What your analysis and Diane Coyle's article "Labour looks favourite for the fiscal beauty contest" (5 September) show is that the need of the hour is "tax, not spend". Indeed, the party that comes to power in 1997 will have to be prepared to raise taxes to meet the Maastricht criteria, whether we are in the single currency or not. Whatever the pre-election Budget, the post-election Budget will have to be a tax-raising one.
The poverty of fiscal debate in the UK has reduced the word "tax" to "basic rate of income tax" and every proposal, no matter how small, is costed in terms of so many pence on the basic rate. Thus, afraid of proposing any positive projects, politicians of both parties are falling back on the rhetoric of "deep" cuts in public spending. This is a delusion, of course. The last time there was a real cut in public spending was in the days of Denis Healey who, in 1976-77, produced the only year-on-year reduction in real public spending. Public finances have come to resemble a game of fantasy football - pluck millions out of the air and put them together as it suits your argument.
An independent central bank is much mooted. But that is a hangover from days of monetarist dogma, when people blamed money supply growth for all our ills. The Bank of England has hardly done any harm to the economy compared with the roller coaster rides of Lawson, Major, Lamont and Clarke. Perhaps we need an independent fiscal authority which will stop playing fantasy Budgets.
Professor MEGHNAD DESAI
The Centre for the Study of Global Governance
London WC2Reuse content