Gurmaj Dhillon is a former Treasury official who recently served as an adviser to the Conservatives on police reform and youth justice policy. He is on the Conservative approved parliamentary candidates' list.
In this article I will seek to make the case that:
- An ‘early and greater’ approach to fiscal consolidation is needed to restore the public finances back to health;
- We should adopt a two-pronged approach: re-focusing public spending towards frontline public services; and applying the concept of GDP-targeting to public spending, while redefining the provision of welfare support; and
- This approach should help to manage risks both around the process of economic recovery and the UK’s sovereign debt rating.
The political debate on how to restore the public finances back to health has largely focused on the timing and scale of reductions in public spending on one hand, and measures to stimulate private enterprise on the other. This has driven scrutiny of activity, headcount and pay across the public sector and publicly-funded bodies, and barriers to business growth and job creation in the private sector.
Advocates for ‘earlier and greater’ intervention on public spending (including the Conservatives) argue that this approach will help to both reduce the growing burden of public debt and stimulate private enterprise through reductions in corporate taxation (accompanied by a deregulatory agenda). Proponents of ‘later and gradual’ intervention (including Labour) point to the fragile nature of the anticipated recovery, arguing that shortfalls in banking credit and private consumption require that that government maintains demand in the economy, as individuals and businesses repair their respective balance sheets.