By Ben Simmons
The Chancellor must acknowledge the economic case for reversing his austerity plans and introduce bold measures to support investment and young people to get the economy up and running again, says the TUC budget submission published today (Tuesday).
Other groups, however, including the British Chambers of Commerce observe a number of positive indicators in the UK economy, despite the worsening crisis in the eurozone, and urge the chancellor to adhere to the deficit reducing 'Plan A'.
The TUC submission says that with growth flat-lining, unemployment far higher than expected and the government having to borrow an extra £158 billion as a result, the economic case for a change of direction is overwhelming.
With even senior government ministers admitting that there is no co-ordinated plan for growth, the TUC is calling on the Chancellor to focus his efforts on tackling record levels of youth unemployment and creating incentives to encourage companies to invest more of the £724 billion they are currently sitting on to get the economy growing again.
The submission says that the UK risks losing a generation of talented and highly skilled youngsters to joblessness and stunted careers unless it rapidly increases investment in employment programmes.
The current cut-price, poorly-targeted and unpaid work experience schemes are not helping enough young people back into jobs so the government should introduce a guarantee of paid work or training for anyone young person who has been out of work for at least six months, says the TUC.
The submission says that support for young people should not be restricted to those out of work and calls for the introduction of a new youth credit for all 16-24 year olds to boost access to training, work placements or progression into better jobs.
The Chancellor must also be far bolder in using the tax system and a state bank to encourage companies to invest, says the TUC. The current approach of cutting corporation tax is benefitting already highly-profitable sectors but failing in its core purpose of encouraging businesses to spend.
The submission argues that these tax cuts, as well as the reduction in capital allowances, are transferring the corporate tax burden from financial services to investment-led sectors such as manufacturing. The government should stop propping up the City, reverse corporation tax cuts and reductions in capital allowances, and cut taxes on investment and infrastructure development instead.
The TUC supports the Chancellor's programme of credit easing but wants it doubled to £40billion and its implementation speeded up. The submission also calls for a new state investment bank, similar to those operating successfully in Germany and Scandinavia, which could be modelled on a beefed up green investment bank with new borrowing powers.
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