LONDON, March 17 — Chancellor George Osborne should cut payroll taxes in a budget next week to boost a stagnant economy teetering on the edge of its third recession in four years, the Labour party said yesterday.
An emergency tax cut would pay for itself as it would stimulate economic growth, Labour finance spokesman Ed Balls said in a newspaper interview.
“Something must be done now ... you need some fiscal action,” he told the Daily Telegraph.
“If George Osborne announced a temporary cut in the basic rate (of income tax) we would applaud him because we would say, ‘At last he is finally doing something to get some spending power back into the economy.’”
Osborne outlines his budget plans on March 20, under pressure to find ways to kickstart an economy still struggling to recover from the 2008 financial crisis.
But Osborne is expected to resist calls for tax cuts or extra spending and instead stick to his austerity programme to reduce a budget deficit that peaked at more than 11 percent of GDP.
Conservative Prime Minister David Cameron underlined that message in a speech to party activists in London yesterday.
“Labour say: We need more spending, more borrowing, more debt - and everything will be fine. When will they learn? You can’t borrow your way out of a debt crisis,” Cameron said.
Labour lead the Conservatives in opinion polls but have yet to regain voter’s trust in their ability to run the economy after they were ousted from government in 2010 following the country’s deepest recession in decades.
The Conservative-led coalition blames Labour for the dire state of Britain’s finances they found after the 2010 election. One Labour Treasury minister left a note for his successor saying ‘There’s no money left’.”
But Balls said Labour had not borrowed too much. “The reality was we had a lower level of national debt than America, France, Germany and Japan.
“Clearly and understandably, the Conservative Party wanted to say, ‘Forget the world, public spending in Britain caused the financial crisis.’ I understand the politics of that but I don’t think it bears any relation to the truth.” – Reuters