DEBATE: Should Philip Hammond borrow more?
Should the chancellor borrow more to pay for infrastructure and public services?
Alan Lockey, head of modern economy at Demos, says YES.
Basic decency explains why we should be spending more on Britain’s poorest. The rising gap between inflation and frozen benefits is crippling their living standards, and the Universal Credit fiasco looks more and more like a “poll tax” moment.
Yet social spending could – and probably should – be met through new tax rises or alternative spending cuts. Britain’s investment crisis however, is another matter altogether. Since the crash, we have the lowest investment rate in the G7. This is a private austerity emergency – the “crowding out” hypothesis simply has not worked.
Moreover, we have a pressing social issue – housing – where capital investment enjoys a decent multiplier effect. Sometimes the simple solution is the right one.
Brexit too might benefit from expansionary economics. After all, what says, “whatever it takes” more than a chancellor ripping up his fiscal rules?
As we approach the crunch December negotiations, Philip Hammond should allow himself some flexibility – and give the economy the “animal spirits” it needs.
James Price, campaign manager at the TaxPayers’ Alliance, says NO.
The UK is addicted to borrowing. Despite so-called “austerity”, the government is forecast to borrow £60bn this year. Demographic pressures will inevitably push age-related spending on things like the NHS higher in years to come, so the government has to get its house in order now.
With infrastructure, the government has an atrocious record of prioritising grand follies like HS2 over smaller, more worthwhile projects. The NHS is struggling, but this is nothing new: the permanent state of crisis persists irrespective of how much money is spent and who is in government. And with pay in the public sector still higher than in the private sector, a spending splurge cannot be justified. After all, we’ve been on one for nearly two decades.
If there is to be any loosening it should come in the form of tax cuts, lessening the burden on individuals and businesses, and making the UK a more competitive place to do business.