I read in the Labour press this morning we all need to go out and shop til we drop – but showing suitable responsibility at the same time.
I ventured out this morning to buy a couple of newspapers and some fresh bread. I added seasonal marzipan to my basket so I could ice the Christmas cake later. Was that enough, I wondered, to meet the new patriotic requirement to be a cheery shopper? The marzipan was certainly dear enough to make a difference to the Sunday bill. It didn’t mean, however, that I needed to up the mortgage.
Therein lies the dilemma. The authorities visited this crunch on us, because they judged we were collectively borrowing too much and spending too much. They hiked the interest rates and later told the banks to lend less for the level of capital they held. Now they don’t like the results that come from jamming on the monetary brakes so spectacularly. They want us to be both prudent and to spend more. Given many families personal circumstances they can’t do that.
The spectre at the feast this Christmas is not just cash strapped banks reluctant to lend. It is many people worrying about whether they will get any overtime in the New Year, whether they will be on short time working, or whether they might lose their job altogether. Unemployment is the spectre stalking the land. If you fear loss of job you are not going to go out and buy big ticket items. You are going look carefully at the price of any inessential you would like to buy. You might buy some decorations and some Christmas lights, but preferably on the day the shop has cut their price by 25% to promote them. You won’t buy the new plasma TV, even when it is £300 off, because it’s still a large commitment. As for a new car, well you can forget it.
Companies are in an even worse plight. If people don’t spend enough in the shops, they feel it first at the factories making the goods. The stores soon turn off the suppliers. Companies cut out buying new cars for their staff, cut back on corporate hospitality, and review the prices they are paying to all who work for them on contract. You soon get into a recessionary psychology. Why buy it today? It might be cheaper tomorrow. Why buy it today? We might not be able to afford it tomorrow. Why buy it today? We can make the one we’ve got last longer.
After years of fulminating against the throw away society, after years of moral condemnation of the have it now pay later society that fuelled the boom, the government has come to the conclusion there is one thing worse than such a society. That’s a society where people are so careful with their things and their money that they throw others out of work with their parsimony. Did I do enough with my marzipan? No I didn’t. Should I do more? No, I don’t think so. What’s the point of buying food you cannot eat, only to throw it away, or buying things you do not need. Besides, many are saving up for the tax bill in January, as the government does want to spend so much for us.
December 21, 2008
[…] Wrong Shadow Chancellor?? John Redwood MP » Is it my democratic duty to shop til I drop? The authorities visited this crunch on us, because they judged we were collectively borrowing too […]
December 21, 2008
[…] The Wrong Shadow Chancellor?? John Redwood MP » Is it my democratic duty to shop til I drop? […]
December 21, 2008
Yes, the irony is almost funny. After years of lectures about “consumerism” we are now being encouraged out to the shops.
JR, Way off topic if you will forgive me, but how about a referendum on the continued licence fee for the BBC? It’s a hard thing for anyone to oppose and it gets the tories off the hook with regard to BBC reform ~ let the people decide. I for one could stand a massive ramping up of pro-BBC propaganda on the BBC for a short while if it meant their demise.
Reply: I like it, but I don’t think any main party is likely to pick up the idea.
December 21, 2008
Talking about tax bills in January why not tell all QUANGO’s that unless they cut their budgets by 20% overall within three years that they would lose all public funding ? The ÂŁ20 billion saving could fund raising the basic personal allowance over & above prices/planned levels by ÂŁ2,000 to cut the burden on basic rate tax payers . If people felt that their taxes where going down long-term they might be more likely to spend money if they knew they would be better off.
Personally I would cancel the VAT reduction that has not worked, raise it to say 19% and would extend it to exempt goods & services. This could fund phasing in a 10p tax band on the first ÂŁ10,000 p/a along with the end of tax credits & poverty trap creating payments that stop the working poor from embracing self improvement and fewer tax breaks for the wealthy. This would be phased in over three years. This would free-up the jobs market by making it more worthwhile to get better paid jobs – so that when the recovery happens there is a pool of people on low paid jobs who have the incentive to get on thanks to changes to tax & benefits.
Higher road fuel duties could fund extra cash for OAP’s to stop the VAT hike hurting their finances while reducing oil dependency which is good for economic stability and the environment. Pensioners could get a Citizenship Pension to slash poverty & red tape while boosting saving and a big fuel duty hike would force car-makers and sellers to develop greener cars to people facing a major increase at the petrol pumps. Car manufacturers are unlikely to sell cars that are bad for the environment if they are too expensive to run- they could recover by selling fuel efficient cars to people paying less tax on the basis that they used little petrol to run. This would solve the pensions crisis and could also be partly funded by raising the age of retirement to 68 and making that the same for the state sector too. The pensions time- bomb would be diffused as state provision would be made more affordable thanks to a later retirement age and a handy revenue stream from fuel duty increases.
As deflation is getting drastic a one off ÂŁ22 billion cash injection into the economy would help as basic rate payers getting a ÂŁ1,000 cheque this April would be a big boost to people paying off debts and to retailers wanting more sales.
ID Cards, New Deal , IT Schemes and Regional Development Agencies could all be axed to stop Big Government & long term increases in the public debt being a drag on recovery . A short -term boost to stop a depression is all well & good but longer term high debt interest charges for future generations , anti-competitive taxes and investment smothering public spending increases sound pretty bad. To speed up the fall in unemployment once a recovery starts why not replace JSA & IB with a less generous payment to curb economic inactivity ?
Civil service recruitment can be frozen for five years and government procurement costs slashed via a greater use of market forces to fund dispensing with Labour’s potty hikes in top rate taxes & NI charges while raising Child Benefit to stop higher VAT & other changes plunging more children into deprivation. The Tories could hardly be the nasty party if they pledged to tackle child poverty while stopping the kind of 1970’s style high taxes that brought the UK to its knees.
This would mean that within three years a person on ÂŁ18,000 odd a year would only pay income tax at 10p while Labour’s higher taxes & the need for them ( excess public borrowing and the failure to reduce wasteful public spending) would be prevented and poverty kept down. The policy ideas would get money to those most likely to spend it – i.e. the lower paid .
You would get an economic upswing on the back of these reforms – taxing consumption rather than income is pure logic and has worked before. Helping people to spend more money while ensuring longer term stability via less oil usage and lower budget deficits sounds quite wise to me. People who need more cash actually getting it could see outstanding credit card bills being paid off thus getting more cash to the banks meaning that they would have more money to lend and thus defrosting the credit market too.
December 21, 2008
Another very good analysis of the current dilemma we all find ourselves in. While I would like to help keep people in jobs through my purchasing power, I have no wish to run myself into (worse) financial trouble by doing so, particularly as I am a pensioner. Therefore my Christmas spending is parsimonious to say the least, as is the Christmas spending of most of my friends. We have decided to cut back on the amount we spend on presents anyway & donate some of the money saved to small, local charities. The remaining presents are going to be items of food & drink to enliven our Christmas festivities or something we each need rather than want. Personally, I’m not using my credit cards this year – it’s either debit cards or cash – or do without. I believe the old adage was something like ‘cutting your coat to suit your cloth’. A pity Chancellor Brown, with his budgets unbalanced since 2002 as I understand it, never learned this lesson.
December 21, 2008
The debate about increasing debt when we are already massively indebted is well chronicled, the futility of buying more imported goods seems less examined. What has amazed me for years is the blind eye turned to our monumental and worsening balance of payments deficit. Having followed the Wilson/Callaghan torment over the sixties inbalance and the three year battle not to devalue, it has seemed very odd that the New Labour deficit has been largely ignored. The Sterling devaluation over the past year is no surprise but at some point the beneficial arguments for currency devaluation wear very thin. We are being encouraged to make our massive trading deficit, already further affected by the loss of financial service income, worse by binge buying more inconsequential imports. This likelihood has been increased by the VAT reduction, money that could have eliminated stamp duty for years and helped resuscitate the construction industry. Tax pounds should be spent on improving our cities, infrastructure and supporting new energy not encouraging the import of throw away clothes from China.
December 21, 2008
No icing on the cake then?
reply: Good question! There will be, but you need to do the marzipan at least 24 hours before. Fortunately I have icing sugar in stock!
December 21, 2008
My Mum has always put the marzipan on & then the icing straight afterwards ! Mind you she uses roll out store brought icing from M&S ( my staff discount card makes buying the marzipan & icing far less profligate !).
December 21, 2008
Don’t forget the sieved apricot jam betwixt cake and marzipan.
December 23, 2008
If you threw a packet of last year’s icing sugar and the same amount of caster sugar into your mixer + egg yolk, lemon juice, and a few ground apricot almonds instead of the recommended huge amounts of tasteless and expensive sweet almonds, you would save time spent shopping for bought marzipan as well as money, and have something much nicer to put on your cake. (The bitter almonds can be ground by you, and have huge amounts of vitamin B 17 in which might inhibit cancer too.)