It is very clear that the government cannot carry on borrowing at current rates and the
coalition’s proposals for reducing government borrowing are prudent. However, today’s VAT rise is unnecessary.
As has been said before, we did not get into this situation because the government taxes us too little. Ever since Gordon Brown abandoned his self-imposed restraint in 2000, government spending, financed mainly by stealth taxes and increased borrowing, has expanded rapidly to its current level of over 50 percent of national income. As such the whole of the balance of fiscal adjustment should come through spending cuts.
The coalition’s spending reductions have reflected political expediency, not sound economics. The aid budget will rise, despite the empirical evidence that shows the damage that foreign aid does to recipient countries. The NHS has been ring-fenced, even though it has experienced huge budget increases and has a shocking productivity record.
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