Tuesday, 6 December 2005

Brown Budget Report

Gordon Brown made his pre-Budget report yesterday, emphasising that GDP growth would not be as high as previously predicted.

Gross Domestic Product growth for the UK would reach 1.75%, according to Brown, in 2005. This is significantly below the 3-3.5.% figure outlined in the March 2005 Budget. Brown cites this slowdown to the rise in global oil prices.

The Conservatives believe the slowdown can be attributed to increasing amounts of regulation by the Blair government.

Whoever is true, it is a concern that GDP growth would not be as high this year (as it was in 2004). Granted, inflation and unemployment remain low, so the economy is still relatively healthy.

The Conservatives do have a point though. Too much regulation would hurt the economy. I've often stated how the CBI and other business pressure groups cry out for reductions in business regulations and red tape. With less regulations, businesses would have more money to reinvest, hence expanding their operations and employing more people. This would lead to more people having purchasing power which enables greater economic activity and demand for goods and services.

From the libertarian perspective, all regulations on business would be scrapped, except those which protect rights to the person and property. In a libertarian society, government wouldn't even need a monetary policy, central bank or state-owned fiat currency. I'm not an expert in economics, but monetary policy can lead to an artificial raising of the money supply. It's better to leave the business cycle as it is, rather than tamper with it.