Red lines for a progressive PBR

By Alex Smith / @alexsmith1982

With less than a fortnight before the Pre-Budget Report on December 9th, Will Straw at Left Foot Forward has set out five “red lines” that he says the Government must not cross, which are summarised below but are absolutely worth reading in full.

1. The PBR must make the Keynesian case for budget deficits
After the investment vs. cuts debacle of the summer, it is crucial that the argument is framed as sustained recovery vs. “double dip” recession.

2. Any deficit reduction plan must be flexible and based on cautious growth projections
If there has to be a plan to halve the deficit by 2014-15, then to be credible it will have to be based on cautious economic and revenue projections, and not on growth numbers that can be criticised as too optimistic in the press on the day after the PBR.

3. The Government must outline how it will return tax receipts to at least 38% of GDP over the medium term
The proposals published earlier this week by Compass to raise £45.8 billion in extra fiscal revenue amount to 3.2 per cent of GDP next year. These proposals enjoy public support while other measures such as a windfall tax on banks are now supported by Martin Wolf.

4. The PBR must help those most in need by finding the £4 billion needed to meet the 2010 child poverty target and protecting the labour market interventions already in place
Since £142 billion has already been invested in financial sector interventions, the Government must not shirk from these priorities and should find this money ahead of all other spending commitments. They should challenge other parties to support these measures.

5. Growth policies must be geared towards investment
The PBR under this Government has traditionally been an opportunity to set out new measures to encourage enterprise and growth. Any new policies this year should look to bolster investment, particularly in sectors of the economy where there is growth potential.