Tuesday, 11 May 2010

We need investment, not cuts

Whatever the outcome of the negotiations about the new government, we know one thing for sure: All three parties are united on, and committed to, deep cuts in public spending. It is our services, pay, pensions and jobs that are at risk.

Yet none had a detailed plan for cuts in any of their manifestos. In fact, they deliberately did not mention cuts in any of the debates because they know how unpopular they are. The voters were not asked to vote for cuts, and the parties have no mandate for them.

Instead we are supposed to be frightened into agreeing huge attacks on living standards because of the crisis in countries such as Greece. But this only proves the point that cuts won't work - Greece was recovering until it was demanded that they raise VAT, increase the pension age to 67 and accept job losses and huge cuts in pay.

Investment works. And we can avoid any crisis by investing in schools and colleges, our creaking infrastructure and new council homes. They should all be green investments too, reducing carbon emissions. Over a short time they will pay for themselves as getting people off the dole will save the government money. And getting people back in work and spending again will produce tax revenues, which is the key to reducing the government's borrowing.

This increase in investment can be a temporary one. It doesn't need to be anything on the scale of the bank bailout, which is £126bn. The sky didn't fall in even when that happened, and that is producing no return, either in new lending or in tax receipts.

Investment will produce a return and can be financed in many different ways. Aside from increased borrowing, we could instruct the banks (which taxpayers now own) to lend to these projects and to viable businesses. Interest rates are much lower than expected, so we could use this saving to invest. We could even set up a state investment bank, like the government's Green Investment Bank, but with real firepower to get the economy on its feet and people back into work.

Above all, we must reject the failed policy of cuts. It has no logic, no support and no mandate from the voters. Instead, we can and should invest in our future.