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Government budget deterring spending say IPPR

A new report by the IPPR has indicated that the Government’s economic strategy, which intended to boost confidence and encourage investment is actually deterring spending.

The economic think-tank is now calling on the Government to rethink its economic strategy, following statistics indicating that the UK’s long term growth rate is set to drop to 1.7% by 2015 - the lowest level since World War Two. It is also the equivalent of £165 billion in lost output over 15 years.

The IPPR believe that the Government should consider introducing temporary tax cuts, additional infrastructure spending and further quantitative easing to boost demand and bolster weak levels of private sector investment.

They also suggested that a 2 year 2p cut in National Insurance would help by injecting a further £14 billion into the economy, which they propose could be paid for through a permanent mansion tax on homes worth over £2 million.

The IPPR have calculated that by 2015 average growth over 15 years will have fallen to 1.7%, compared to the historic average of 2.4%, and the 3.5% peak midway through the last decade.

Tony Dolphin, the thinktank’s chief economist said: “Fears that more quantitative easing would increase the risk of higher inflation in coming years are misplaced.

“Inflation pressures in the UK in recent years have been imported and are largely the result of high commodity prices.

The IPPR also believe that the Government should implement a Jobs Guarantee of work at minimum wage levels for individuals who have been unemployed for over 12 months, at the cost of almost £2.5 billion annually.

It is believed that this will help to boost demand and prevent workers dropping out of the labour market completely.

This was posted in Bdaily's Members' News section by Ruth Mitchell .