When is austerity an appropriate economic policy?
The results of the consistent application of austerity policies – cuts in public expenditure and/or increased taxation – since the Conservative-led coalition government came to power in 2010, do not make for encouraging reading. Although politicians have claimed that austerity means “living within our means”, the reality for the vast majority of British citizens is very different.
Austerity has also failed to deliver its stated objectives. But the fundamental question isn’t whether austerity is a “good” or “bad” policy. Rather, it is whether austerity is an appropriate policy, given a particular economic situation.
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Public Sector Borrowing
It has long been assumed that government spending is financed by taxation. This should be challenged, because it is not true. A clear understanding of the mechanisms for funding public expenditure is essential to implementing a sound fiscal policy. The question to be asked is this:
What is the appropriate and effective mechanism for funding public expenditure?
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Using the Budget to Manage Employment & Output
After the economy showed strong recovery in 2009 and 2010, eight years of austerity policies by Conservative governments brought recession, stagnation and faltering growth. What policy framework should a Labour government use to maintain a high and stable level of employment and output?
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Successful Macroeconomic Stimulus
Modern economies can be stimulated by macroeconomic policies that increase purchasing power. If the stimulus is deficit-financed, the resulting increase in national debt can be accommodated within broad limits.
This policy brief looks at the conditions that allow for successful implementation of macroeconomic stimulus programmes appropriate for a progressive government.
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Public Sector Debt Management
By June 2017 despite the austerity rhetoric of the subsequent coalition and Conservative governments the debt reached £1.75 trillion. Is this level a debt a problem requiring action by an incoming Labour government? Need the debt be reduced and is it a burden on current or future generations?
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