Growth – what business should ask for

 

               Today representatives of business will meet the Prime Minister to discuss the government’s growth strategy. The government is keen to stress that it understands the need for growth, to generate the jobs to get people back to work, and to generate all the extra tax revenue they have forecast to pay the big bills for the public sector.

              The following are things whcih business could ask for which would help:

1.  The introduction of a fuel tax regulator, to prevent large price increases on fuel that occur when tax and oil price go up at the same time.

2. More  competitive levels of Income Tax and Capital Gains Tax. Lower rates would doubtless bring in more revenue as well as encouraging more business.

3. Better transport systems, through spending what public money there is available on projects that remove capacity bottlenecks on roads and rail. This could be allied to private finance initiatives to increase overall net work capacity.

4. Cheaper power, through a programme of permits and incentives for modern more fuel efficient power stations.

5. Informed purchasing by government, that allows local companies to compete for sensible sized contracts that they might win and be able to fulfill.

6. Weeding out more of the quango state which imposes too many penalties, charges and restrictions on business.

7. Review of employment law, so we can have one which is fair to employees but does not deter the offer of more jobs, especially by smaller businesses.

8. Changes to bank regulation and bank management in the public sector, so there is a better supply of finance for small and medium sized enterprises.

9. A general review of regulation to concentrate on what is really necessary.

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46 Comments

  1. Posted January 10, 2011 at 8:23 am | Permalink

    Agree with everything on your list and I have three others to add :-
    1 A serious review of planning laws which create months of frustrating delay and make it very difficult to get change of use on commercial premises.
    2 Improvement in capital allowances where companies who invest in new plant and equipment can offset the costs against their corporation tax all in year one or over several years whichever they prefer to do.
    3 Tax breaks for companies who invest in training for their staff or who help subsidise the cost of further education for their staff.

  2. Posted January 10, 2011 at 8:26 am | Permalink

    More discussion, more yap, when do we get the action? Take a machete to quangos and regulation. Get rid of the 3 million or more useless civil servants that clog this country up. Get rid of the EU. Concentrate on core services efficiently delivered. If you can’t find any more Eric Pickles types give me a call and I’ll be happy to be the axeman.

    • Posted January 11, 2011 at 6:17 am | Permalink

      esbut even the “yap”, as you put it, is not very encouraging. They should show now that they are serious and say that by 2015 they aim to have government spending down to below 25% of GDP and will reduce all taxes by 50% at the same time.

      Many state workers are actually rather worse than useless being paid large amounts just to think of new ways to inconvenience and fine us, to transfer more money from the responsible to the feckless or to mislead/lie to us with expensive propaganda.

  3. Posted January 10, 2011 at 8:30 am | Permalink

    Better transport systems, through spending what public money there is available on projects that remove capacity bottlenecks on roads and rail. This could be allied to private finance initiatives to increase overall net work capacity.

    This just illustrates why politicians are the problem.

    You’ve said ‘better’. You’ve not said cost effective. ie. There is no mention in any of your post about government getting value or being value for money, because you don’t care. You’re immune from the costs.

    Reply: That’s an unfair jibe at me, as I have said and done a great deal over the years to improve value for money for taxpayers.

  4. Posted January 10, 2011 at 8:45 am | Permalink

                  The following are things whcih business could ask for which would help:

    1.  Fuel tax – I suggest ending VAT and just have a duty set at no less than x% of the total price charged. Oh, sorry, can’t change fuel VAT to zero as we no longer have a Sovereign government. Silly me.

    2. Absolutely.

    3. We could do with removing distortions, such as the massive subsidy of road haulage via tiny road fund licenses for HGVs.

    4. Remove distortions, yes. Subsidise? Not so good due to clumsiness of State intervention.

    5. Plurality of suppliers, not monopolies, small geographic included, plus the basic fact of the state doing less

    6. Absolutely.

    7. Owner operators should not have to answer for their employment decisions at all – basic freedom of association issue.

    8. Remove obstacles, yes, enforce actoin? No. The state meddling will be counter productive and highly likely to result in malinvestment.

    9. I suggest the default is to repeal unless a case can be made that does not violate Rule of Law (eg presumption of innocence).

    • Posted January 11, 2011 at 4:28 pm | Permalink

      When I hear someone use the phrase ‘malinvestment’ that’s usually the bellwether for me to have a serious listen to what he says.

      I agree entirely and might add the total abolition of business rates and corporation taxes on UK based manufacturing industry, along with the abolition of all NI on employees and just watch the trade gap shrink and our manufacturing base grow.

      Instead we get plastic dave and his jobs summit which will amount to a photo-op and not much else, plus the curious, pained facial expression* when he explains why he can’t cut fuel duty because what we need right now is to maintain our gender equality outreach workers or something.

      * (I get exactly the same pained facial expression in entirely different circumstances first thing in the morning!)

  5. Posted January 10, 2011 at 9:05 am | Permalink

    Hi John,

    As a new reader I would like an answer to the question of whether you agree with the often quoted assertion that travel by car is cheaper in real terms than it was in 1997?

    I post the address of an example below:

    http://www.economist.com/blogs/blighty/2011/01/cost_driving

    Best wishes,

    Bob

    Reply: No, I do not agree. Running costs of cars,led by the escalating tax and cost of fuel, have gone up. This is the relevant consideration. Most people buy second hand cars not new cars. The cost of cars also has to be determined by looking at the cost of credit as many buy cars with borrowings.

  6. Posted January 10, 2011 at 9:17 am | Permalink

    I would add to that list the repeal of the Climate change Act provisions which increase costs for businesses and consumers.

    Failing that, suspend the said provisions to enable more mature consideration of the case that was advanced to justify those provisions in the first place.

  7. Posted January 10, 2011 at 9:48 am | Permalink

    John

    Did anything get resolved/put in place/work in progress, after Philip Greens recomendations with regard to Government waste.

    Do not agree with fuel stabiliser all too complicated, more paperwork, more people to administer it, more cost.

    Notice we now have a plan (reported in the press) to crush cars which are not insured, even if they are not on the road, but perhaps in your drive or garage.

    Seems/proposed you must shortly fill in another form (to be introduced) to say its not on the road (thats why its not insured) and does not need insurance. Since you already have to fill in a Sorn notice, to say its not on the road to DVLC for road tax why not just merge the same information on the same form, why another with another department with more expense more wasted jobs, more cost to the taxpayer.

    Why not just scrap road tax, and scrap a complete department, we pay enough in fuel now. Oh yes forgot, its information they are collecting no matter what the cost.

    If you scrapped road tax, you could place an Insurance disc/certificate of insurance (from your insurers) on the screen to highlight uninsured vehicles.

    It will not happen its too simple, but it happens in Europe, so it may happen here eventually I suppose, not by choice but by directive one day.

    • Posted January 10, 2011 at 4:06 pm | Permalink

      Here here this is just another way of a department raising fine income like the SORN racket fines for late filings, etc etc. These government edepartment become like malignant growth feeding of the voters by thinking of new way to make you default on something so they can fine you, licence you or mug you some other way.

      • Posted January 10, 2011 at 4:16 pm | Permalink

        These fining organisations are what the government often refers to as “providers of government services” please can they cut as many of these as possible and fire the people working therein – these “service” they are not things anyone wants of the state.

    • Posted January 10, 2011 at 4:08 pm | Permalink

      This car insurance situation is one of the numerous no brainers as you say which all the brains in Parliament have not been bothered to grasp over the years. More examples for the record – planning consent needed for all, trespass should be a criminal not civil offence and squatters should be evicted on the issue of an affidavit by the property/land owner.

    • Posted January 10, 2011 at 4:31 pm | Permalink

      You don’t need any sort of insurance or MOT certificate in the window. All vehicle insurance and MOTs are on a database that the Police access, often using camera-based automatic number plate recognition.

      If you take an average car, average mileage and the cost of the average tax disc, the equivalent payment translated into fuel duty would be about £0.04 per litre – about the same amount that fuel has just gone up as a result of the fuel tax and VAT increase.

  8. Posted January 10, 2011 at 9:51 am | Permalink

    And here is the answers they will get:

    1) No chance, have you seen the size of the deficit? Tax, tax, tax is the order of the day
    2) See 1) but let’s look at this again in the last budget before an election (when we really need the growth now)
    3) HS2
    4) Expensive, useless windmills
    5) You’re having a laugh
    6) Any quangos that are being abolished are simply having their functions moved to other departments
    7) This one could be done
    8) Curbing bonuses and banker bashing are higher on the agenda than practical policies but this may change in time
    9) Nick Clegg is already giving us a Great Repeal Bill, what more do you want?

  9. Posted January 10, 2011 at 10:16 am | Permalink

    It is worth looking at Australia to see the effect of tax rates. Yesterday, “The Australian” reported on research which showed that Queensland and Western Australia, which have the lowest rate of state taxation, are the two fastest growing states in economic terms. Surely this is a perfect example of a free market as there are absolutely no restrictions on movement and trade within Australia, and yet two of what might be considered as less popular states are gaining at the expense of the more popular states of New South Wales and Victoria.
    There’s a lesson to be learnt here by our “tax and spend” politicians.

  10. Posted January 10, 2011 at 10:26 am | Permalink

    Businesses should get back to work and stop trying to lobby the peoples representatives.
    Certainly dont need a whole new regulator to periodically review fuel tax, chancellor is capable of doing it himself.

  11. Posted January 10, 2011 at 10:40 am | Permalink

    I would add:

    Better regulation of Business rates, and maybe a look at abolishing central government role in their settings and collection. Thus there can be some “local” response and policies to “encourage” business to stay (never mind arrive)

    A simple explanation to the banks that if they “fail” they will be allowed to be fail, and the shareholders and directors of the companies become personally liable.

    Corporation Tax: Abolition or equalising with Ireland and Switzerland.

    Piecemeal destruction of “Job Centre” which is unable to provide what employers want, so farm out the “finding employment” to the private sector

  12. Posted January 10, 2011 at 11:03 am | Permalink

    Not more reviews!

    The government must agree what it is going to deliver, and within what time frame, otherwise it will just be another Blairite headline with no follow through.

    The government promised deregulation and isn’t delivering. It also promised a bonfire of controls, but Mr Clegg shuffled off his liberalisation bill to the Home Office after the public suggestions seemed to overwhelm him.

    Time for ministers to get down to the grind of delivering.

  13. Posted January 10, 2011 at 11:10 am | Permalink

    Excellent points on how to achieve growth, I broadly agree with all of it except for point 7. Spain recently overhauled its employment law in order to make it easier to hire and fire on short term contracts but it did nothing to alleviate the 20% unempoyment rates.

    Low corporation tax is an excellent way of attracting inward investment, you have shown before how in both it and CGT the yeild is higher when the rate is lower. However, income tax especially the 20pc rate is already too low. A lot of the research on America’s woes are reaching the conclusion that it is undertaxed. There is plenty of polling to show that people prefer personal direct taxation, as opposed to VAT.

    To sum up, excellent peice with lots of bright ideas but remember that for some on the lower rates, income tax has already declined by 50% in the last 15 years…

  14. Posted January 10, 2011 at 11:20 am | Permalink

    Agree with all that but rather understated.

    The best employment law for employees and employers is easy hire and fire with no come back. If people are any good at their jobs they will easily get another anyway and empolyers will have no reason not to give them a try. Bad for lawyers too so good done all round.

    The main things holding investment and business back is over taxation, over priced energy, over regulation, disfunctional banks, the EU and the fact that business can see that Cameron’s heart is essentially behind this big state pro EU agenda.

    There is a soft socialist, big government approach in power – probably to be followed shortly by an even worse Labour government. If he just could send out the right message half the battle would be won but his heart is just not in it and the Liberals make it worse too with the mad green anti nuclear energy nonsence.

    • Posted January 11, 2011 at 7:13 pm | Permalink

      Basically your plan is to make unemployed people more desperate in the hope that this will somehow help employers. Many will just refuse to work. The next obvious one is benefits. Of course the poor and working poor will just take that one lying down just like the middle class students Huh?

      • Posted January 12, 2011 at 6:28 am | Permalink

        No my plan is just to create jobs to benefit all by getting the state off the backs of industry. Not to make anyone desperate that is the Labour approach.

    • Posted January 11, 2011 at 11:20 pm | Permalink

      I will not vote for any of the main parties next time. I do not think I am alone.

  15. Posted January 10, 2011 at 11:26 am | Permalink

    Our UK and Euro Govt has been incredibly pro-business over the last 30 years , pro BIG business that is .

    Quote ” Today representatives of business will meet the Prime Minister ” …..

    When politicians talk about “business” , they mean BIG business only , not medium sized companies , niche exporters , sole traders who would like to expand or white van hero’s .

    The very things you are talking about removing in items 7 and 9 were introduced at the request of big business to stifle competition . Big business lobby groups decide the agenda of the EU and our own parliament .

    “Informed purchasing by government, that allows local companies to compete for sensible sized contracts that they might win and be able to fulfill.”

    Public procurement has been little short of another tax-payer subsidy for big consultancies (names left out -ed) . Big business will not allow the Govt to break up the party and start planting grass seed under their feet .

    Item 9) More than anything else removal of regulations is the acid test for me .
    I know half a dozen sole traders and small business which would like to create employment but won’t for fear of being taken to cleaners by trouble makers and no-win-no-fee solicitors .

    I don’t see how much of this is possible within an EU framework of regulation , big govt and harmonised taxes .

    You have “thought the unthinkable” and listed what the country needs but sadly it will just be another in the growing list of soundbites from image conscious Cast Iron .

    He is becoming more like Tony Blair every day .

  16. Posted January 10, 2011 at 11:34 am | Permalink

    1. We need more competitive fuel prices: in Jan-June 2010, diesel pump prices were nearly 18ppl higher than on the continent in Holland/France/Germany (and 34ppl higher than in Luxembourg) – although pre tax UK prices were actually lower, so all due to taxes. The regulator might look good if oil prices rise, but it will make matters worse for hauliers and motorists if they fall – but government revenue would be stabilised either way because of North Sea taxes.

    The other ideas are spot on. Getting banks to lend to business means discouraging them from diverting funds to mortgages.

    • Posted January 10, 2011 at 4:10 pm | Permalink

      Or get the government to cut expenditure so they did not need to lent the state so much.

  17. Posted January 10, 2011 at 11:52 am | Permalink

    I’d certainly vote for all of that – #4 in particular. I’d start on that by removing or restricting the massive ‘feed in tariff’ subsidy (for example, close it to new supply and cap current users at their present level of feed in) and extending ‘renewable obligations’ to cover nuclear, since it is also carbon free. (A modest pressure on generators which should improve supply security by reducing reliance on imported coal and gas, as well as cutting pollution a little.)

    I’m not sure big business would jump at a reduction in red tape though; unfortunately, it can actually act as a barrier to competition for them. Some of them at least will be perfectly happy to hire another lawyer or two to cope with an extra regulatory burden which crushes smaller competitors.

  18. Posted January 10, 2011 at 12:00 pm | Permalink

    It’s really refreshing to read that a leading member of the government is proposing measures to assist smaller businesses. I would suggest that to this list should be added the restoration of the 0% rate of corporation tax for profits at or below 10,0000 pounds and of marginal relief for profits form 10,000 to 50,000. These allowances were scrapped by Brown in his last budget as chancellor in 2007, when he was scraping the barrel so as to offer a cut in the basic rate of income tax on behalf of the election that never was.

    These allowances helped to nurture small business, especially the young and the new. These days we need to nurture them more than ever.

  19. Posted January 10, 2011 at 12:05 pm | Permalink

    Growth usually comes from self employment and (very) small businesses.
    The critical stage in the growth of a small business is the transition from sole trader to a business with one or more employees.
    Cash flow requires that the principal continues to work as hard as possible which means that there is no time whatsoever to become immersed in the intricacies of PAYE, tax tables, or employment law.

    How could the Government help?

    By creating a new class of employee who is exempt from the requirements of the more onerous financial burdens of the employer, such as maternity leave.

    By creating or facilitating the creation of enterprises which take over all the burden of PAYE for the small business, possibly in exchange for a small fee.

    Simplicity has to be the keynote because at the transition stage the sole trader is working all the hours of day and night and has no spare time or intellectual capacity to get his head round the horrible complications created by the State when someone wants to offer someone else a job.

    I challenge everybody to actually find out for themselves how complicated it is to employ someone and work out PAYE and NI for themselves, keep accounts, and maintain the required paperwork. For many sole traders it is impossible; as a result many businesses which could grow remain stillborn.

  20. Posted January 10, 2011 at 1:34 pm | Permalink

    As ever John Redwood hits the nail on the head.

    George Osborne has it within his grasp to go down as one of the Greatest Chancellors of the Exchequer.

    BUT

    He needs to embrace far more than spending cuts as a primary economic strategy. Spending cuts have helped to stave off the markets, whilst the ‘teenage scribblers’ encircle Spain, Italy, Portugal and watch like vultures as Greece and Ireland seek to recover.

    To get the country back on track, John talks a lot of sense. Especially on income tax cuts and corporation tax cuts. The laffer curve works. Reduction in tax has shown to increase tax receipts. People response with initiative and enterprise when they can keep more of the fruits of their labour. Hence the 50p rate must go in the next budget as it reportedly collects little desired revenue as individuals cleverly use accountants to get round it.

    In the short term, Osborne would be well advised to scrap the 50p tax rate, reduce the upper rate from 40% to 35% and the lower rate to 18p in the £.

    Coupled with this…..(to reduce the deficit harder & faster)……

    What John misses out on is that privatisation must be reengaged to help repay the debt, (and liberate business and drive up competition and free up the market). Rothschild’s last year did a report on the privitisation of the road network could reportedly generate close to £100bn in revenue for the Government.

    Imagine Osborne not only cutting spending but reducing tax, (personal and corporate), and privatising, (and paying down debt, reducing state control). This magic combination would be a god send to the markets, make the UK a low tax economy and hence a beacon for investment, jobs and enterprise. We would truly be open for business once again.

  21. Posted January 10, 2011 at 1:45 pm | Permalink

    How about a lower taxes but especially for manufacturing coupled with new legislation to tackle offshoring which has the main or most significant reason to avoid tax.

    How about ensuring all UK residents are treated and taxed the same. Scrap the non domiciled rule.Tax all UK citizens and residents on worldwide income and capital.

    Review the rationale and rules & reasons why some MP’s claim housing allowances for mortgages where if it was not for the reimbursement/tax avoidance rationale, the loans may not exist. Another use for an antiavoidance rule or anti abuse rule.
    This could be implemented before the caps in housing benefit.

    Simpler taxes with a general antiavoidance / anti abuse rule.

  22. Posted January 10, 2011 at 2:09 pm | Permalink

    Mr Redwood, I agree with most of your points but why has the PR machine left us with the impression that the Prime Minister and a few business leaders are going to conjure up new jobs out of thin air?

    I don’t know if it was the press release, dodgy briefing or the media that got the wrong message. All I know is that this kind of spin will lead to cynicism and devalue future messages.

    Reply: I think they wanted to send out some good news about new jobs that varuious companies are planning to create.

  23. Posted January 10, 2011 at 3:51 pm | Permalink

    Today programme this morning said that Cameron would be meeting today with representatives from larger Companies to seek their advice on how to help small Companies. Rather like the Head asking the school bully how to help poor old Simmons with the squinty eye in Class 1E.

    • Posted January 10, 2011 at 5:21 pm | Permalink

      Perfectly put Sir .

  24. Posted January 10, 2011 at 3:58 pm | Permalink

    Corporation Tax is more about stopping Companies investing than taxing the rich.

    If full relief was given against all capital expenditure in the year of expense there would be an explosion of investment. Ignoring the borrowing element (many of us are too nervous of banks’ behaviour to borrow) Companies are losing most of the cashflow of their investment in the year of investment because we’re paying CT on most of the profits which were spent on machinery and equipment. So you can never maximise your investments against profits without borrowing.

  25. Posted January 10, 2011 at 5:55 pm | Permalink

    The Job Centre is making things worse for employers who want to hire.

    The Job Centre swamps Employers’ recruitment systems with candidates forced to apply to keep benefits. At present most employers get enough applications from folk who want the job with out extras from the Job Centre.

  26. Posted January 10, 2011 at 7:54 pm | Permalink

    I would just like to respond to your items 1 & 2.

    1/ Why not scrap the Road tax licence for commercial and private vehicles and replace it by adding to the current fuel tax.

    2/ Abolish capital gains tax and introduce a ‘Flat tax ‘ to replace the current income tax system

    • Posted January 11, 2011 at 1:46 pm | Permalink

      Damage to roads increases with the fourth power of the axle weight. That’s why trucks do need to be taxed additionally.

  27. Posted January 10, 2011 at 9:55 pm | Permalink

    Your list of measure to promote business growth is strangely unimpressive, not least for reasons given by Norman. Cheaper power and infrastructure spending focused on clearing bottlenecks rather than prestige projects are directly contrary to the Government’s programme and lower direct taxes are ruled out until revenue rises strongly. As you have so revealingly researched and chronicled, regulation outside local government has grown apace since the election.
    Britain is not China or Vietnam: there is no suppressed pent up flood of entrepreneurial energy waiting to be unleashed. Our markets are more competitive and our labour laws less restrictive than rival EU countries. Hundreds, maybe thousands, of measures to promote small business have been brought in by successive governments since Harold Lever in the mid 1970s. But markets have worked the other way.
    The reality is that we have sold the pass. We relied on the City to drive the economy and the engine has blown up. Most of our big industries are owned by foreign multinationals that correctly view the UK as a low-growth market to be run for cash.
    Rebuilding a world-beating economy would require a long-term industrial strategy drawn up with our remaining top companies as top priority. That is not even on a wish list. We shall just have to keep muddling through somehow and hope that something will turn up. .

    • Posted January 11, 2011 at 8:31 am | Permalink

      Name me a world beating economy that had a long term strategy “drawn up”. There are none

      World beating economies occur when individuals are given their head in an environment that does not steal the fruits of their labours.

      • Posted January 11, 2011 at 5:53 pm | Permalink

        Tim, your point is made perfectly.

      • Posted January 11, 2011 at 10:46 pm | Permalink

        Absolutely. It’s not rocket science.

        (sorry, I put my first comment in the wrong place)

  28. Posted January 11, 2011 at 3:08 am | Permalink

    We’ve been having reviews of business regulation for as long as I can remember. They usually go like this:

    Civil Service: “So what should we do about regulation?”

    Big businesses: “Well we like having all this regulation, but we’d rather you didn’t do anything to us when we break it.”

    Small business: “We think you should get rid of regulation X, Y and X.”

    Civil Service: “Sorry old chap, X, Y and Z are EU regulation, we’re stuck with those”.

    Big business: “We agree, we like the EU free trade zone and we want to trade within all their rules and have spent lots of money on solicitors and compliance officers to prove it. Your chaps should focus all their attention on those small businesses that don’t spend lots of money on compliance, they are the ‘risky’ ones that might break all the EU rules and compete unfairly with us.

    Civil Service: We’ll get onto it.

    Big business: “While you’re at it we wanted to talk about getting some more subsidies…”

  29. Posted January 11, 2011 at 7:05 pm | Permalink

    What exact laws are you thinking of making more lax to help employers? The system pretty much allows hiring and firing at least in the short term with agencies and umbrella companies being used by employers. Bogus use of self-employment laws and even if you get a full time job there are no rights of dismissal for the first three months and full employment rights are not reached until after at least a year. All of this leading to revolving door recruitment policies often with four groups of people employed for three months, so they do not have any rights.
    I think many of the contributors would like laws on pregnancy, redundancy, sickness, holidays and so on revoked. I which case they are wrong.
    On saying that. Here is a strike they will understand. Goodbye!

  30. Posted January 11, 2011 at 10:45 pm | Permalink

    Absolutely. It’s not rocket science.

  • 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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