Proposals for an economic plan B published by the left wing pressure group Compass today will fail to be taken seriously until they explain how it will be paid for, according to Labour MP Michael Meacher.
Compass’s plan B calls for cuts to be reversed until the economy is growing and a new round of quantitative easing launched with the money aimed directly at environmental firms and increasing benefits. It also calls for the cancellation of private finance initiatives with an expected saving of £200bn, the introduction of a financial transaction tax and increasing efforts to close the tax gap.
But writing on his blog, Meacher says the revenue raising measures do not go far enough to fund the plan. He says setting out clearly how the proposals will be paid for is vital to the plan being taken seriously.
He says: “These are all warm words from the centre-left perspective, but it avoids the hard issues. How is it to be paid for?”
“That question needs to be answered, but it needs to firmly and clearly. Partly it is from the growth dividend, worth £40-50bn over a four year period. Partly it is increased taxation on the 2 per cent super-rich who have so far got off scot-free, and partly it could be, but does not necessarily have to be, some modest extra borrowing.”
He also says the plan “does not cut the mustard” because it is missing a strategy to re-balance the economy away from financial services to industry and a revival in manufacturing which would be necessary to achieve that. He says: “None of this in Compass plan B, but it will not persuade critics until it is spelt out in full.”
On Sunday, the Observer published a letter from 100 economists calling on the Government to consider the plan.
The letter says: “It is now clear plan A is not working. Wave after wave of economic figures from the Treasury, national and international economic institutions have all concluded the British economy is faltering. We urge the Government to adopt emergency and common sense measures for a plan B.”