No concerted action to help the G7 economies

It is a pity that the UK and Japan are both so over borrowed that they could not join in a concerted programme of tax reductions to get the advanced economies moving again after the credit crunch.
It is good news that the G7 avoided a public row, and understood the need to make soothing noises about slowdown, not recession.
It will take a combination of interest rate reductions and tax cuts to stimulate growth sufficiently. Both the Uk and Japan need to take aciton to get better value for money from public spending, and to curb their deficits.

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2 Comments

  1. Tony Makara
    Posted February 9, 2008 at 6:06 pm | Permalink

    Life is all about incentive and business needs to be seen to pay to encourage further investment. Now that we are in an economic downturn, we need to incentivize entrepreneurs, by cutting tax for business, to ensure the supply-side stays on the front foot. If goods and services are still being produced weaker demand will lead to a fall in prices and iron out some of the underlying inflation in the system. However I am worried that further rate cuts and a weaker sterling will import inflation, so the balance has to be right.

  2. David Eyles
    Posted February 10, 2008 at 9:36 am | Permalink

    I quite agree, but there is no sign of this happening in any real sense. Gordon Brown seems to be aware that his proflicacy of the last decade is unravelling, but is using this as an excuse to cut front line services rather than the bureaucrats – the most stark example recently being the argument over police pay. For him to argue as he did that paying them just over 2% would produce so much inflation that the difference between what they asked for and what they got would soon be whittled away, was an astonishing piece of contorted hypocrisy and spin.

    What concerns me more is that the Opposition are not getting the message across anything like clearly enough that they intend to change things. There are hints, of course, like the "small government" phrase, but only a few are taking this to read: "We are going to cut 600,000 useless, pointless, utterly unproductive public service jobs whose only aim is to interfere with peoples' lives." I suspect that there is a real fear, amongst the Tory leadership, of alienating voters in what has become a remarkably complete client state.

    I can understand that the two years before the next election means that Cameron must not peak early, but the fact is that the lead in the polls is still pretty pathetic. Polls are usually based on a sample size of about 1100 to 2000. In terms of predicting the likely outcome in an election, I reckon that an uncertainty of as much as plus or minus 2.5% is intrinsic within all of them. Given the bias in the constituencies which give a big advantage to Labour, Cameron needs a lead of a steady 15 to 20% in the polls to guarantee a comfortable working majority. Given the absolute incompetence at every level, a 9 to 10% lead is well short of having got your message across.

    Cameron made a really good speech at the Conservative Party conference which, because she was listening to it, converted my wife into a potential Conservative voter. But it was the clear and unambiguous statement by George Osborne about IHT that actually cut through the fog of electorate apathy and caused the surge in the polls. There must be many, many more such clear and unambiguous statements. These need to be both negative – the way the government continually misspends our money – and positive: the EU; surveillance of ordinary people; tax; how the NHS will be reformed and so on and on.

    The policy reviews are good stuff, but they need to be much more widely understood to get the Tories into government. we need to know that Cameron understands the difference between spending our money and using it efficiently – a distinction Gordon Brown is unable to make.

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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