At the present time the party conferences are taking place and, as usual, there are arguments about how to clear the budget deficit.

We all know that the collapse of the banks was the cause of the problem, but what puzzles me is how the banks generated so much tax that it was able to keep the UK solvent.

We know that the banks had a habit of entertaining politicians and one can only guess that this entertaining was to allow them to lobby those in power to do something for their benefit.

It seems that politicians of all parties believed the banks when they said that they were good for the economy because even Mrs Thatcher once said something like “We don’t need industry because the city will look after us”.

Today’s letters

The present government seems to believe that the way out of the balance of payments problem is to cut expenditure and to have a low wages policy.

Governments do not earn money by selling things but have to rely on taxation to be able to do their job. If a government makes cuts then it means less people in work to pay taxes and less purchasing power. If people are on low wages, most of what they earn will go on food, which does not generate tax, and, after paying for essentials, there will be little left to buy luxuries.

All this leads to further reductions in purchasing power and even more job losses, which is hardly the way to encourage industry to invest. Without a buoyant home market there is little incentive to invest in an export market.

I was always under the impression that the way out of a depression was for the government to spend more to kick start the economy and progressively produce more wage earners and as a consequence get more in taxes.

I believe that this is what the United States did during the 1930s great depression, in a programme called the new deal.

Derrick Holt

Fortnam Close

Headington

Oxford

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