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Tha A Word is featuring strongly in the debate on whether or not The Green Party should enter government. Those advocating a No vote see austerity as a given, if the party participates. The argument is augmented by stating the proposed programme for government brings this about.
Austerity is taken to be any attempt to bring deficits back in line. Actual austerity is seeking deficit reduction over the shortest period of time, often with across the board cuts, usually with little thought as to how such cuts affect public services.
No such policy exists in this programme for government. And here is why not. Austerity gets to be avoided by a combination of economic recovery, targeted investment in (largely) green infrastructure, and working towards establishing a more sustainable economic base.
A new government will be starting from a difficult place. The budget deficit will be in the region of 25 to 30 billion euro. This has come about by the need to additionally resource the health service to deal with a pandemic. More of the deficit results from economic fallout.
Huge amounts have been spent on wage subsidies and income supports. The near economic standstill has impacted the other side of the government balance sheet Little economic activity has meant diminished taxes. Post pandemic recovery will be the first step in closing the deficit.
The new government would not be committing to any expenditure cuts. In its first two years of office it is committing to a significant increase in capital expenditure to fund much needed infrastructural investment. This investment would further stimulate economic activity.
Stimulated economic activity would be the second part of closing the budget deficit. Half way into the life of the new government, decisions would have to made as to how and when a balanced budget can be brought about. This can't be done within one term of government.
There are many economic tools that can be used to work towards achieving a balanced budget, the last and least of which should be public expenditure cuts. The hope is that sustained increased economic activity continues bringing with it greater tax buoyancy.
Of course there may be further economic shocks that may occur - a second pandemic surge or a no deal Brexit. Neither such likelihood should change the basic economic policy of a new government. To borrow over a longer time period.
The difference between now and 2008/10 is significant. Then the Eurozone, the European Central Bank and influence of the German government were obsessed with balanced budgets. Now governments throughout Europe will be borrowing to invest to stimulate.
A Green New Deal promoted by the European Union will be the template for this approach. If we want to be the best boys in class in Europe we should be adopting this enthusiastically.
This proposed programme for government does not promote or encourage austerity. It does the opposite. We recover. We borrow. We invest. We stimulate. We sustain. If and when a balanced budget is achieved, some tax cuts might be possible, but that won't be any time soon.
