Ed Balls was on the Marr show this morning and also has an article in the Sunday Times ahead of the budget, advocating tax cuts to boost growth. He repeats his long-standing call for a reversal of the consumer whacking VAT hike and comes over like a born-again Nigel Lawson in his article:
…cut the basic rate of income tax by 3p for a year. Or raise the income tax personal allowance to more than £10,000… It would be better to cut VAT now — it’s fairer and quicker and would help pensioners and others who don’t pay income tax. But any substantial tax cuts to help households and stimulate the economy would be better than doing nothing.
Tax cuts won’t scare international bond markets, even the austerity friendly IMF is advocating a VAT cut for Britain, government gilts are propped up by QE (for now) so the issue of bond market vigilantism doesn’t arise.
It was a mistake to hike VAT and it is a strategic error to burden industry with crushingly high green taxes and penal marginal income tax rates of over 50% discouraging entrepreneurs from coming to invest in Britain. If the government is going to miss the deficit target, and it is, miss it because the government slashed taxes to grow the economy. The international bond markets will forgive a finance minister with a growing economy who misses his deficit target, they won’t forgive a finance minister with a contracting economy in any circumstances. Chancellor Zero knows that with no growth there is no hope for the deficit.