What should the government do to stabilise the economy?

The government needs to:

1. Get a grip on its lending to Northern Rock and set out how and when it will be getting money back from this bank.
2. Remove wasteful and unpopular public spending, like ID cards, regional government, extra contributions to the EU, too many spin doctors and consultancy contracts.
3. Start applying pressure to raise public sector productivity in those areas where we do need spending. Impose a staff freeze on the civil service.
4. Cancel the increase in CGT from 10% to 18%, and leave the new 18% rate in place of 40%.
5. Issue more index linked bonds to finance the remaining deficit, as inflation will come down after this winter’s fuel and food rises.
6.Create an employee ownership scheme for the Post Office and press ahead with its privatisation involving employees.
7. Open the water industry up to competition, to bring prices down and open up new supplies and new investment.
8. Get on with commissioning private sector investment in energy capacity by granting the necessary licenses and planning permission.
9. Introduce more private capital into railways, reuniting track and train in regional private companies.
10. Call a halt to the overregulation of financial services from Brussels, and put through deregulatory legislation which starts to lift the burdens on business.

This programme would at one and the same time

1.Lower prices by using competition to cut monopoly prices
2.Increase investment in infrastructure where we are short of capacity by harnessing private capital
3.Reduce public sepnding
4.Allow lower interest rates as a result of 1 and 3 above.

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10 Comments

  1. haddock
    Posted January 20, 2008 at 2:23 pm | Permalink

    I do not understand economics, especially not Brown’s version. All ‘growth’ over the last decade seems to me to be the result of people spending borrowed money. The whole thing seems to be going belly up as people begin to realise they have been conned and we are not a prosperous nation but up to our eyes in debt.
    The cry to cut interest rates to encourage more reckless borrowing and spending cannot be the right way to go.

    Your list could be simplified;

    The government needs to:

    1. Get a grip.

  2. newmania
    Posted January 20, 2008 at 3:34 pm | Permalink

    Well that all seems sensible . I notice you have dropped the call for tax cuts which Bush is using to relight the boiler in the States. You have accepted that we are far to in debt with reciepts falling anyway to risk cuts in the short term ?
    Shall the Headline be 'Redwood drops tax cuts from his personal agenda and admit Cameron was right '… hmmmmm?
    All the best and good luck. I am a commited Conservative and just enjoying myself a bit

    Reply: The piece you comment contains requests for two tax cuts – CGT and small business tax – and of course we need more as my Economic Policy Report made clear – as we bring public spending under control.

  3. Tony Makara
    Posted January 20, 2008 at 4:26 pm | Permalink

    In the long-term economic stability can only be achieved by supplying our home market with British made goods. Most of the things we import can be produced in Britain but are not because there is no government policy to protect British business from the (low cost – ed) economies of the east. Government should support the supply-side and be especially favourable to entrepreneurs who aim to supply the domestic market. A British firm producing British goods for the British market should be given massive tax relief by way of incentive.

  4. mikestallard
    Posted January 20, 2008 at 5:57 pm | Permalink

    You and I, as Conservatives, think there is a need for urgent action and urgent reform.
    I was at a most interesting meeting yesterday to select our new (North Cambs) MP. Apart from being very inspiring and indeed choosing an outstanding candidate, the meeting was full of gossip about Westminster which I found fascinating.
    Jim Callahan's name kept on cropping up…..

    It is quite clear from what Jacqui Smith said on Question Time on Thursday, that she thinks that everything in the garden is lovely.
    I understand that Polly Toynbee in the Guardian thinks the same.
    So do not expect any action.
    They honestly do not think it is needed.
    Too many years of being driven round in chauffeured limos and posh noshes have insulated them from reality. They are like the dear old Tories at the end of Mrs Thatcher's time when they had lost touch with their electors – and, indeed, everyone else.

  5. Richard Edwards
    Posted January 20, 2008 at 6:02 pm | Permalink

    Open up the Water Industry to competition?

    What like the Gas and Electricity Industry!

    I worked in the Electricity Supply Industry all my working life, and the nadir of that career was when Mr Redwoods mate, Cecil Parkinson ordered the Elecricity Boards to raise prices, just to attract private investors. Flogging off part of the countrys infrastructure at half price wasn't enough inducement, so a quick cash pool had to be created.

    What's left now isn't an industry owned by the British People, as promised by the Conservatives, but an industry stripped of all it's movable assets, and now owned by semi-state owned foreign companies such as EDF.

    Reply: Competition ushered in much lower prices, better service, and a switch to cleaner technology.

  6. Neil Craig
    Posted January 20, 2008 at 7:06 pm | Permalink

    I agree with all the points you make.

    I only disagree with calling it a programme to "stabilise" the economy. We don't want to stabilise we want to grow – at least at the world average. Brown has used the word "stabilise" very successfully since it implies everything is ok if we just keep on in the straight line we are going in. The Tories have not & should have pulled him up on this since the rest of the world (excluding the EU) has been doing, comparative to us, not a straight line but a rising curve.

  7. Nick
    Posted January 20, 2008 at 9:45 pm | Permalink

    It could cancel the Olympics, cancel cross rail and save lots on money in the process.

    Neither will make money without massive subsidy.

    By specifying a cost for Cross rail in advance of getting the quotes all they have done is put a lower figure on the cost. The contractors will bid up from this figure, not down.

    The interest bill (before any running costs) of cross rail are a billion plus a year.

    Divided that by the most optimistic number of passengers and you get 15 quid a day. Add on running costs and you are talking over 20 pounds a head.

    1) Would you pay it?
    2) Would a poor person pay it?
    3) Would they get their passenger numbers at the price?

    The answer to 1 is yes if desparate. 2 is No. 3 is no.

    The end result is a subsidy, and/or a tax on 'those that benefit'. The last is real Winston Smith speak. It means taxing those that might use it, even if they don't. The only people who benefit are those that use the service. For that there is a good system already in place to make sure they pay the cost. Its called a ticket.

    John Redwood, you need to stop promoting subsidy.

    Nick

    Reply: I have not been promoting a subsidy and have not spoken in favour of Crossrail.

  8. Steven_L
    Posted January 21, 2008 at 9:02 am | Permalink

    I read with interest your comments regarding deregulation of the water industry. Yesterday the Mail on Sunday reported on a tiff between the respective heads of OFGEM and Energywatch.

    Alan Asher, of the latter, believes that the market is not working and has called for an OFT investigation into the market, to investigate, amongst other things, "Why small suppliers have been forced out of the market or are struggling, and new entry is regarded as nigh on impossible".

    Further down the same page the MoS reports on goings on at OFCOM and quotes Charles Ponsonby, CE of Simplifydigital at saying "Today there are 530,000 different TV and broadband packages …"

    Before rushing into deregulating the water, should we not look at why is there such a difference between barriers to entry to the deregulated telecoms and energy markets. Take broadband for instance, yes there are problems, but it is relatively easy for a medium-size commercial venture to purchase bandwidth on the wholesale markets and sell it on to consumers.

    The apparatus through which the consumer receives gas, electricty, water or communications services through the old BT lines does not change hands in any case, however there seems to be a huge difference is access to the consumers between communications providers and energy providers.

    I strikes me that this must be something to do with the way in which the wholesale energy markets are working. How would you see the water ending up? An oligopoly like the energy or as competitive as consumer broadband?

  9. Richard Edwards
    Posted January 22, 2008 at 9:36 pm | Permalink

    Mr Redwood replied to my comments on privatisation of the Electricity Supply Industry by say "Competition ushered in much lower prices, better service, and a switch to cleaner technology"

    How does he know that prices were lower? Perhaps they were when the companies were first privatised, but thats not surprising as they were artificially raised by Conservative dictat to attract investors.

    Better service after privatisation? Again how does he know? I used to work for one supplier, and the gold standard for keeping customers "on supply" was checked by the number of minutes the average customer was off supply through the year. This figure plummeted after privatisation and has never recovered.

    The third point, switch to cleaner technology is true. Mr Redwood doesn't mention however that the old CEGB was actually forebidden by the various government parties to use gas for electricity generation. It was considered "correct" to use poor quality coal to generate electricity, and to use a prime fuel like gas, for other purposes.

  10. Adrian Peirson
    Posted January 24, 2008 at 1:49 pm | Permalink

    The Bank of England is NOT Englands Bank, it is a Private Company.
    The Crown should Mint its OWN Money so we the British Taxpayer do not end up paying Interest on Govt Money Borrowed from a Private Company. http://www.stopthelie.com/chapter_1_money_is_powehttp://www.stopthelie.com/chapter_8_how_they_do_i
    http://www.healthfreedom.info/Federal_Reserve_Frahttp://www.propagandamatrix.com/makow_banking_carhttp://www.prosperityuk.com/prosperity/articles/mhttp://www.planetquo.com/The-Law-Is-An-Ass-And-Yo

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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