Today we have the debate on how to secure faster and more consistent economic growth in the UK. I will be proposing a five point plan for the government.
HONEST MONEY The Bank should be told no more quantitative easing and reminded its sole aim is to get inflation back to target. Neither the public nor the private sectors can afford inflation of nearly 5% on the RPI.
LOWER TAXES The government needs to raise an extra £176 billion a year in tax by 2014-15 to deliver its plan. If it cut Capital Gains Tax and Income tax rates it would be easier to deliver, as lower rates lead to higher revenues and more growth.
MORE AND BETTER BANKS The policy to make the UK banking market more competitive needs to be brought forward. The Regulators should agree that the main UK banks now have enough cash and capital to be secure, allowing them to lend more to business and for major infrastructure projects.
LESS AND BETTER REGULATION The government needs to revive its promised deregulation bill. Deregulation is the tax cut for business that does not cost the Treasury revenue. Sensible deregulation saves the government money as well.
MORE PRIVATELY FINANCED INFRASTRUCTURE The government needs to make prompt decisions on the regulatory frameworks and planning position to allow the construction of a new generation of power stations and to permit more privately fiannced transport provision. It needs to crack on with its plans for faster and better broadband throughout the UK.
November 11, 2010
Will record, and then view with interest.
I hope the chamber will be well attended.
November 11, 2010
Me also, go for it JR.
November 11, 2010
You are pretty much right on everything but I do not expect it to happen. Much regulation is controlled undemocratically by the EU anyway and any movement will be slow, non existent or more likely in the wrong direction.
That is why a general legal exemption for regulations that are plainly pointless should be brought in. Something that says that if you can show the the regulation has more negative impacts than positive in your particular circumstances you should be allowed to ignore it.
Anyone who spends any time long looking at the vast vague fog of UK employment laws would probably not employ anyone. Restricting compensation to a low limited would encourage employment (and encourage bank lending to business). After all if the employee is any good he can always get another job so where is there real financial loss?
The are many parasitic industries, usually based on daft regulations or rigged markets, like the employment litigation and the silly domestic green energy industries that richly need to be destroyed to help real businesses stay competitive.
November 11, 2010
Lower taxes are key to sending the right message that the UK welcomes the rich, inward investment and businesses. It would also raise more tax than the high existing levels by enlarging the tax base.
Cameron/Clegg seem to prefer to be seen to be “fairn” with the feckless equally poor to the responsible hard working poor. Invest in the UK lose 5% in inflation and 50% in tax on you “paper return” roll up roll up!
If we do not have lower taxes now and with the clear prospect of Labour’s politics of Envy back within 5 years what does the UK actually offer to investors?
November 11, 2010
I would add REPEAL THE CLIMATE CHANGE ACT. This Act imposes unnecessary costs on UK businesses and consumers thereby reducing the international competitiveness of the UK economy.
November 11, 2010
I’m very far for sure that more privately financed infrastructure is a good idea. Certainly the privately financed schools and hospital buildings have been far from successful, With low (or lower) initial cost, the subsequent rent and maintenance liabilities have shot through the roof. School maintenance costs in particular are generally far higher than they would be with normal “in-house” maintenance, even when run by an inefficient council, and the long term liability for rent does not seem to appear on the government books.
November 11, 2010
PFI is very different from bona fide private infrastructure, in essence it is just off balance sheet public spending.
November 11, 2010
I was pleased to see you voted with your conscience yesterday and that some new recruits felt able to do likewise.
I trust that the debate today commands wide attention and provides a focus for action.
November 11, 2010
What worries me about this, is that with Labour’s abstention, there was, presumably a potential eurosceptic majority ? Under the line we have been fed, that is. I.e. give us a good Tory majority, and the majority of Tories will be eurosceptic, and a eurosceptic commons can do something.
Well – with Labour taking itself out of the loop, those are effectively the conditions that prevailed yesterday. Mr. Redwood ?
November 11, 2010
Lower taxes I certainly agree with, along with your earlier statements on “flat” taxes
Now we will have a situation where potential university students will have to pay more for their education, and if they do find the jobs that provide the rewards that politicains spout about then they will also be secondarily penalised by the “progressive” taxation system which takes more money from them because of its stratification.
I am with Lord Ashcroft who asked the government if it was policy to ensure that individuals maximised their tax
November 11, 2010
“HONEST MONEY” It’s good to see that you are using the RPI value of 5%.
That sort of honesty is a good start.
The definition of the word “Inflation” should also be clarified to mean the Increase in the Money Supply.
“inflation is usually generated by an excess of demand over supply” -BoE
This is only a half truth by the Bank and hides the fact that money creation also causes rising prices.
You are absolutely right to point out that the Bank of England does need publicly reminding that it’s key Role is to keep Inflation down. What disturbs me is that the BoE is tasked with keeping Inflation within 1% of 2% – either below or above.
This should be changed to 2% or below with no need for the Governor to write an open letter to the Chancellor if Inflation is below 1% explaining why inflation is so low.
November 11, 2010
The Bank of England accepts responsibility for Rising Prices in this statement:
“The ultimate cause of inflation can really be said to be central banks, like the Bank of England. Their behaviour and actions determine whether inflation is allowed to rise or is kept low – in other words, whether they allow prices to rise unchecked by monetary policy, or whether the central banks seeks to influence the amount of money in the economy by changing interest rates.”
November 11, 2010
Mr Redwood,
I agree with you – we do need more Banks and market lead Banks, with Free entry into the Banking System. We also need less regulation with no Bail Outs. This would save the Tax Payer an enormous amount of money in regulation costs and bail out costs.
The Bank of England should not be allowed to control the money supply as it is giving an unelected institution far too much power – whether the Government gains tax revenues from this system or not – it is dishonest and will lead to far too much power in the hands of a few individuals who are essentially unelected – and in some cases – unelectable. It also promotes profligacy.
I’ve heard some commentators say that the Government should not be allowed to set interest rates (as in the past) and it is good that the BoE now does this. This is essentially saying that we the people should not be in control of our own money supply and interest rates through our elected politicians. If we disapprove of the the handling of interest rates or money supply issues, then we can vote them out. The Dangers here are that no one can vote out Mervyn King – this is undemocratic.
Good Luck.
November 13, 2010
Interesting article by “Cambridge University Conservative Association”
Gordon Brown was allowed to be profligate as he could throw blame at the BoE for Inflation and general economic instabilities.
http://www.cuca.org.uk/2008/11/14/abolish-the-bank-of-england/
November 11, 2010
It’s not just a matter of lowering tax – it’s the fact that people are penalised for being successful and independant. We are being disincentivised.
Who’d have thought that my grammar school educated boys (with their aptitudes towards science and of financially strapped parents) would have a lower chance of getting to university than their cousin – already known to police and of a benefit dependant, single teenage mum.
And don’t get me started on the issue of free tuition in Scotland !
The Tory press may delude themselves that the student riots were hijacked by left-wing militants.
It’s been proven time and again that smashing the place up is what gets politicians to listen – Poll Tax, Stop and Search laws, (etc)
November 11, 2010
John,
Maybe now is the time to officially purchase the North of Ireland from the South?
November 11, 2010
What a shame you were not joined by more tory MP’s yesterday, but thank you for voting. As for your post, your economical sense is unquestionable as usual.
November 11, 2010
Low taxes, low inflation, and a low degree of appropriate regulation will undoubtedly lead to a higher growth rate. That should be common sense to anyone not suffering from the recently discovered left-wing genetic disorder. Lower taxes may have to wait a while until the deficit is under control, but the QE/inflation/pound trashing and over-regulation problems can be tackled straight away. Force the BoE and its MPC to follow its mandate of controlling inflation, and to stop worrying about a deflation fantasy that never threatened the UK even at the peak of the financial crisis. Then get a task force with a fine tooth comb to go through all the major legislation enacted in the last 15 years, pick out the really damaging stuff like the Climate Change Act (identified by oldtimer above, thank you), and start to unravel the foolish rules and regulations that are strangling enterprise and robbing consumers of their purchasing power. Good work, John!
November 11, 2010
John,
We both know that what you are actually going to get is more EU, taxes and regulation.
Back in the 80s I loathed the NUS and Militant. But I have to say, I was very pleased at how the students just trashed CCHQ, while the police stood by and did nothing. Now Cameron and his buddies – who are conservative only in name – can have some idea of how ordinary people in the UK feel every day. The difference, of course, being that regular people have to claim on their insurance and won’t get the damages repaired at taxpayers’ expense.
November 11, 2010
Rich
Think you will find that any Insurance policy excludes damage caused by Riot and War.
November 12, 2010
You are right of course
November 11, 2010
Good luck. There is no intrinsic reason why we cannot have growth exceeding China’s (history shows growth is actually easier for already rich countries) & your programme could achieve that. We have David Cameron’s recent promise of a “forensic, unrelenting focus on growth” so I’m sure he will be with you in spirit, or at least I hope he will.
November 11, 2010
Excellent list Mr. Redwood and I too will watch with interest. Is anyone able to tell me why we need a Governor of the Bank of England. Please dont tell me because we have always had one. One year ago he said inflation was on the way down. Now it is going to stay too high for the foreseeable future. Is it that inbetween all his time away from the BofE he reads a quality newspaper occasionally and realises things are not as he thought in his little world so he should tell us what we already know and have known for months longer than he appears to?
November 11, 2010
Re: overregulation.
Report on recent dealings with the FSA. Re their ‘initiative’ of “‘Treating Customers Fairly”.
Scene. A rented conference room. Me and Business partner and FSA appatchik.
FSA apparatchik goes through the usual pramble.
FSA: “Right. first I’d like to ask you what you think the FSA means by Treating Customers Fairly?”
Me: “Could please help us by telling how the FSA defines ‘fairness’?
FSA: “We ask the questions”.
Yep. Just like some (autocratic ed) interrogator, that was exactly what he said. I mulled over leaning over the table and grabbing the oik by his throat and explaining to him in words of one syllable, with manual gestures, just exactly where he was going wrong. Why didn’t I? Because if I had they’d’ve arbitrarily shut us down and all our clients, whom we’ve successfully defended from most of New Labours foulness, would have been marooned and likely as not the FSA would’ve tried to have my house off me, which would have destroyed my wife.
The whole interview was conducted in the manner of an interrogation with tangental questioning, that is never quite direct, as blokey ‘assessed’ our answers against a little matrix he had sketched out on a sheet of paper.
The FSA is uttrely out of control. It is a bureaucratic (dictatorial ed) organisation seeing its agenda as continuing the work started by Brown and now the aim of the EU. (words left out)It is an utter dsgrace. It must be shut down, now.
Oh, and if you have the time I am quite prepared to explain to anyone the stupidity of the whole idea of a ‘project’ to find out if we or anyone else for that matter is ‘treating their customers fairly’.
Reply: The government has said it is abolishing it.
November 12, 2010
Lola
Many Government Departments have exactly the same attitude, they forget that it is our money, which keeps them employed. They need to be re-educated, and fast.
November 12, 2010
JR: “The government has said it is abolishing it.”
Which is equivilent in Clegeroon speak to, ‘we will rename it and role it up into another existing EU sponsored orginisation. The stupid plebs won’t notice’
November 12, 2010
“The Government has said it is abolishing it” Yeah. Right. When? In between now and then the FSA will wreak havoc on wealth preservation, wealth, free and independent businesses and liberty. Do you know it now takes at least 21 weeks to get their ‘approval’ to trade a simple retail financial advice business. 21 weeks! Talk about throwing and in the gears of enterprise. It is useless.
And you’re going to replae it with the ‘consumer protection agency’. Well let me tell you, sunshine, that I have spend the last 15 years desperately trying to protect our clients (aka Eurospeak ‘consumers’) from the economic and financial disaster precipitated by parliament, government and its apparatachik bureaucracy. It is not private business from which the ‘consumer’ needs protecting, it’s you (well not you personally Mr R – your heart and head seem to be in the right place). It’s incompetent government and its attendent incompetent bureaucracy, especially and always the FSA.
(I noticed you edited my previous comments as to the descriptions I used. They were as accurate as I could make them and if you’d been there with us you’d have been horrified and drawn the exact same analogy. I apologise if you felt that the descriptions were intemperate, but I am now so very very angry about all this it is difficult to always be objective).
November 11, 2010
I would also add :
NO MORE BAILOUTS FOR ANYONE. ….. Bad businesses must be allowed to go bust. Moral hazard must be removed. Risk takers must realise upfront that if you take crazy risks , you are liable to go bankrupt. Recovery is impossible until the bad debts get cleaned out. It will be painful, but not nearly as painfull as decades of drifting nowhere.
QEII is amounting to nothing more than another banker bailout at the taxpayer expense.
November 11, 2010
We have a law that says that legislation and the budget need to take into account their effect on sexual equality.
How about a more fundemental version of this philosophy? All new legislation and rule changes must make note of any increase in the costs of employing people and on the creation/destruction of jobs. Sometimes it is justified to add costs to industry, but nearly always it is not. This includes making micro businesses pay for employee pensions and regulations like maternity/paternity leave. This government should recognise the destruction of UK jobs that it causes. That is actually more important than worrying about whether Joanne Public receives the same wage as Joe Public because you need wages to be able to have equal wages.
November 11, 2010
Hear, hear. Excellent points.
Could we also not place greater emphasis on the superiority of British manufacture over Chinese? Just one example among many: in bathroom sanitary ware. Theirs looks fine in the brochures but turns out very hit and miss in real life. Not enough glaze, holes punched carelessly, taps, plugs, handles etc not long lasting. How many people besides John Prescott must be regretting having economised in this way and ended up with bathrooms inferior to the British-made ones they had before? The Chinese are not the Japanese or the Germans. We should be competing with the latter two for quality and reliability, not worrying about being undercut in price by the former. But the quality needs to be sold to the rest of the world, as it as in the past. We don’t need to confine ourselves to niche marketing excellent though that is too.
November 12, 2010
Rose
Afraid “Price is King” for most people now.
Buy in haste, repent at leisure. I forecast it will get worse, before it gets any better.
November 11, 2010
Dear John you have omitted the most important aim from your
“Going for Growth” list. You may add it if you wish.
Repeal the Act! Campaign to Repeal Climate Change Act 2008
WHAT WE WANT
We want the Climate Change Act 2008 to be repealed because it is based on flawed science.
We want the IPCC to be abolished.
We want an end to all carbon taxes, cutting carbon emissions and the ETS.
We want an end to the Act on CO2 propaganda campaign.
We want to stop the building of wind farms both on and off shore.
WHY WE WANT IT
There is no scientific evidence for dangerous human-caused global warming. There is no scientific evidence that CO2 in the atmosphere causes extreme weather events.
There are now 4.5 million fuel poor households compared to 2 million in 2004. The average household is spending £1,194 per year on energy bills. “Green” renewables will add £880 a year to our energy bills.
More than six out of 10 households are worried about the cost of their energy bills this winter due to carbon taxes.
The EST is a pointless and extremely expensive political gesture – costing the British taxpayer £18 billion per year for the next 40 years – for a country that produces less than 1.5% of global carbon emissions!
Decarbonisation of the British economy will cause the export of British jobs.
Wind farms are ugly, noisy, inefficient and expensive and will have no effect on the climate whatsoever!
Kind regards Fay
November 12, 2010
Seconded!
Sadly with the Clegeroons in power, the term ‘cats chance in hell’ comes to mind.
November 11, 2010
Stunning lead article in today’s Spectator. As expected top paid businessmen are fleeing Britain in their droves and companies are finding it very difficult to persuade their top talent to move here and even more companies are considering relocating their HQ’s for tax purposes.
One estimate given is that in the not too distant future this glut of banker bashing and punitive tax rates to ‘soak the rich’ is going to be costing HMRC £4.5bn a year.
At least the politics are sound though, eh? Keep bashing those bankers, you know it makes sense! (not John Redwood, the ‘you’ being the economically illiterate populists that we currently have in charge)
November 11, 2010
After watching Martin Durkin’s “Britain’s Trillion Pound Horror Story” on C4 tonight I also felt like buying a one way ticket to Hong Kong.
November 12, 2010
Norman: “As expected top paid businessmen are fleeing Britain in their droves ”
Other than Bob’s suggestion that we should flee from a fairly free declining economy in a degenerate democracy to a slightly more free economy in a totalitarian regieme. That is my question, where would you go?
The USA, is in depression with the Government borrowing 12% of GDP to pay to the banks, while the rest of its economy is in freefall.
Australia?
New Zealand?
November 13, 2010
I’d rather not flee anywhere. Far better would be for our government here to adopt the policies that can turn our situation around and halt the decline.
November 11, 2010
I seem to recall you recently describing Mervyn King as a man of integrity, or similar. I wonder if you still believe that? The ease with which he moves from one position to another would make Mandelson proud.
November 11, 2010
Why not as an experiment – give a run down area of the UK – say half a county – a special low tax status. A maximum of 20% total tax take. Let us see if it works.
November 12, 2010
Martin: “a special low tax status”
Excelent idea. But here is why, the European Union which runs the show now, would have a appoplectic fit.
Don’t you remember all that sh*te they used to spout about ‘harmful tax competition’?
You don’t hear that any more, because the EU has taken hold of the tax authorities in the UK.
So your plan while an excelent idea, is impossible while we have the Clegeroons infesting the Tory party.
November 12, 2010
In theory that is what devolution allows. In practice devolution has been limited to depressed areas committed to big government so while they have been succesful at being an ‘orrible warning they have not done better. You would really need to find some part of England where the people really wanted a Hong Kong style regime & let them run with it. That would almost inevitably be a relatively succesful area already.
November 12, 2010
All very sensible policy’s but they will be considered too ‘right wing’, ‘nasty’ and generally unfashionable (too many associations with the Thatcher years) for Call me Dave and the boy Osbourne. Whatever you say Mr Redwood I’m almost certain Conservative HQ will do almost the exact opposite just to show how much he has ‘changed the party’.
Depressingly they often seem to have fallen completeley into the trap that business is about dullness, bureacracy and grinding the noses of the poor into the ground, and fat cats etc. What we need is more voices like yours advocating lower taxes and real wealth and job creation that can make peoples lives betters. We also need to nail once and for all the lie that government can create real wealth and prosperity.
There seems to be a gulf between yours and the Conservative Party position. The so called ‘cuts’ are nothing of the sort and a cynical attempt to talk tough without actually having the guts to significantly reduce government spending. All we have is a modest ‘cut’ of the rate at which projected public spending is set to rise which is pretty pathetic and dishonest.
As we are, there is no chance of reducing the 4.8 trillion national debt and this wont change until someone faces up to the fact that the state has got far too big and needs to be radically cut in size.
No doubt the Conservatives will carry on spending too much and using quantitive easing which is effectively stealing the savings from millions. Sorry to say the Conservative party and Labour are having a phoney debate about tiny cuts as the nation faces economic ruin. History will judge them harshly and rightly so.
November 12, 2010
My thoughts exactly. Our best bet is a rerun of the 1970’s. This path Cameron is leading us down won’t lead to growth, that’s as sure as can be, and Labour will disingenuously use the perceived ‘cuts’ as the reason for this come the next election. Labour or a Labour/Lib Dem (you just know that the Lib Dems can’t wait to jump out of the bed of the nasty party and into Labours, Dave is deluding himself if he thinks otherwise) government in 2015 will make a complete hash of things, leading to a conservative revival.
We’ll have to default on our debt at some point, that’s obvious, although we won’t say it out loud, we’ll do it via stealth measures – means testing pensions, inflation reducing the value of the pound, raising retirement age, etc. It’s only fair that we should pay the penalty though, the debts are being racked up by us (or at least in our name) and I’d far rather we suffered the consequences that future generations.
November 12, 2010
the leadership of the Tory party will never allow honest money. Osborne was caught swanning around on yachts of people who got their money from the (financial sector ed). Cameron comes from a line of financial scions wedded to the system. Brown and the Labour party didn’t understand it. So there is no hope of political change, change will therefore come from collapse. Debt pyramiding baked into the system will ensure it.
November 12, 2010
John
Interesting viewing on the Growth Debate yesterday, as usual you made your points well, as did some others taking part.
We had some of the usual Labour MPs making comments about a totally different World to the one they actually live in, but I suppose some of them had to take the Party line.
Pleased to see the Debate was reasonably well attended, with over 50 Members present, although I would have liked to have seen more taking an interest in what funds all of the expenditure they vote on.
Yesterday seemed a better day for some of us realists.
An actual Parliamentary Debate of the Economy.
Ian Duncan Smiths presentation of Welfare Reforms.
Channel 4 programme on Britains Trillion Pound Horror Story.
Perhaps, just perhaps, the light is begining to shine, and the penny is begining to drop.
WE NEED CHANGE, AND WE NEED TO TAKE ACTION FAST.
November 12, 2010
Conrad Jones :
Under your definition of inflation, and the definition of most sane economists, that is not a half truth it is a complete untruth.
If prices rise and there is no debasement of the currency , then the rise in prices is due to demand outstripping supply of the goods. Nobody will call this inflation. The Central Bank in order to justify the unjustifiable have to resort to mangling the axioms.
November 15, 2010
Hello Gary:
I believe the Definition of Inflation was changed during the Reagan/Thatcher years to hide the fact that the Booming economy was being paid for by debt and money creation through the Federal Reserve.
It is becoming increasingly obvious that many free thinking people who take an interest in economics and Central Banks either disagree with, or are baffled by their Orwellian Newspeak way of defining economic terms such as “Inflation”.
http://economics.about.com/b/2008/04/17/did-the-dictionary-definition-of-inflation-change-in-the-late-1980s.htm
The Labour Chancellors decision to change the Rate of Inflation target from RPI to CPI was – yet again, a worrying indication that the Government and BoE have no intention of reducing Inflation as they depend on it for extracting our Purchasing Power. Notice that the current Chancellor has not put this right by re-establishing RPI as the Target for the BoE to follow.
Thank you for your comments.
November 15, 2010
In addition:
If Inflation is running at 5% per annum, then using the Exponential Growth Rate Rule of 70, we divide the Inflation Rate into 70 to find out how many years it will take for us to lose half our purchasing power:
70 / 5 = 14 years. (50% of the purchasing power taken through money debasement)
With 6%, 11.6 years.
With 7%, 10 years.
With Savings Rates so low (negative in Real Terms) the interest on savings can no longer be relied on to safe guard our savings.
I would be interested to know if this Tax Income for the Government is listed anywhere – especially as it must account for an enormous amount of revenue?
November 12, 2010
I fear for the future of the conservative party. You will not win the next election. I supported Cameron, being fairly right wing, but why did he waive through the equality act?. That alone was enough for me. He is simply rubber stamping european legislation. He seems devoid of ideas, at least Brown for all his faults had an ideology, I see nothing in Cameron, just an empty shell.
November 13, 2010
Dear John, I hope you will be the next chancellor.
November 13, 2010
George Osborne has singularly failed to explain the link between tax rates and tax revenue.
If he announced a lowering of tax rates in order to maximise the tax paid by the rich, it would be highly constructive and very hard to oppose.
At the moment he is playing Labour’s game and pretending that the rich should be “punished” by high taxes to promote “fairness”.
There needs to be a new narrative on tax rates, based on reality, and a reminder that the hard left is espousing policies which have made Cuba so dynamic and successful.