This year's budget on 22 April will be the most important for many years. The UK economy is deep in recession; unemployment is widely expected to increase to 3 million; and independent forecasts suggest the Government's budget deficit will be around 10 per cent of GDP in 2009-10, even before any measures contained in the 2009 Budget. Chancellor of the Exchequer Alistair Darling faces the unenviable task of having to produce a package of measures that supports the economy in the short term, while providing reassurance that the deficit will be reduced in the medium term.
In this paper, we urge Darling to look to the great reforming Chancellor David Lloyd George for inspiration. Almost 100 years to the day before this year's budget, on 29 April 1909, Lloyd George presented arguably the most famous, the most radical and the greatest UK budget. He made the moral case for taxation to finance welfare spending and established the principle of a progressive tax system. The budget was such a success that it was given a soubriquet and is now known as the 'People's Budget'.
Alistair Darling should be as bold as Lloyd George was 100 years ago. To counter the recessionary forces in the economy, he should propose a package of measures that includes:
- A substantial increase in personal tax allowances
- Extra spending to achieve the Government's child poverty reduction target
- Extra spending on low-carbon technology
- An immediate restoration of the link between pensions and earnings.
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