I have set out my big idea – a competitive banking industry with money available to lend for business growth, for individuals to buy homes, and for infrastructure projects paid for by the private sector. It has had on the whole a positive response here. It could make say a 5% or £75 billion difference to output by Year 4.
The government is looking at several ideas, according to the press. They do see that lower taxes might make a difference. However, they feel boxed in, both by the size of the deficit, and by the worries of some Liberal Democrats who like high taxes. The 50% rate may not be cut soon, and the report from the Treasury on whether it loses revenue or not may be inconclusive.
They might decide to invent an entrepreneur’s relief for new business start ups, perhaps with a limited life. One of the stumbling blocks the Treasury will see is how to stop people transferring existing business into new companies to take advantage. It might just be CGT, or it could also include an Income Tax break.
They could extend the number of Enterprise Zones, and increase the area covered. They could offer bigger concessions within each Enterprise Zone.
They might consider switching some revenue expenditure into capital expenditure. If they could economise more on day to day running costs, they could free some spending for larger projects which might help stimulate UK competitiveness.
They will probably look again at their deregulation programme, and consider introducing more items. Deregulation is the tax cut that does not cost the Treasury money, as it cuts the costs of doing business.
Whilst all these improvements would be welcome, and would make a modest difference, all of these taken together are not going to make much difference to the UK growth rate.
It is possible the Bank will embark in due course on another round of quantitative easing. I have expressed some misgivings about this in a previous blog, which have mirrored the concerns of many readers.
Tax cuts across the board on income and enterprise would make more of a difference. A larger deregulatory programme would help. Giving to the whole country some of the advantages that Enterprise Zones enjoy would speed it up a bit.
I fear UK policy making is stuck in a mode which does not come up with ideas large enough to shift the big economic problems the government has inherited.
September 14, 2011
Enterprize Zones and regional scheme are a way to ensure businesses locate in the wrong place for contrived tax reasons and provide unfair competition for others – a level playing field should exist everywhere.
The main thing lacking is confidence in Cameron he is a very good presenter and public face but if all his action are in reverse and directly opposite to his words he will never inspire confidence.
Halve the state sector, cheaper sensible energy, halve regulation and make it sensible, easy hire and fire, banks that can lend, lower taxes and shift more taxes to consumption than business and income and a new EU relationship this would give confidence and a slim chance of winning the next election.
Fire Cable and Huhne that would at least show some proper sense of direction.
September 14, 2011
Absolutely right on EZs and other regional distortions. Cities need to be allowed to contract as well as expand, if that is the natural direction their local economies are taking.
September 14, 2011
All excellent ideas but equally likely to never happen.
September 14, 2011
Agreed- the most positive thing I see is that Milliband looks so bad but cameron Cable & Huhne are doing their best to make him electable shortly. Even without him promising an EU referendum.
September 14, 2011
They can’t happen.
The Lib Dems hold the balance of power and in no way are they going to countenance any of the ideas on this blog.
September 14, 2011
Indeed they do – thanks to the Cameron’s socialist, pro EU green prospectus at the election – against sitting duck Brown how could anyone fail to win?
September 14, 2011
i dont actually agree with “easy hire and fire”, i do however think it should be a lot easier for folk in all walks fo life to operate as freelancers. then business can take their choice, perm staff who get some level of protection and elsewhere freelancers who get little or none. let employers and employees engage on a freelance basis if both sides want it. normal course of events freelancers should get a little bit more money for the “flexibilty” they show.
dropping all staff to the status of freelancers is not good for the economy or business.
and actually any staff who are harassed, bullied and subject to the more outrageous exteme behaviour of the worst employers should be able to go to tribunal for the worst companies need sorting out, even if they have been there less than 12 months. it is not good policy to enable bad employers to be able to abuse their staff.
September 14, 2011
Agreed on the freelancing point, and generally just simplifying tax and NI. It is a real pain trying to be flexible and being self-employed for some roles, whilst being multiply employed for others. ‘Multipreneuring’ has barriers.
September 14, 2011
The best protection for employees is an available alternative job and easy hire and fire is the best way to ensure this is available. Also it is in the interest of good employees and the business that the bad ones can be moved on.
September 15, 2011
Agreed .
An alternative available job is the only job security worth a damn .
Everything else is artificial .
Full employment , or at least fuller , is the only way to confound bad employers .
September 15, 2011
As I have pointed out to you many times if you are a cleaner or the like this ‘logic’ does not apply as there will always be more cleaners than cleaning jobs. Maybe you could tell us why it does?
September 15, 2011
Won’t the companies with the most vacancies be the bad employers because they keep firing people all the time?
Also if employees have no job security they’re not going to show any dedication to the company. Countries with high levels of job security, such as Japan and Germany, have companies that produce high quality products because their employees are willing to support a company that supports them.
September 15, 2011
it is perfectly possible to hire and fire in a decent and honourable way
the problem is the real outrageous employers who are little better than slave traders, sadly many of these exist and get away with their terrible practises hiding behind expensive lawyers
it is not in this countries interest to allow such employers to prosper
September 15, 2011
This may apply to self employed accountants and the like, but in the metal and building trades just created bands of wandering minstrels lowering wages, standards and working conditions. The lower ones just got exploited with less money and work available for them.
I suspect many of businesses greatest apologists are the pen pushers with mortgages and children. Singing the bosses songs and being his eyes and ears, or spies as I like to call them. Thinking they have some sort of position and being led down the garden path with promises that will never materialise, being told they are part of the ‘team’ and they are the most important. The most important being the ones paid the most going like cardboard over Paris when pointed out. When the company folds for whatever reason go to another with the same attitude. Sad really. Thinking they are someone and opening the third bottle of wine or drinking white with red meat is rock and roll. Burger flippers in white collar jobs.
September 14, 2011
Also EZ are a good way to ensure pointless parasitic jobs in the state sector and tax advice, lawyers and similar to no general benefit.
September 14, 2011
Cameron’s responce to the expected poor job figs is “investment” in hs2 trains and the green investment bank both will be negative for jobs and I see the 50p rate costing eonomy £50m PA from IFS – still worth it for a few liberal votes I suppose!
September 14, 2011
How would this help geographically isolated areas? Easy hire and fire what is the problem at the moment in hiring and firing?
September 15, 2011
Take a look at employment and recruiting laws and legal case rulings – after you have read them all you probably would not ever wish to risk employing anyone.
September 15, 2011
After reading how employers abuse their staff and let bullying continue I’m surprised anyone wants to work. If these employers aren’t punished people won’t want to work at all.
September 18, 2011
It’s called a revolving door recruitment policy and is how jobs are often ran. Many people think that no employer would run a business like this. Or the employees should just put up and shut up or leave as they do or become one of the capos enforcing this policy. Lifelogoic would have you believe this is a legitimate way of running a company and creating jobs with everyone working like this under the guise of self employment enforced by a cut in the benefit and health systems. Even this should be undermined with cuts in health and safety regulations and no minimum wage.
September 15, 2011
Bazman ,
As lifelogic says it’s the perceived risk ; and a very real one at that .
I know a number of small businessman who would love to expand and create jobs but they don’t feel they can take the risk .
– one has been bitten before by a rogue employee who almost managed to get the business closed down . The police even tried their best to provoke a reaction from the proprietor in an attempt to contrive an excuse to arrest him .
– another is an architect
Harriet Harperson’s equality laws which the coalition blindly rubber stamped mean that the whole force of law stands to be brought down on you if you recruit an able bodied white , straight , british male instead of a gay/ethnic/foreign/disabled/femail .
You can’t even ask someone “how they are” on the day of the interview . If they have a health problem and you then failed to hire them you could be successfully prosecuted for discriminating against them on health grounds .
These laws are different from the normal ones where it is neccessary to prove guilt . The onus is on the employer to prove that they took all measures to ensure equality . So presumed guilty until proved innocent .
Employers are now advised to have a solicitor present at interviews .
The net result is the jobs just do not get created so I suppose the laws achieve their aim of impoverishing everyone equally .
September 15, 2011
Daily Mail fantasies. I have been employed directly and indirectly through agencies. Doing a days work and some times a few hours employed directly with a company. Scaremongering at it’s worst to enable wages and conditions to be forced even lower, but not for yourselves as apologists and grovellers to the employers.
September 15, 2011
Your comments on equality and health laws are so wildly inaccurate it’s obvious you haven’t researched either. These laws aren’t different from ‘normal’ laws as the employee has to prove their was discrimination, not the employer.
Next time try getting your facts a reputable source, not the Daily Mail.
September 15, 2011
yep
i more than most want a dynamic flexible pro employment environment
but having seen up close and personal some of the more ourageous practises of some of the worst employers i see no reason to allow them a free reign
frankly the state should actively prosecute the harassment laws against the worst culprits
and the worst culprits are not small dynamic businesses
decent businesses should not have to compete against slave traders
September 14, 2011
Osbourne may regard people who, legally put their money offshore, as “leeches” but they are actually behaving is a way that is in everyone’s interests – forcing government to make sensible lower tax and waste policies as clearly they need to be forced. Thus preventing Osbourne from wasting so much money on nonsense such as green Bling and HS2.
A highly moral action to be much encouraged, the leeches are rather closer to home I suspect Mr Osbourne. (personal questions removed to Mr O)
September 15, 2011
So you’re saying it’s okay for people not to pay their taxes or that it’s only okay for the rich not to pay their taxes?
September 16, 2011
Which one is it Lifelogic? You are listening to your ‘betters’ to much.
September 14, 2011
So just more of the same useless ideas . How about for one year we buy nothing, just coast and use the money to pay down debt.
September 14, 2011
I remember reading a throwaway comment (it escapes me where) – and it may not be true – along the lines of that David Cameron doesn’t see a Prime Ministers job as much more than steering what is already in place along the rails already laid down.
As well as the numerous stories one reads that aren’t so easily dismissed from well connected journalists that he has phases of, laziness perhaps isn’t the right word, but maybe ennui when it gets down to humdrum everyday business.
To expect this government to do anything radical, and by radical we’re talking tiny changes in the grand scheme of things (e.g. breaking up RBS), I fear is a forlorn hope.
It’s becoming obvious that like the Eurozone we won’t act until it’s far too late.
September 14, 2011
And the problem is that the rails are heading towards a bridge that has collapsed
September 14, 2011
First of all, do you have the ear of the government? If not, why not? Do the top of the hierarchy still circulate round the ancient tea room and lovely bar opening onto the brown sewer that is the modern Thames? Or are they far too busy while you minor figures (actually our representatives) bustle around in your smart little offices next door? This is urgent (if true) and needs to be fixed fast. It seems to me from afar that back benchers like yourself are not being listened to. If real life is not discussed then the policy makers are just listening to each other and, yes, very often getting it wrong. I do not give a damn about the 50p tax. But have you ever driven down Welwyn Garden City High Street and seen block after empty block? I do not think that many of “the top brass” have, actually.
Secondly, I distrust the overpopulated and blind Civil Service. This mistrust is based on how they have castrated the Free Schools idea. Not only have they sucked almost all the life out of it, but they are now using delaying tactics to make people lose our enthusiasm.
Unless proper decisions, based on real needs (like those you outline above) are considered carefully, then, when the now imminent European Hurricane happens, we will all get swamped by the ensuing tsunami. And, to be honest, I get the impression that people in Westminster are just stumbling round in the dark at the moment as the barometer drops.
Reply: There is plenty of discussion and many exchanges with Ministers when Parliament is in session.
September 14, 2011
You should give a damn about the 50p tax rate. It’s what will make sure those blocks in Welwyn Garden City stay empty.
September 15, 2011
If they’re empty they could be turned into additional housing. Problem solved.
September 14, 2011
Discussion and exchanges with ministers perhaps – but they are not doing anything much positive at all and what little is positive is hugely outweighed by negatives such as no retirement laws, agency workers, non gender insurance, 50% tax and an absurd tax system, inflation, non functioning banks, the EU & Euro fiasco ……….
1% of tax payers pay 28% of income tax and only about 5,400 non doms who pay the 30/50K who have not yet vanished like the 16,000 already.
Insane to push these people away 90% of tax payers are paying about 6K in income tax each or less the UK is hugely reliant on taxes from the wealthy. Why push them away with every daft LibDem Coalition decision that is made and the prospect of real Labour soon?
Reply: democratic politics is a continuous conversation. The job of an MP is to continuously engage Ministers on the topics that matter to constittuents and where the MP has an expertise.
September 14, 2011
Sadly John , your answer is as dry as hardened cement and is one of the reasons why the body politique is so out of step , nay cut off from those who have reasonable and responsible ( no blame to yourself of course) and who are just a finger width away from putting two fingers up to the political establishment who have in main abdicated responsibility on the grounds of short term political expediency! We are about to reap what has been sown!
September 14, 2011
Engagement which is continuous but seemingly unproductive on the economic scene. Mr Cameron does not appear to be listening, and Mr Osborne is doubtless tied up with other matters rather than attempting to stimulate the economy with tax cuts and other pro-business measures.
zorro
September 15, 2011
zorro: “Mr Osborne is doubtless tied up .. ”
Ha ha Mr Zorro, what a wag.
September 15, 2011
A question of judgement, old chap…..
zorro
September 15, 2011
1% of tax payers have 23% of the wealth, so they should pay at least 23% of the taxes. However given that we’re all in this together they should be prepared to pay extra as the price for paying themselves such huge salaries and bonuses in times of austerity.
September 14, 2011
Completely agree, Mr Redwood.
I only hope you can persuade the rest of your party to listen to your eminently sensible ideas.
September 14, 2011
He clearly cannot.
September 14, 2011
John, here’s a radical idea to help the rebalancing of public vs private sector: make income tax cuts apply only to private sector jobs.
I think this would help to move things in the right direction with regard to the bloated public sector.
(My wife is a nurse in the NHS).
September 14, 2011
cronshd: “make income tax cuts apply only to private sector jobs.”
I like it, but as no one in the public sector pays income tax it would make no difference anyway.
Reply everyone in the public sector does pay income tax
September 15, 2011
Technically that may be true but I’m sure the point being made is that the majority of public sector workers income tax / NI payments do not make any contribution to the size of the governments pot of money.
If anything asking them to pay decreases the money that is to be spent on services as the government could simply pay them less in the first place and do away with the bureaucratic arrangement of collecting their NI and income tax.
Do government departments pay employers NI to employees? I can understand making employees ‘pay’ tax as then they have an incentive for lower taxes too, as well as it helps hide the fact that they aren’t really generating wealth, but if employers NI were to be paid that really would be bureaucracy ran mad.
September 15, 2011
should read ‘Do government departments pay employers NI for employees?’
September 15, 2011
Why would anyone work in the public sector as a teacher, nurse, or doctor when they can work in the private sector and pay less tax? People won’t work in the public sector if you punish them for it.
September 15, 2011
JR: “Reply everyone in the public sector does pay income tax”
John, the government pays a person in the public sector, and from that sum, the government decducts a notional amount for tax.
The government isn’t better off because it made a book keeping entry, detailing a notional movement of money from one account to another.
The whole process is a charade and a fiction to make taxing the productive sector so heavily more palitable to the folk who actually produce the wealth rather than just spend it.
September 15, 2011
Only on paper, you can’t add to a pot by taking from it!
It’s mathematically impossible!
September 14, 2011
As long as the West continues to impose tighter regulation, higher taxes and more generous welfare and health benefits, that they cannot afford, than countries like China and India then the decline of the West and migration of wealth to the BRIC counties will continue.
September 15, 2011
What happens when the BRIC countries become like Japan? In the 1960’s Japan was economically similar to the China, a poor country that the Americans outsourced all their textile jobs to.
September 14, 2011
I agree that policymaking is stuck in a rut. Big problems need big ideas to solve them and apart from this site there is little evidence of this happening. Taxes are higher than they were under the Blair government, debt is higher, public spending is rising, the EU is more powerful and there is no sign that nanny state over-regulation is being repealed (and no, I never bought in to Blairism). I’m glad to hear that you get airtime in Parliament, but I’m sure most bloggers on this site can’t understand why you haven’t been given a front-bench role to inject some impetus. (Actually the fact that you haven’t makes it clear the Coalition has no time for radical free market ideas.)
Two immediate points. First, why should a target to reduce government spending be considered as “austerity”? Lower spending means lower taxes and less borrowing, meaning more money being available in the private sector for investment. What’s austere about that?
Second, tax rates. Take the case of a “high earner” – a solicitor, architect, doctor, accountant or senior salesperson, say – earning GBP 100,000 a year. At the current rate he or she takes home GBP 64,608. He works 55 hours a week, or 11 hours a day Monday to Friday. Let’s say he decides to increase his income by 20% this year so that he can install a new kitchen. To do that, he would need to work another 11-hour day. Let’s say every Saturday for a year. Having lost his tax free allowance he would end up with GBP 73,218, or just 43% of the extra money he earned. Well he won’t bother, will he? Which means the economic activity that would have resulted from his extra work won’t happen. The kitchen company won’t get an order that might have led it to take on extra staff or buy components. That has a knock on effect throughout the value chain. Multiply that across an entire economy and the deadening effect on wealth creation is clear.
What’s worse is that puts a lid on people’s aspirations. Why aspire to earning a high salary if you get tagged as a rich parasite whose only value is to be fleeced through the tax system? It is the antithesis of an enterprise economy.
And ironically, of course, the state loses out on the tax on the extra he would otherwise have earned under the Blair tax regime.
Nice one Vince.
September 15, 2011
Your argument is flawed in many ways.
1) Why is it necessary for the solicitor, architect, doctor, accountant or senior salesperson to earn 20% more to have a new kitchen? What’s wrong with them saving their money to buy something?
2) Given that minimum wage is £11,563.50 per year and the median salary is £26,000 why should anyone sympathise with someone who earns more than 98% of the population of the UK and more than twice as much as 90% of the UK.
3) I could make the argument that if I don’t throw a brick through the window of this person’s house the glazier the won’t get any business, so they won’t hire extra staff or buy components. However like your example it’s a fallacy. If the person earning £100,000 doesn’t want the extra £20,000 someone else will do the work to get it, and they will spend the money in the economy. Thus it won’t have any effect on wealth creation.
4) Why should enterprise only be about high salary? Most people don’t set up their own businesses to become rich, they set them up because they’re sick of parasites getting rich off their hard work. For example the record industry is dying because musicians are no longer willing to have a record company take a huge cut of their income for acting as a middle man.
September 14, 2011
Doesn’t matter. I’m moving my new company offshore. 50% of nothing is nothing.
Mind you, the Lib Dems will feel good about it.
Next it will be 50% at 40K
Then it will be 50% at 20K
…
September 14, 2011
So well said Nick. I don’t know why this government lets the Lib Dims run the show. A very obvious example is Hong Kong. An Englishman went out there and reduced tax to something like 7% !! What happened? The economy boooomed, money poured into the coffers and people created so much wealth and are still doing so. The Lib Dims are mean-minded, ignorant, envious twerps and should not be allowed anywhere near government ever again. They have been shown to be utterly out of touch with real people and the need to get this country out of an enormous hole of debt. Nobody in the tory party has the guts to tell them to take a running jump over a very high cliff. But then nobody in the tory government has any courage to say NO to anyone. They are all wimps.
September 14, 2011
Crawford Murray MacLehose was born in Glasgow. Not really an Englishman at all.
September 14, 2011
Indeed what people often do not realise is that businesses often must to more offshore as they cannot compete otherwise. It is not just greed or that the do not want to pay the high taxes, over regulation and overheads – if they want to survive against competition they need to stay competitive of liquidate.
September 15, 2011
Does this mean Tesco and McDonalds are going to close down all their branches and reopen them in Hong Kong; where taxes, regulations, and overheads are lower? If so good riddance.
September 14, 2011
I think your last 2 paras say it all and I was worried that you were going to go into a list of twisty-turny itsy-bitsy things that won’t make any real difference.
20% flat rate income tax combined with NI
20% Capital Gains
10% corporation tax
abolish business rates
Cut public sector/housing benefit/welfare by 50%
Job done. House prices will reduce. Real private sector employment will rise as productive enterprise returns to the UK (selling to real people not HMG). The system will correct.
September 14, 2011
It seems that the establishment doesn’t want house prices to reduce.
0.5% interest ?
September 14, 2011
Why renting from a bank should be so much cheaper than renting from a landlord is unjustifiable, and the subsidy to do this coming from savers, it is both distastful and disgraceful.
September 15, 2011
Reducing benefits by 50% will dramatically increase crime. Unless you also plan to make everything 50% cheaper for the unemployed.
September 14, 2011
“One of the stumbling blocks the Treasury will see is how to stop people transferring existing business into new companies to take advantage.”
And that is exactly why governments should not tinker around with headline grabbing initiatives that simply create more anomalies. Why should A get a tax break because he happened to start his business one month after B, or because he is 500 yards away in some kind of “enterprise zone”?
Governments should make it as easy as possible for everyone to run a business and then the startups will take care of themselves.
September 14, 2011
Precisely and get rid of the equally absurd energy market rigging too.
September 14, 2011
Cut the fuel tax by 50% – that will make a massive difference to individuals, including some of the poorest, businesses and to government costs.
And, by the way, before anyone says it, there is NO global warming, and the effect of your exhaust is minimal, and in any event, nobody is going to drive an extra 100 miles just because petrol and diesel is cheaper, so there will be no ‘green effect’ of this sensible tax cut.
September 14, 2011
I tend to agree people do not really drive further just for the sake of it. Many places have petrol at under 40p litre.
September 15, 2011
More to the point people won’t drive much less if petrol goes up to £2 litre.
We do not ‘love’ our cars as Radio 4 has it. Overcrowding has caused people to live far from where they work and for retirees to move hundreds of miles from their families.
Why the anti car policies of all parties and yet they fully support out of town supermarkets ?
This tax has nothing to do with the prevention of global warming and everything to do with the fact that the country has been messed up.
September 15, 2011
80p out of a 1.30 litre of petrol is tax.
Radio 4 would have it that we pay around 60% tax on our fuel. Bad enough but the calculation is wrong.
The basic cost of the product is 50p and the tax element is 80p.
We’re paying 160% tax on our fuel.
September 15, 2011
Yep ,
Radio 4 do rather give their perpective away .
Thanks for reminding us .
September 15, 2011
Kevin ,
A tax of 160% on the fuel might indeed be justifiable if the money collected was put into a sovereign wealth fund for then benefit of future generations of Britons .
Seems to have worked for Norway .
As we all know it’s already been wasted before it’s collected – and then some .
September 14, 2011
There is too much government, not only in the UK but elsewhere in this Keynesian mess, and that is what is stifling growth. What then is the answer? More government?
Our parliamentarians and our Civil Servants must cease the delusion that they are running the country and start thinking of themselves as Administrators.
Take a look out of the window at the lorrys that trundle by. These are the people running the country.
It will become very clear in time that the answer is not more government action but by that time it may be too late to save the world from chaos.
September 15, 2011
How are lorry drivers running the country?
September 14, 2011
It’s not rocket science is it?
Public squandering is far too high.
Cut the non-jobs, bureaucracy and waste, lower the tax burden then stand back and watch the economy take off!
Which part of the above statement is difficult to understand??
September 15, 2011
How to identify ‘non-jobs, bureaucracy and waste’ as you didn’t provide any criteria. Most likely because you don’t understand what the various Government departments do.
September 14, 2011
The welfare state, which is a Faustian pact between govt and taxpayer, has now got them both in a hammer lock. The govt cannot cut it without being voted out , and the taxpayer feels dependent on it .
Checkmate. Something has to give, and when it does, it may be somewhat disorderly.
September 15, 2011
If companies paid their employees more money and hired more people then there would be far fewer people on welfare.
September 14, 2011
Growth can’t happen while the public sector wage bill is sky high. Public sector wages are way higher than the private sector. (Pay, pensions, job security etc).
Once again I reckon you need to tackle public spending with a 20% cut in the salary bill. No redundancies just a cut in the overall salary bill.
This will finally stop the government borrowing and capital will then be available for the private sector to use.
Unfortunately this is such a big issue that the government is ducking it making a fuss instead about side issues like 50p tax rate and benefit cuts.
You hinted in your article about a “deregulatory programme”. The regulations I would dump are the over zealous conservation laws. These are stifling our towns and cities. Unwanted Victorian building can’t be demolished or altered and the physical framework of our economy is stuck in a 100 year old rut.
September 14, 2011
There needs to be far more control over the over-zealous ‘listing’ of old commercial and particularly industrial buildings. I’m all for preserving the history of this country as the creator of the modern world through invention, but that does not extend to gutting industrial eyesores like power stations and filling them with industrial scale ‘artworks’ at public expense. Locales which could be renewed by the replacement of obsolete structures are being converted into morbid museums of prior mediocrity.
I agree: the listing racket is damaging growth whilst preserving too much of little public value.
September 14, 2011
Meanwhile, of course, greenbelt is to concreted over in return for backhanders and to satisfy the insatiable need of new Britons for our land.
September 15, 2011
I doubt the Unions would approve of cutting public sector salaries by 20%. Nor would MPs and Councillors as it means they get less money.
September 14, 2011
Tinkering will achieve nothing. It has been tried before and has failed – as you imply. It justs adds to the complexity and inefficiency of the tax system. There is an absence of convincing ideas at the heart of this government government on how to promote growth and to reduce the deficit. The Coalition is failing in its primary duty and raison d`etre. The sooner it is put out of its misery the better.
September 14, 2011
This government has not reduced its spending but merely increased taxation. Is it any wonder that there is no growth? I keep repeating that Osborne promised 80% deficit reduction by reduced spending which he has no intention of doing. We are told that what he meant by reduction was in fact a lowering of the planned increase. Semantics may have enabled your party to take office but you will not be re-elected if you don’t sort out the economy and you are on course for failure because you are not dealing with the core of the problem which is that the government is spending too much.
September 14, 2011
“In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government; and certainly the harm is likely to be counteracted faster.”
This came from the mind of John Cowperthwaite, Financial Secretary to the Treasury in Hong Kong in the early sixties who was asked to propose ideas to develop the Hong Kong economy. This man, however, had other more practical ideas and refused to interfere in the affairs of business. He even advocated that the removal of statistics collection would be beneficial as it would avoid the temptation for administrators to meddle about in remedying perceived ills, to the detriment of all
Was he right? Look at Hong Kong
Perhaps it is time for our leaders to learn from the past. With the venerable Vincent in place, however, this seems an unlikely outcome
September 14, 2011
John Cowperthwaite was absolutely right about big government making big, and not easily remedied, mistakes. He also kept the income tax at as low a level as possible.
The paradox is that in the case of both Hong Kong and Singapore, there was centralised planning. The same is true of Victorian England, in the sense that Mr Gladstone, through his own personal authority, brought and kept the public sector down to exceptionally low levels over a very long lifetime.
September 14, 2011
PS Palmerston had been spending as if there were no tomorrow, so an axe had to be wielded to begin with. But after that, the economy grew every year, and all Gladstone needed to do was not allow the public sector to grow in tandem. This he assiduously did by introducing a culture of thrift and frugality with the public purse throughout the public service. How different from our own dear PM’s sometime dictum about “sharing the proceeds of growth.”
September 14, 2011
Edinburgh born. Still no Englishmen Vanessa…
September 15, 2011
Gladstone was a Scot too.
September 14, 2011
“I fear UK policy making is stuck in a mode which does not come up with ideas large enough to shift the big economic problems the government has inherited.”
I share that concern but am inspired by the way in which we are becoming able to widen and deepen our insights and the quality of proposals made when we effectively harness mass online discussion – which is still such an pre-embryonic form of consultation.
September 14, 2011
“I fear UK policy making is stuck in a mode which does not come up with ideas large enough to shift the big economic problems the government has inherited.”
Too right!
And UK policy making will stay stuck in this mode because the advice given to Ministers by their Whitehall Mandarins is geared to be over-cautious, and towards keeping any change from happening. Unless, that is, they are nice, incremental little changes which add to the bureaucratic work – and to what we have to pay.
As long as politicians, or Ministers, rather, keep cowering and agree with their Mandarins that radical change is too expensive, not helping, rocking the boat, giving a dangerous precedent, there will be no chance.
We’re governed by a bureaucracy, not by Parliament.
September 14, 2011
The media and blog narrative takes it for granted that it was no accident that the coalition inherited an enormous deficit and various political time bombs over taxation and expenditure.
What is too shocking for words is the undenied assumption that Brown’s policy was determined first and foremost by a desire to make life as difficult as possible for a new administration.
A political party which openly sacrifices the economic well being of the entire country in order to make life impossible for its political opposition is one which has no right to exist.
Devolution settlements openly intended to gain political advantage which are destroying the union fall into the same category.
Am I alone in expecting a political party to govern for the good of the country. Am I alone in the fury and disgust I feel for a Labour Party which did the opposite and even boasted about it?
September 15, 2011
How exactly did Labour create the Global Financial crisis, which started in the US? Given that this crisis cause Labour to lose the 2010 election if this was their plan it exploded in their face.
Anyway the Conservatives are already setting up a disaster for the Government that will take office in 30 years time by loaning large amounts of money for tuition fees to people who will never pay it back. Loaning £40,000 to 200,000 students, which will become £80,000 per student after 30 years of no repayments, will create £16 billion of debt per year.
September 14, 2011
put more work into intellectual property protection internationally, and work at a government level to get the UK the licence and royalty fees it is due from those countries which often dont pay up. this is a source of lots of money which could be coming into the uk. this would help growth in lots of ways.
put in place proper immigration controls which stop the many and various ict visa abuses, this would stimulate growth in lots of ways
radically cut back on emissions regulation on british industry, keep it in the top 5 % of the world but dont make it the most expensive in the world, this would stimulate growth
its the non fiscal things that need sorting, any idiot can flood an economy with money (and often end up giving the money to foreign producers), and any idiot can devalue
September 14, 2011
“Tax cuts across the board on income and enterprise would make more of a difference. A larger deregulatory programme would help. Giving to the whole country some of the advantages that Enterprise Zones enjoy would speed it up a bit.”
Has anyone made serious objections to these localised priveleges? If not, why can the country’s entire brown field content not be declared an enterprise zone?
September 14, 2011
By the way, if all of the brown field sites in the country were designated as enterprise zones, that would naturally distract developers from wrecking the countryside, and at the same time turn the attention of entrepreneurs to the areas which most need attention, and which at present it is not economic for them to bother about. This would avoid an embarrassing u turn on the proposed planning policy.
September 14, 2011
Enterprise Zones were an innovative idea when Thatcher introduced them. Because those in power were not absolutely certain such deregulation would work trying it out in small areas was a good experiment. Now we are sure. If deregulating in limited geographical areas works then the obvious conclusion is that we should turn the entire country into an Enterprize Zone.
Regarding housing – 75% of the cost of housebuilding is government regulation. If we want to get that significant part of the economy moving all we have to do is get government out of the way.
I am impressed with Sarah Palin’s programme for getting the economy moving. Treating her call for enforcing the Xth amendment as equivalent to us getting out from under EU regulation and her call for energy independence as including a higher proportion of nuclear here it would work:
First “let’s enforce the 10th Amendment and devolve powers back locally where the Founders intended them to be.
Second, … rein in burdensome regulations that are a boot on our neck. Get government out of the way. …
Third, no more run away debt.. … We either do it ourselves or the world’s capital markets are going to shove it down our throats, and we’ll have no choice but to reform our entitlement programs. The status quo is no longer an option. Entitlement reform is our duty now, and it must be done in a way that honors our commitment….It’s their money! They have paid into Social Security all of their working lives; and for the President to say, “ah, we may not be able to cut their checks,” ah, well, where did all their money go, politicians?Fourth, it is time for America to become the energy superpower. …. Affordable and secure energy is the key to any thriving economy, and it must be our foundation. …, a hardcore all-of-the-above energy policy ….It wouldn’t cost government a dime to allow the private sector to do these. In fact, these projects will generate billions of dollars in revenue. Can you imagine that: a stimulus project that actually helps dig us out of debt
Fifth, we can and we will make America the most attractive country on earth to do business in. Here’s how we’re going to do this. Right now, we have the highest federal corporate income tax rate in the industrialized world. Did you know our rates are higher than China and communist Cuba? This doesn’t generate as much revenue as you would think, …So, to make America the most attractive and competitive place to do business, to set up shop here and hire people here, to attract capital from all over the globe that will lead to an explosion of growth, instead of chasing industry offshore, I propose to eliminate all federal corporate income tax.
September 14, 2011
Neil Craig .
We need to find a long-term sustainable answer for our economy .
It is essential for everyone to realise that house building provides only a temporary stimulus to the economy .
The building industry must eventually find something else to do , somewhere else to do it or shrink in size .
I do business in a country with even greater immigration than the UK ; Israel . Immigration provides a massive stimulus to their country but again ; it’s unsustainable (especially with their shortage of water) .
For the record I would like to see a house building program , particularly of social housing . I want house prices to halve and accomodation costs to halve so our young can afford houses and afford to save the money they need for old age .
At the same time perhaps we could introduce rules whereby landlords would forfeit their property if they let it to illegal immigrants .
September 14, 2011
Will you provide a reference for the 75% claim, Neil?
RIBA appear to want more regulation.
“Consumers buying or renting newly built homes in the UK are likely to get less space than their European neighbours. In the rest of Western Europe new homes being built are bigger, even in countries with similar population densities to our own.”
http://www.architecture.com/Files/RIBAHoldings/PolicyAndInternationalRelations/HomeWise/CaseforSpace.pdf
(p6 of the pdf)
September 15, 2011
I suspect that builders would argue that Section 106 subsidised social (slum) building, smaller windows etc. cost more. The fact they bid up land prices and hoard land they prefer to ignore.
September 15, 2011
House prices, over the last century have gone upm 4 times compared to the RPI.
There is no technological reason for this (if anything house prices like most technological manufacturing should have dropped compared to the RPI) so it can only be government regulation – both by the gross disparity between cost of land with and without planning permission and the way “planning” prevents us getting the advantages of mass production – imagine having to get a mechanic in to build every car in a backyard after getting permission of a government inspector.
Simon I do not agree that government doing the housebuilding is likely to reduce the parasitic costs created by government doing the regulating. We can have inexpensive housing, far more robust than modern traditional housing any time the government is willing to get out of the way.
Of course donations from party supporters who also happen to be developers might reduce. There are downsides, for those in government, to a successful economy with less parasitism by those in government.
September 14, 2011
It’s not that people can’t borrow money to buy homes – it’s that they can’t borrow enough.
Houses are inflated way above their true value and being kept there so that owners can enjoy credit and spend money that doesn’t really exist.
If I were young, talented and well qualified with skills in global demand would I stick around here to be a renter serf and tax slave to the baby boomer generation ? Put up with gloomy weather, high crime and litter ?
Not on your nelly.
September 14, 2011
On the contrary, the problem is that those few who can borrow to buy a house can borrow too much. The average new mortgage is nearly 90% of the average house price: in July some £7,915m was approved for 55,365 customers (fewer than half the boom volume) or £142,960 each. The Land Registry, Halifax and Nationwide indices all indicate an average house price of a little over £160,000.
The size of the average mortgage should be reduced so that buyers would be limited in what they could pay. Then prices would necessarily fall.
September 15, 2011
True.
I didn’t make myself clear enough.
The group I am talking about are the many, not the few. The young skilled/professionals who cannot afford to start families as the choice is a stark one between either kids or roof ?
Having kids dips out. And so Britain encourages all the wrong people to become parents.
The only secure way to have it all is to become an unmarried teenage mum.
I’m a home owner myself but can see the folly of keeping my house’s price inflated whilst driving away the best of the younger generation.
September 15, 2011
I agree: but we need affordable homes through lower prices.
I noticed Barratt reported yesterday, lamenting that they found mosts lenders unwilling to offer more than 80% mortgages on their new builds while second hand houses could get 90%. They revealed that 22% of their sales relied on shared equity devices. The implication that their tat is overpriced is evidently lost on them. Meantime they claim to have net assets per share worth £2.11 – the market disagrees, valuing them at around 80p, including its assessment of the value of future dividends discounted to the present.
I suspect that you would have similar findings looking at any of the major house builders accounts.
September 14, 2011
The absurd green policies being pursued should be the first to be scrapped, now! It is hiking prices of everything and with the forthcoming energy shortages it is a block on growth of any kind. Regulation is also a major problem, but that is down to the sheer stupidity of our own politicians and civil servants, other EU countries do not deliberately strangle their business sector. Mind you there is always the exception Germany seems to be going down the same road as the Huhne, shutting down their nuclear power, stupid.
September 14, 2011
(o) Recognise and publicise that inflation kills growth. (Admit that MPC has selected the inflation to stagflation to stagnation route.)
(1) Dump stamp duty and put CGT on private residences.
(2) Merge income tax and NI
(3) Honour all existing public sector pension contributions, and those for the next year. Return these to at least RPI indexing, BUT scrap public sector pensions entirely from one year hence. There would be no retrospective changes so more legitimate, and a year will give people chance to leave public sector to private sector if they wish.
(4) Ensure all Conservative (or wider) MPs who have misgivings about further QE write and sign an open letter to the Chancellor.
(5) Unwind QE and increase interest rates. Stop the flattening of the yield curve, get the house price adjustment done and stop supporting boom marginal businesses.
(6) Remove Adam Posen from MPC
(7) Dump the greenbelt entirely … rather than some – presumption in favour of sustainable development criterion.
(8) Tax mortgagees more (negative tax relief) and redistribute to savers to make reparations for damage already done.
(9) Cut the NHS and invest in transport to break city monopolies, and do this quickly.
(10) Relocate the tax-supported museums and art galleries from London to Birmingham, so freeing up space in London and moving the tourist attractions to a more central location.
(11) Introduce multiplier into public sector income tax rates. If in previous year Government ran a deficit greater than 3% then multiplier is greater than 1. If in previous year Government ran a surplus than multiplier is less than 1.
September 14, 2011
Instead of your (7) I think it sufficient to ensure that builders’ land banks are heavily taxed where they exceed say 4 years supply: the tax could be avoided by putting the land up for public auction.
(8) is unnecessary if interest rates are allowed to rise and banks are told that undue forbearance will be considered poor banking practice that will increase the cost of discount window lending and other BoE bailout mechanisms.
(10) better wait until HS2 is built! (a hint of sarcasm here…)
September 14, 2011
A manifesto guaranteed to ensure a landslide victory … for the Labour Party!
September 15, 2011
3) What do you plan to do when teacher, nurses, doctors, police, and fire fighters desert the private sector?
9) So you want people to have less access to healthcare? Also what’s the ‘city monopolies?
September 14, 2011
While I wholeheartedly support John Redwood’s ideas for economic growth, we are still obliged to carry on reducing the deficit even if increased growth does not materialise. Plan B is tougher than plan A, nor easier. So let us have a few ‘big ideas’ to contain public expenditure.
Tell the public sector workers that if they want to keep their pension benefits, their numbers will be allowed to dwindle through natural wastage and their salaries will not be increased at all until public sector labour costs are under control.
Bear down on the total amount spent on the retired elderly. Raise the retirement age for men by one year in each parliament until it reaches 70. Make sure that concessionary fare entitlement keeps in step with retirement age.
Re-assert the right of budgetary control to the NHS with regard to the provision of drugs. You are not entitled to very expensive drugs just because some judge has said so. If the law needs to be amended, amend it. Recognise that medical expenditure on the retired elderly is investing in yesterday and needs to be capped.
Let America fight America’s wars.
Withdraw our contribution to the offices of Herman von Rumpey Pumpey and Baroness whats-her-name. We don’t want an EU foreign policy.
And if you want a big idea to control monetary policy, just tell the Governor of the Bank of England that he is getting no more salary increases.
September 14, 2011
Lindsay McDougall wrote: “You are not entitled to very expensive drugs just because some judge has said so. ”
Yes, you are – it is called the rule of law. The old Tory party used to be quite attached to the concept.
September 15, 2011
That is why I followed up with: ‘If the law needs to be amended, amend it.’
September 14, 2011
re “the NHS with regard to the provision of drugs.” politicians should not be deciding which drugs are bought in the health sector. talk about mao style regime! how do we even allow ourseleves to talk like this?
turn the nhs into a state backed health insurance scheme, not the owner and operator of hospitals
however i dont see why we should be paying more than india for drugs
September 15, 2011
The Government is trying to abolished the retirement age, so changing it to 70 would be contrary to their current plans.
September 14, 2011
Growth- I agree with all your ideas.
I would like to see increases of the point at which you start to pay income tax, good for the lower paid and good for taking families out of the benefits trap, as well as the removal of the 50% rate.
If both were done at the same time this would make it much more difficult for the opposition to criticise and would promote growth.
There is no point having tax rates beyond the top of the curve which give diminuishing levels of revenue when lower rates can be proven to increase revenues.
Two other off the point comments:-
Pleased to see trouble brewing on the EU/Greek bail out crisis as either way it is going to benefit the UK.
If Greece leaves the Euro then it will be a start towards the eventual end of the United States of Europe project but even if Germany and France keep bailing out Greece then they will continue to burden themselves with debt, weaken their economies and give the UK a relative advantage.
BBC quoting average pension in public sector as being £4000 per year “hardly a kings ransom” as one BBC news journalist just said.
This statistic is misleading and should not be used without qualification as it includes staff who have worked for just a year or two and part timers who have just a few years service.
September 15, 2011
Even the £4,000 figure corresponds to a pension pot of over £100,000 plus the lump sum .
Compares favourable with the £30,000 of savings which it has taken the average private sector worker an entire lifetime to build up by the time their state pension kicks in .
September 15, 2011
Edit : after working 8 years longer
September 15, 2011
According to the treasury reducing the 50p tax rate to 45p would cost the Government £2.4 billion in lost tax revenues. Thus a lower tax rate would reduce revenue, not increase it.
September 14, 2011
As we’re looking into the future I think this needs to be seen post-EU-meltdown and a true bursting of the debt bubble.
People on this forum may not be aware that there has been a huge withdrawal of US cash from Europe and a huge withdrawl out of the equity markets by institutions. Banks and financials are all going into defensive mode as they await the Greek default.
A future is nearly upon us where the debt bubble will burst and the Greeks will default, then the various Government bond bubbles will burst. If Italy follows Greece it truely will become “Eurogeddon”.
When the bubble bursts getting your hands on credit will be the most difficult thing post. Liquidity and cashflows will be the initial problem, destroying healthy businesses. That will be the job of banks to manage – the Government needs to allocate “printed money” to banks specifically for this purpose.
Cutting red tape and distancing yourself from the luxurious red-tape dream up by the Eu, health and saftey and the tax man will be the next priority.
Finally cash for investment and renewall will be needed.
September 15, 2011
Javelin: “People on this forum may not be aware .. ”
They bloomin’ well should be, casandra and I have been posting enough!
September 14, 2011
The only strategy the Coalition appear to have for dealing with the problems of the UK economy, is cross your fingers and hope it all comes right in time for the next Election. Luck is on their side, as long as Ed Miliband remains as opposition leader, as the public still do not see him as a potential Prime Minister.
Stimulus packages are more effective in economies that are in near balance or surplus when recession occurs, they are of little use to the debt ridden UK economy, especially on such a small scale. Government meddling to try to prop up the UK economy has actually made things far worse, in my opinion.
The public is expecting more inflation and higher energy bills. As their incomes become more squeezed through this and higher taxation, they will pay down debt and hold onto their money instead of spending. Savers who rely on a decent rate of return are unable to spend as their income has been restricted by low interest rates. Confidence in the UK economy is low because businesses see little settled policy by Government on tax rates, regulation, lending, proper growth policies and substantial cuts to the bloated public sector. More QE will further lower belief in the economy and fuel more inflation. Under these circumstance no company will expand and none will move their business to Britain, no matter how many enterprise zones there are, growth will remain stagnant.
The only possible solutions are to make deep cuts in Government spending, interest rates must start to go up to cure inflation and give savers a reasonable rate of return, cut red tape and tax rates. This is the only way forward for a Country in debt that needs growth in its economy. As the Government seems so afraid of taking these steps the economy is unlikely to recover.
Strikes will be the next stage as the Unions sense that they are dealing with a Government that will cave in everytime there are any difficulties. Indeed they would be wise to believe this, as proposed reforms are continually being watered down whenever opposition to them occurs. What could have been a radical Government that moved the culture of the UK from high debt and low savings ratios to one fit for the new competitive Global outlook is failing badly.
September 15, 2011
Have you worked out where these deep cuts in governments spending and reforms will be made. The NHS and benefits by any chance? Crawl out from under your stone or stop fantasising Susan.
September 14, 2011
John,
On a recent subject re Mr Eustice’ s (Mr C’s former press secretary) new Eurosceptic group, have you seen the Guido Fawkes story…http://order-order.com/2011/09/14/cam-euro-sham-fears/…. on it being a tactic to control and manage the parliamentary party.
Apparently, there is some suspicion over how serious an attempt it is to express Eurosceptic opinion rather than containing/managing it.
So much so that ….’a fair few of the more senior sceptics are highly suspicious that this group has been put together to stop other more aggressive and louder blocs being formed.’
I can’t think who that might be referring to….
zorro
September 14, 2011
Me and my builder just did a deal. Cash payment, no VAT no TAX. Everyone a winner.
September 15, 2011
Not if the work is substandard. The real winner will be the builder. Eastern European by any chance? Most reputable tradesman are mainly just concerned about being paid no matter how. Good luck.
September 14, 2011
Switch back to cash, no banks, no tax, money is in your control.
September 15, 2011
Redwood: ” Growth ideas .. ”
Too late!
From the Wall St. Journal
“BNP, Société Générale and Crédit Agricole together hold nearly $57 billion in Greek sovereign and private debt, versus $34 billion held by the largest German banks and $14 billion at British banks.
French banks also held more than €140 billion in total Spanish debt and almost €400 billion in Italian debt as of December, according to the latest figures from the Bank for International Settlements. If either of these latter two governments were to default, their banking systems could collapse and take the French system with them.
BNP, Société Générale and Credit Agricole all say that their finances are in order and the market worries are unfounded. But it’s difficult for the BNP executive to hide his concern. “Look at the French banks’ debt holdings versus those of U.S. banks,” he continues. “The total debt of the three big U.S. banks (Bank of America, JP Morgan and Citigroup) is $5.86 trillion, or 39% of GDP, while the debts of BNP, Crédit Agricole and Société Générale come to €4.7 trillion, or 250% of French GDP.”
September 15, 2011
Come to think of it another friend used to be a fireman until retirement,he is still in the association,he told me of current serving firemen who legitimately moonlight in out of shift hours,NONE he knows declares ANY income, some earn over £20000 per annum extra
Holidays/wine/Krugerrands etc etc hidden,one I know bought a parcel of Nederberg auction wines 5 years ago that recently sold for a profit of 150% totally hidden,again I say WHAT DO YOU EXPECT?.
Reply: failing to declare taxable income or gains is an offence and should not be undertaken. I do n ot believe that most firemen are tax cheats as you suggest.
September 15, 2011
John did you completely CENSOR my comment before the one above ALLOWED and
without even the usual ED. written,have I become a NON PERSON “AGAIN” and then with the ALLOWED piece somehow rehabilitated,in the totally OBLITERATED piece all I did was reiterate what I hear in HUNDREDS of conversations every month. WHAT ARE YOU SCARED OF???????????
Reply: I have no wish to get into legal rows about allegations, nor does this site exist to promote law breaking.
September 16, 2011
Lower government spending in favour of lower Taxes, less regulation, less spending/taxes on green policies. Sure all good ideas, but does not strike me as sufficient, so what new ideas are there? I thought you were asking for additional suggestions so here goes:
I would further suggest that the government looks at the economic impact of its spending and rebalances it in favour of investment which will bring an economic return (i.e. as distinct from Gordon Brown’s misuse of the word ‘investment’). Improving the nation’s infrastructure such as road building/improvement/ repair or improving internet speeds. Aim to shorten journey times, not lengthen them in the farcical belief this will discourage people from making them and so help the environment. Few car journeys, especially in rush hours, are made for fun.
Higher education should be a priority. This country’s universities are high in the world rankings, only the US with 5 times the population and GDP does better. This is a success which should be built on and government policy should have maintaining or improving UK universities as a priority, especially in science and technology.
Enterprise zones should not be just for blighted areas, but also near top universities where they are near a source of new ideas and where they might generate the most economic growth. University enterprise zones could be partnered with another enterprise zone in a blighted area, so businesses could expand into the blighted area enterprise zone as they grow.
Growth should take priority over social engineering as an objective of government policy, for the long term good of all.
The government should also look at how it can aid small and medium sized companies to export. It could establish an internet based system along the lines of Amazon, partner with banks to ensure payment on delivery is guaranteed and further work with logistics companies on delivery methods. It could be called UK online. Customers could view a wide selection of British goods, with simple payment and delivery arrangements and the suppliers could reach a much wider range of customers, with issues around delivery, local laws and payment already dealt with. Large companies might also use it for markets they do not currently serve or products they are not well known for.
As a more long term idea schools could teach being an entrepreneur as a career option, which might help sow the seeds for future small businesses.