Rising inflation, falling retail sales and lacklustre economic growth. The deficit in the UK is not the only thing to worry about here by raising tax revenues which reduce economic recovery that you may not raise the revenue needed in the medium term.
Shadow Chancellor Ed Balls understands this having called for the reduction in VAT (sales tax on retail goods 20% nationally in the UK):
The shadow chancellor criticised Mr Osborne’s refusal to consider changing course on the economy.
“When I hear George Osborne refuse even to countenance a Plan B, I do not believe this is economic judgment at work, but a political gamble with the nation’s economy from a chancellor shaping his policies not around constitutional responsibility, sound economics and the protection of jobs, growth and homes, but around a fixed political strategy to win an election in 2015.”
I suspect many in the Liberal Democrats are more inclined to John Maynard Keynes on the fool hardiness of cutting spending and keeping taxes high when the economy is in the doldrums. The emphasis should be on getting business going again, increase economic activity stimulated to increase revenues overthe medium term, measures to boost productivity and deal with structural issues.
Then reduce the deficit.