Bill Wiggin MP would like to share a piece written by his constituent, Mr Guy Griffiths, about the dangers posed to the economy by a Labour Government, following the General Election:
The General Election – Economics made simple
The Government itself has no money. Before it can spend money it has to raise taxes or borrow. As Lord Digby Jones, the former Labour minister, said: “if it wasn’t for the wealth created by UK PLC– large and small business alike – then there would be nothing to spend on schools and hospitals, on police officers, on soldiers, on nurses and on teachers. Only business generates taxation.”
For many years successive governments have not lived within their means. They have not raised enough taxes to cover their spending and therefore they have had to borrow. The difference between what is raised and what is spent is known as the deficit. The last Conservative government has managed to reduce the deficit but not to eliminate it. This attempt to live within our means has been called ‘austerity’ but some argue that, whilst we are still spending more than we earn, there has been no ‘austerity’ at all.
Even with a reduced deficit the total government debt is still rising. The National Debt is currently £1.88 trillion but it is rising at the rate of £5170 per second. The interest on this debt is £46 billion that is almost enough to cover the complete defence budget.
In the last election the Labour Manifesto appealed to many. They announced generous and wide-ranging spending plans including a National Transformation Fund that would invest £250 billion pounds over 10 years. They would buy back the rail companies, the energy supply network, the water companies and Royal Mail, returning these to public ownership. In Education they would increase staff wages and remove university tuition fees. They would create 4 new public holidays, raise the minimum wage to at least £10 per hour by 2020 and end the public sector pay cap. They would extend pension credits to hundreds of thousands of vulnerable women, reinstate housing benefit for under 21s and increase employment and support allowance and carers allowance. In Health they would provide £30 billion of extra funding for the NHS, £8 billion for social care. In the Public Sector they would create 10,000 extra police officers, 3,000 fire-fighters and 3,000 prison officers.
Mindful of what this extra spending would do to the UK economy, the Pound fell in value on the international exchanges every time that Labour fortunes improved in the polls. Notwithstanding that the top 1% of high earners currently pay 27% of all income tax, the Labour Manifesto said that they would finance extra government spending by further increasing tax rates on high earners. All those earning over £80,000 a year would pay more and the rate of Corporation Tax on businesses (the sole generators of wealth in the country) would also increase.
Labour has estimated that it could raise up to an extra £52 billion pounds a year from tax rises but the Institute of Fiscal Studies has ditched £11 billion of this as being over optimistic. High earning tax payers would be likely to change their behaviour such as moving abroad, said the IFS. Similarly, large companies would have the option of moving their operations to countries charging a lower rate of corporation tax. Overall, the lavish spending plans of a Labour Government would increase both our deficit and our debt, causing a fall in the value of the Pound and a likely reduced credit rating which would further increase the interest on our National Debt.
Labour’s policies are like a man with a salary of £20,000 a year but with a spending habit of £25,000 a year. First he exceeds his bank overdraft then the limit on his credit card debt. He is paying an ever higher rate of interest and then he loses his credit rating so that he can no longer buy goods on credit. Finally, his only resort is to declare himself bankrupt. We have been here before with Labour who bequeathed a £150 billion deficit when the Conservatives came into Government. We must not go there again. It would be a recipe for disaster!