Thursday, 14 May 2009

How to pay for the crisis

This is the title of a paper by Ray Barrell, Ian Hurst and Simon Kirby from the NIESR examining the different ways of closing the gaping hole in the public finances. What I found fascinating was that they concluded that a very effective strategy would be to get people to stay longer in paid work. Each year of additional employment would cut the budget deficit by 1% of GDP after 10 years and in time reduce government debt by 20% of GDP. Boosting average working lives by 3 years would cut the deficit by 3% and the government debt by 60% of GDP. And yet this government is still allowing companies to throw people out at 65.

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