Sunday, January 30, 2011

OK, so what is Plan B for the UK economy?

Dave Cameron must be thanking his lucky stars that the youth revolution of North Africa has buried the embarrassing economic question he would otherwise have had to try to answer: What is your economic Plan B? What are you going to do if UK goes back into recession?

We all know Cameron's Plan A: Cut Cut Cut.

But there is a serious question for Cameron. If there is no recovery, if the UK economy fails to grow, or begins to shrink, Plan A is not going to work. Tax takes will fade away, unemployment will rise, the social security bill will skyrocket, and the deficit will get worse, not better.

George Soros says Cameron needs a Plan B. He says Cameron's plan cannot “possibly be implemented without pushing the economy into a recession".

US Treasury Secretary Timothy Geithner agrees: "rapid, drastic spending cuts are "not the responsible way" to cut national budget deficits. The  way out is through "education, innovation, and investment" . Cameron is dead against education and public investment.

There is a link between the youth revolution that saved Cameron's blushes and the youth on the streets of London and Manchester (not to mention Stroud). They have common concerns. In Tunisia and Egypt one of the complaints is unemployment. The demonstrators in London realise if they are locked out of study by high tuition fees, they face unemployment. Both sets of demonstrators resent the grotesque gap between rich and poor that is a feature of economies worldwide.

It is one thing to call on the streets for a reviled dictator to go, or for cuts to be cut. It is another thing entirely to have a robust economic plan to put in place when the dictator has jumped into his jet plane, or when the Coalition calls, and loses, and early General Election.

We need  a Plan B - a detailed, fully-costed alternative to the Coalition's programme of deep, early cuts.

Labour has a kind of plan: shallower, slower cuts. Ed Balls is talking about Plan B today, but not coming up with any ideas. This just ain't good enough. Big problems need big solutions.

The deficit is a big problem.

Every year, there is a £150 billion gap between our income and expenditure.

 < This graph (Source: HM Treasury, via puts it in context. It gives a somewhat different picture from the budget deficit hysteria peddled by Osborne on the news. Is suggests that Labour held back the expected upswing in 2004-7, only to have it soar upwards thanks to the banks in 2009.

So what is Plan B, that can reduce the deficit longterm, without cutting UK public services to shreds?

Here is the bare bones of Plan B:

  1. Cancel NHS reforms (save £3 billion, save the NHS)
  2. Close the Tax Havens - across the world
  3. Close the tax loopholes - across the world
  4. Tobin / Robin Hood / Financial Transactions Tax
  5. Bonus tax, followed by international rules to restrict bankers' bonuses
  6. Banking reform moving towards a fractional  reserve ratio of 50%, with the other 50% of money being supplied by Government in ways designed to increase the common wealth
  7. Cut large donations to political parties from corporations
  8. Cut Trident and other military white elephants
  9. Continuous, grassroots amendments in the public sector designed to cause increased efficiency 
  10. Investment of public money in a Green New Deal that will create jobs, save future expenditure on energy, increase spending in the less affluent sectors of the economy, close the energy gap, reduce our imports of energy, diminish the impact of Peak Oil, and reduce Global Warming.
  11. Convert dole payments to a Green Wage Subsidy
These are a few measures, off the top of me head on a Sunday morning. Intelligent and well informed readership of the Mabinogogiblog will no doubt be able to supply further proposals. There are many good people working on this problem, for instance:
Richard Murphy,
Tax Justice Network
Coalition of Resistance
False Economy UK
The Other Taxpayers' Alliance
The Green Party

Here is a full list of groups working on this issue. I counted 33 national organisations.

It is imperative that these organisations to get together and hammer out a costed programme along the lines sketched out above.

Without a plan, demonstrations are a waste of time.
Without demonstrations, the best plan possible is just a bunch of words on a page.
By uniting demonstrations with clear, practical and radical economic plans, we can change the world.
Here are the excellent Richard Murphy's proposals.

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