With the budget only a few weeks away, the Westminster guessing game has begun.
What conjuring tricks will the Chancellor pull out of the bag? What cunning schemes? What Baldrick-like wheezes from the Treasury? None, I hope.
Here instead is a very straight forward idea: Let people and businesses keep more of the money that they earn for themselves.
This new "let folk keep more of their own money" scheme would be very simple to administer. In fact, no overhead costs would be required.
Secondly, it is fair. The more that someone strives to earn, the more they are rewarded under the scheme.
Thirdly, it helps boost demand and increase savings. If folk don't have to hand over more of what they earn to the state, they have more to spend in shops or to make provision for rainy days.
Finally, the money will be more wisely spent.
Keynesian economics rests on an assumption that the government is better at spending people's money than the people themselves. In the boom times, so the theory goes, government will wisely build up a surplus as the people merrily over spend. In the downturn, when the pesky people ought to be spending more, government will step in to do it for them.
Nice theory, but unfortunately it never works out that way. People are, it turns out, better at spending their own money on themselves and their families than politicians.
"But that would mean unfunded tax cuts!" pipe up the Treasury's pet pundits. Perhaps one would take such voices a little more seriously if they had a record of objecting to all those unfunded spending commitments.blog comments powered by Disqus
New! Download Douglas' new paper on economic policy and monetary reform
"A revolutionary text ... right up there with the Communist manifesto" - Dominic Lawson, Sunday Times