while public-sector spending in real terms continues to increase. Borrowing last year was higher than in the year before. The Treasury expects to spend £756 billion by the time of the next election compared with £683 billion in 2012.
Balls has repeatedly spoken out against spending cuts, rather called for stimulus spending. Asked on Sunday whether the government could borrow to promote growth, he argued, “Of course you can.” Yet he also chastised the coalition for borrowing some £200 billion more than it said it intended when it took office.
Instead of lowering tax rates for the highest income earners, Balls also suggested repeating a tax on bankers’ bonuses, enacting a mansion tax on homes worth more than £200,000 and investing in home construction to help middle and low-income families. “Any tax cut” for them, he said, “is better than none.” He specifically suggested a sales tax cut.
Rather than reducing low-income tax rates, the government has raised the personnel allowance £1,335 so Britons can earn £9,940 per year before paying income tax at all. The threshold for paying the top 40 percent income tax rate is slated to be raised 1 percent next year and another 1 percent in 2015.