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KINSEY MP: The Paradox of Thrift, University of Bradford

Matty Bradford

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Tabitha Kinsey speaks in front of students at the University of Bradford

It's been a few weeks now since we introduced our Shadow Budget. I'm incredibly proud of our team's efforts in shaping it. And, despite what the news media may yammer on and on about, I'm especially proud about the ideas for the budget that came from all flanks of our party. 

Now, you've also seen the Tories come out with their attacks on our Shadow Budget and trying to drive fears of rampant hyperinflation resulting from our plans to offer 1,000 in stimulus money to so many citizens of our country.

As students, hopefully you’ve heard about the concepts of “supply and demand.” Prices of goods tend to rise when there are too many people -- or too much money -- trying to purchase a limited supply of goods. After all, we can’t snap our fingers and all of a sudden make us have an unlimited amount of food or cars or really anything.

Right now, we are facing a major issue in this country via our economic projections. First, we’re seeing a terrifying spike in unemployment - a spike that really threatens the fabric of our society. On top of that, wage growth is going from a very strong number into becoming essentially flat, and very quickly.

I do not need to explain too much about why all of those numbers dropping so quickly is so worrisome.

But one number that is truly scary is the drop in the inflation rate to 1.5%.

Here is why this is not a good thing. 

Think about businesses. What motivates businesses? Profits. An increase in profits means businesses can invest. They can create jobs. They create demand for more goods and services. They help boost wages. 

Profits are a good thing.

And what is inflation?

Inflation is the broad measure of prices rising. WIth a very steady but growing inflation rate, that means businesses can - and are - increasing prices at a rate that helps them maintain or even increase their profitability. 

Again - that is a good thing.

But what does a shrinking inflation rate indicate?

Well, as stated before -- prices rise when demand outpaces supply. 

Right now, we’re seeing a dramatic decrease in demand for goods and services.

The reason why is because of the dire numbers indicated above. People are losing their jobs. People are worried they will lose their jobs. People have seen wages, on average, go from grow by nearly six percent in one year to flat this year. 

People have less money to spend. People are saving their money because they are scared. People are not going out shopping for much beyond necessities. People are not going out to pubs and restaurants. 

There is, simply, a dramatic shrinking in the demand generated by the people - or consumers - of this country.

That is hurting businesses. And it’s hurting businesses so much that we are possibly approaching a point where they will collectively have to lower prices. 

And that means businesses will literally have to stop producing what they make. If you’re someone who makes, say, doorknobs. And no one is buying new doorknobs, what are you going to do? You’re going to just let the ones you’ve already made finally sell, and you’ll likely have to drop prices to a point where they’re no longer profitable. 

This is a term called deflation. And I cannot stress enough that in approaching this system we are facing an absolutely dire situation, beyond even what we are facing now.

Right now, we truly need to increase demand. We need what some would even term a “demand shock” to make this happen.

We can do this by strategically investing in projects that will create demand and jobs. We’ve done this in our budget by investing in new transportation projects and more green projects. 

But we’ve also done this in the creation of the new National Care Service and the jobs created from that, along with the construction of new hospitals and related services through the NHS. And we’ve also promised our government workers a 3% hike in their wages.

All of those projects, however, take time for people to see the benefits. There are a lot of steps that have to happen before you can start to build a hospital.

But the biggest component of this demand shock comes by issuing the 1,000 pound checks to help many people pay their bills... but to also incentivize people to go out and spend at their local businesses. 

And this is an immediate shock. 

The government’s budget does not do much of anything at all with the big picture of creating demand. Tax cuts don’t do a lot for you if you’ve lost your job.

Our budget was crafted with exactly that in mind. By doing this through the BOE - which, by the way, we’re not going to take it over, that’s just Tory fear mongering once again - we’re freeing up money from the government wallet to build infrastructure to help build long-term demand with wonderful outcomes for our citizens.

And we’re also putting money in people’s pockets to immediately create demand, to keep prices in a responsible inflationary environment, and to help them retain and increase profits to continue investing. 

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