James Mills is a web developer in the North East of England and founder of Refresh Teesside »
Mike Hughes is the Head of Business for the Evening Gazette. He will be blogging on all matters of importance to Teesside businesses - and some that are just worth knowing »
Jez Davison, business writer at the Evening Gazette, is a regular blogger on all things business - particularly finance, entrepreneurship and the state of the Teesside economy » 
Karen McLauchlan is the Evening Gazette's deputy business and features editor - with special interest in all things industry, property and arts related » 
Jeremy Middleton is a venture capitalist and the co-founder of FTSE-200 company HomeServe » 
Deloitte, which has 23 offices across the UK including Newcastle, is among the country's leading professional services firms » 
ClimateNE & Climate Change Schools Project support the move to a low-carbon, resilient economy and help businesses avoid risk and realise commercial opportunities. Posts by Jen Atkinson, Krista McKinzey and Harriet Thew » Profligacy has become the new prudence. Labour's radical spend and tax policy, outlined in the pre-Budget report, is an expensive gamble to stimulate the economy and get families and businesses through the most turbulent economic period in recent history.
If it works, it will be hailed as a political masterstroke. If it doesn't, Brown and Darling will almost certainly leave office with a reputation for fiscal incompetence.
Under the plans, more than ã500bn will be added to the national debt by 2015, blowing out of the water previous economic policy of keeping borrowing at or below 40% of gross domestic product.
Darling has claimed, with some justification, that extraordinary times call for extraordinary measures. But it's hard to escape that middle Britain will pay later.
The 0.5% hike in national insurance from 2011 is an early warning shot and will attempt to recover the ã12.5bn black hole caused by the temporary 2.5% cut in VAT.
The latter measure is a huge political and economic risk. There is no guarantee that the reduction - in effect a 75p saving on a ã30 shopping bill - will persuade consumers to part with more of their precious cash. A further cut is prohibited by EU laws setting VAT at a minimum of 15%, so a much more useful solution would have been to extend the income tax rebate to give workers more money in their back pockets.
This would have provided a higher-value stimulus because history shows that low and middle income earners are more likely to spend than save any increase in their disposable cash.
Similarly, most small businesses would have preferred a corporation tax cut to 20% - the planned 1% rise to 22% from April 2009 was deferred for a year - rather than a temporary reduction in VAT.
Brown and Darling must be given credit for embarking on a bold if expensive journey to put the economy back on track. But if they have chosen the wrong route, it could mark the end of Labour's eleven-year dominance of the political landscape.
- Post to:
del.icio.us
Digg
Newsvine
Nowpublic
Reddit
« Previous | Home | Next »