Options for speeding up growth


  As this subject seems to have broken out amongst spin doctors and media commentators, fuelled in part by Mr Tyrie’s comments,  it is time to dust it down again.

There are five main runners:

1. Spend and borrow more in the public sector – the even larger fiscal stimulus. I dismissed this idea in previous posts. It is dangerous and unlikely to work. It is usually urged by people who do not understand that the Coalition government is spending more and borrowing huge sums. The last budget increased forecast borrowing by £34 billion up to 2014-15 compared to the July 2010 budget, but this big “boost”  has led to a downward revision of growth forecasts.

2. Another bout of traditional quantitative easing. This would depress the pound more, fuelling yet more inflation. This in turn would cut consumers’ spending power further, depressing demand. Government debt would stay at high prices for a bit longer, creating and prolonging a bubble which one day has to be deflated. It is unlikely to make the favourable impact on living standards and growth its advocates hope.

3. A supply side revolution. The government could cut tax rates on success and enterprise, and reduce the costs of regulation, offering a timely stimulus to business. This would help, but seems unlikely to come from the current government, given the Lib Dem influences. Mr Osborne has expressly ruled out tax cuts for three years, whilst ruling in cash spending increases throughout the plan period.

4. A state bank for small and medium sized enterprise. Some seem to be flirting with QE in a new style. The idea would be to print money and push it out to the private sector in the form of loans from a development bank or the like which the state owned. I dislike this idea, as I fear the state would be a poor judge of good ideas and prospects, and land us with yet more bad debts.

5. Capitalise new banks created from within the state banking sector with private sector money. If three banks, say, were set up, and each had £5 billion of new private capital raised from the markets, these banks could lend multiples of the £15 billion to worthwhile prospects. This could provide a welcome and private sector funded stimulus. This is the best idea.

            Recent figures from the government showed that total spending keeps rising, and revenues are  below estimate. The UK borrowed another  £15.9 billion in August this year, up from £14 billion in August 2010. April to August saw total additional  borrowing of  £51.5 billion compared to £55.3 billion the previous year for the same period.  This leaves the deficit reduction programme a little behind where it was planned to be on OBR figures.  It is difficult to grasp how people can  present this as overall cuts, or cutting too much too quickly.  The increases in total spending do of course conceal some individual programme cuts as well as many increases.

           Just for the record, total current public spending rose by £31.9 bn or 5.3% in the first year of this government, and is planned to rise by a further £23.9 bn or 3.8% this  year. The last budget increased planned spending for the  following year by  £5.1 billion compared to the July 2010 Coalition budget. This increase and the accompanying large increases in borrowing over the four year period was presented as a “neutral” budget. The government plans to borrow an additional £485 billion over the planned  five years of this Parliament. This is called a tight fiscal policy.


  1. Vigilante teen
    October 2, 2011

    You do realise that you said the beat idea would be to give more money to banks, is £1.4 trillion not enough? How about you regulate the banks, and introduce the Robin hood tax, that would raise billions and make those who caused the crises pay a small amount towards helping soften the blow. Again though your talking about how to cut the deficit, which looks like it will take years, if not decades. Then you have to start worrying about actually paying off the debt. I really wish you would just give us the truth we need and deserve, that we will never pay back these debts. The fact is were still essentially in recession, and looking like were about to head into a depression that will last for at least a decade. When will you accept the fact that we the people will not pay for a crises we did not create, and that the entire system and structure is inherently flawed. Focus on growth is not what this country, and the world should be looking for, it should be after a system that encourages sustainability. Sustainable energy, sustainable use of resources, sustainable food and water supply, sustainable population growth. The other point you consider is cuts in business tax, and you blame the limp dems for not allowing this to happen. I have never been so happy to have them in government. Seriously. Look at what you have said. Your two possibilities are “give banks more money, make business pay less tax”. This is almost incomprehensible to me, how can you justify this? Just which special interests are you serving here? I don’t like labours sound bytes about too far too fast either, but the message you have put across in this blog makes me want to scream! As I commented above, sustainability not growth is what we, and by that I mean the enitire world, needs. Having said that, if you want to talk about growth and investing in business, why don’t you follow the simple but effective ideas I have mentioned in other comments on other posts. For example switching hospital, prison and school food to local suppliers, that are carbon neutral would help climate change, give the service users better healthier meals, and give a great boost to small and medium sized BRITISH suppliers. This will create jobs, raise tax revenue and would be very popular with us citizens, you know, those 60 million people your supposed to represent. It means we don’t have food that’s flown all over the world, further helping climate change, and it means you recoup the little extra tax money you may have to spend on it, and probably some extra besides. Looking at the big picture, I’m going to say this until I’m blue in the face, there is one option, the only viable way out of this mess, that once again you refuse to even consider. Yeah, it’s debt forgiveness of course. I commented on this on your post “a Greek default would show the weakness of the west” but i didn’t feel you gave an adequate response, in fact I couldn’t see your response at all. Please reply to this comment, giving your view on debt forgiveness, sustainability over growth, why you think giving more to business and banks is justified, in detail, not a one line, “tough times, I’ve commented eslsewhere” etc. And my idea for local produce in public organisations. So that’s a response where your say “on debt forgiveness I think ….” then you say “on sustainability over growth I think …” then you say “on why giving more of YOUR money to banks and business I think …” and “on your suggestion about local food sourcing I think….”. Think you can handle that? Thank you

    Reply: You seem to forget I opposed taxpayer bail out of banks, and am here proposing a private sector bank solution where the shareholders and bondholders pay the losses if more mistakes are made. I do not favour subsidy or special deals for business, but do favour a competitive tax regime for the Uk so more jobs and investments happen here. Taxing state owned banks more is taxing yourself.

    1. lifelogic
      October 2, 2011

      Who on earth is paying for this huge push on the absurd “Robin Hood” “tobin tax” and all the high profile expensive adverts?

    2. Vigilante teen
      October 2, 2011

      Well thank you very much for replying, but I did make it REALLY clear that I had 4 points I wanted you to reply on and you have not done so, is it because you don’t want to get into a REAL debate? A “competitive tax regime”, with all due respect mr redwood, sounds to me like rhetoric not realism. You surely mean tax cuts for business, which I and most of the public would consider subsidys and special deals. The public will be asking, ‘where’s our tax cuts?’ so I’d appreciate more detail there, give me some numbers, what tax would you cut, for whom and by how much? On the bank proposal you advocate, how would you ensure standards? You talk about “private sector money raised from the markets” but that’s risky, because presumably that includes money from financial packages like derivatives, credit default swaps and other financial instruments in market which is currently extremely volatile. So would you enforce rules on exactly where in the private sector the capitol comes from, or how it’s raised? you yourself said “the banks can lend multiples of the £15billion” but again that’s vague. What would you set the maximum leverage ratio at? Just how much could they lend with that £15billion that has suddenly appeared from the markets? Moreover who would be liable if it all went wrong? You say the shareholders and bondholders would pay if more mistakes are made, but does that mean you will state, clearly and unedited the following phrase ” NO TAXPAYER MONEY WOULD BE IN ANY WAY LIABLE OR AT RISK IF THESE BANKS RAN INTO TROUBLE, NOT A PENNY OF TAX PAYERS MONEY WILL GO TO THESE INSTITUTIONS.” if you don’t reply with that phrase clearly stated, why not? How much could potentially be at risk? Another prominent question to be asked is what exactly do you consider “worthwhile prospects”? Who would set the rules on who these banks could lend to, and what would those rules be? How will they be enforced? On the Robin hood transaction tax you make a valid point about taxing state owned banks, but you can transfer it back in or not apply it to those banks, the banks that are not state owned but are still way over leveraged and catalysts to the economic woes we face ought to be paying their bit hadn’t they? After all the Robin hood tax is just 0.05% on exactly the sort of risky deals that got us into is economic meltdown. Please respond with more detail, because you yourself have concerns over how less people are getting into politics, here I am trying, but feeling like you can’t be bothered with me. Further more, and again with all due respect, your governing in a democracy, you answer to me, so do your job. From your point of view, if you can get mire detailed and win these arguments with me it will give others who view this mire confidence in you, and leave you well prepared for anything the media or your fellow politicians might throw at you. Perhaps more to the point, if you can’t go into these issues, as chair of economic policy for the main party in governance, than my confidence in our chances of solving our economic problems will be shattered, let alone everyone else’s. So I hope you see why it would be productive and proper for you to open into a real debate with me on the issues, answering the questions from this comment, and all the questions you left unanswered from my comment above. You are, mr conservative economic maestro, able to answer an 18 year olds basic questions aren’t you?
      Reply: My plan is for the new banks to raise risk or equity capital. They would have to stay beneath the approved gearing ratios of Basel III. I am suggesting low gearing of say 5:1 ASSETS TO SHARE CAPITAL for starter, but as private sector banks they would be free to lend up to international regulatory limits.
      I did not have in mind big portoflios of derivatives etc – there is enough of that in other banks around the world.
      The banks would decide on prospects for loans.
      I would of course refuse all state bail outs. The banks would know from Day One any losses were down to shareholders, and if larger than share capital to bondholders.

      1. norman
        October 2, 2011

        While I agree with a lot of what you say (but would differ on the solution) you can’t really criticise John Redwood for not answering every point raised by every poster here, not only would it be a full time job it would be a full time job for three people. Read his postings every day, or even occasionally, and you’ll get a flavour for what he would or wouldn’t do.

        How many MPs even engage with the public? My MP is a complete non-entity as far as I can see (parachuted into a safe seat from being various SNP MP/MEPs bag carrier) and has zero interaction with us. I did write to her about a matter once and never even got a reply, not even a standard fill in the blanks letter.

        Although MPs will say they’re here to serve the public, they work for us, etc. I wouldn’t read too much into that. We’re just worker bees scurrying about our business and paying for the leviathan with our labour.

        How could it be any different? There are 65 million of us and 650 of them. With the best will in the world you can’t serve 100,000 masters.

        And if the so-called Robin Hood tax was introduced, and banks kept the divisions that make these transactions here, make no mistake we’d all pay for it, do you really think investment bankers would be any worse off? No, muggins here would be.

        1. Vigilante teen
          October 2, 2011

          I was being such a pain precisely because I know mr redwood does respond to comments, and just thought I’d see if I could get him to flesh out his response with more then generic one line replies that a computer could produce. Yeah I’m well aware most MPs don’t bother with the public, but that’s not the way it should be, so im not going to go easy just because others are even more unwilling to engage me, I’d just be tougher with those that arn’t. Also when you post at 7am and every other comment is moderated that was posted hours after that, but not yours until you hastle some more, you get the feeling, rightly or wrongly, that mr redwood doesn’t want to answer your question, which is worrying, Bring in the Robin hood tax, but not alone, make it global. It would bring in an estimated £250billin a year globally, and if you set some rules that the institutions and traders affected are not allowed to pass on the cost to their customers, then it would be a tiny tax which makes a big difference. We have to do something to reign in the recklessness of the banks and speculators, and a tiny global tax on their risky transactions seems like a reasonable way to go about it. We also need to regulate the banks a lot more heavily, look at the fact that the splittng up of the retail and risk, or piggy bank and casino bank halves of these financial terrorist institutions (don’t moderate that phrase out 😉 ) has been delayed until 2019, this means we are on the hook for another 8 years. If these banks encounter troubles, which is almost certainly going to happen over the next few years, are we going to be paying some more? With lagarde as head of IMF and her “no bank must be allowed to fail” rhetoric just how much more will we give these criminals? Will the too big to fail crises become the too big to bail crises, and what happens if/ when it does? Will we see a domino effect taking them all down? These are the sort of big picture questions that no one seems to want to answer. As a desperately unemployed 18 year old I’d really like t hear response to them, and had hoped mr redwood might be able to oblige, but alas he’s too busy or unable to deal with most of it, and so he gives simple quick responses that miss most of the points of my comments. Understandable, as that is for the reasons you layed out above, there’s no harm in my trying to squeeze a more thorough response, I’m sure mr redwood understands and doesn’t mind too much.

          1. A different Simon
            October 3, 2011

            Vigilante Teen ,

            As you know the perception of a lot of policies can be down to how they are presented :-
            – “Osborne freezes council tax” = good
            – “Osborne cuts local spending” = bad
            – ‘Osborne increases central Govt grant to local authorities’ = bafflement from a majority who are under the impression that council tax covers the entire cost of services provided by local authorities .

            Regarding “make businesses pay less tax”

            Suppose a Govt was brave and decided to scrap employers N.I. ; a tax which has to be paid whether a profit is made or not . Would you see that as
            – a favour to business ?
            – a way of encouraging employers to take people on ?

            My guess is that you would see it as the second one .

            I agree with you about the confidence trick which is “perpetual growth” . You are absolutely right that we need a sustainable system , not one which requires us to run ever faster trying to climb an escalator which is on the way down .

            I’ve got a feeling politicians are going to debase the word “growth” in the same way as they recently debased “progressive” .

            Good luck with your job search / further education .

            How about telling the board a bit about what you’ve studied and what sort of area you are looking to go into ? You never know , someone may have heard of an opening .

      2. Electro-Kevin
        October 2, 2011

        I do believe that Vigilante Teen is a vigilante teen.

        It’s heartening to read such passion even if some of it is a bit naive.

        VT – I’m surprised you didn’t mention the pointlessness of ironing clothes or transporting mineral water. I’m serious and don’t mean to be condescending by the way.

        I hope you’re enjoying the good weather.

        1. Electro-Kevin
          October 2, 2011

          PS, Yes. We’re hooked on ‘growth’. Where does it stop ???

        2. lifelogic
          October 3, 2011

          I certainly agree on the clothes and mineral water. Water is far better without the plastic taste anyway.

      3. British National
        October 2, 2011

        Well Done Jon! This MP always steps up to the plate and again has won this debate with common sence, not emotion or subjectivity. Keep knocking them back!

    3. Mark
      October 2, 2011

      Tobin taxes don’t work: Sweden tried one just to prove that. All that happened was that most of its banking industry moved elsewhere, impoverishing their own economy.

      1. Mark
        October 2, 2011

        P.S. It raised about 3% of the forecast revenue, while moving tax paying business abroad: i.e. it cost money overall.

    4. Single Acts
      October 3, 2011

      Would you consider structuring your posts somewhat and using paragraphs? It may make your comments more easily read and understood.

      (Please do not regard this as ad hominem, it is certainly not, I enjoy reading the contrarian viewpoint).

  2. lifelogic
    October 2, 2011

    Cameron yesterday was crowing about how helpful he is being to business with his new two years before any tribunal claims rule. Unfortunately he had introduced the temporary worker directive, the no retirement law and the gender neutral insurance ruling. Also the banks are still calling back lending and not lending new money, taxes are too high, there is the real prospect of Labour soon and he is still wasting billions on HS2, wars, PIIGS, the EU, Carbon energy tosh and huge over government.

    So currently the score is about 9-1 to the anti-business side.

    The main problems at the moment is lack of bank lending and a lack of uplifting pro-business vision.

    1. lifelogic
      October 2, 2011

      So what is the Cameron spin line today – He apologises to women! When the Tories elected their new leader I certainly preferred David Davis but Cameron did not seem too bad as a second option to me. My wife’s initial reaction however was that he came across as a very competent presenter, but as being insincere with no real beliefs of his own. Someone who was happy to say whatever he felt the current tide demanded. She does not follow politics much but her instinct seems to have been right.

      1. Disaffected
        October 2, 2011

        Your wife is spot on. He speaks down and cuts over people in a patronising manner as if he is always right but his comments do not have any substance. Like his appearance on the Marr show this morning.

        The Coalition agreement is a smoke screen, it has not been implemented to the full. How can Clegg two weeks ago say in words of one syllable that the HRA was here to stay when the agreement allows a British rights act to be examined? Why should the views of a small number of Lib Dems have a disproportionate say in government; they resoundingly lost the election and got less on the vote than expected and fewer MPs. Presenters/media point to Clegg’s first TV appearance, they forget to say that when he spoke on the second about EU, defence, immigration etc his ratings plummeted. Now the Uk is subject to the views of a few Lib Dems who the majority of the electorate do not want. Cameron needs to wake up ASAP. He also needs to dump and replace Clark, Green, Mitchell, Gove, Landsley and get some people who have the moral fortitude to stand up for what the consensus of Tory voters believe in.

        1. Mark
          October 2, 2011

          I greatly prefer Gove to Willetts. At least Gove understands we need to toughen standards and discipline, while Willetts weakens them.

          1. Mike Stallard
            October 2, 2011

            As someone who is trying to open up a free school, I can say that as a person, Michael Gove is fantastic. He really seems to believe everything he says.
            The problem is that the DfE is totally against him and they have watered down the ideas so much that we are simply faced with a take-over by London of the Counties.

          2. Derek Buxton
            October 2, 2011

            To the list of those who should go, Huhne must be a high priority, Cameron says he wants growth but this one man contradicts that whole policy.

          3. Disaffected
            October 2, 2011

            So would I if forced to choose between the two. I can’t even begin to understand how Willetts is an MP let alone a minister. If given a choice I would not have either. Both Oxford and Cambridge had a no confidence vote for Willetts. Waste of space liberal minded Europhiles, they are in the wrong party.

            Cameron has also chose to use Labour peers for government reports for goodness sake. Does he not like the views from people in his own party?? Once more, is this to appease the loony left Liberals like Cable (mate of Brown)??

            Cameron must know that his Tory ministers are not a mixture from all sides of the party. He has chosen weak liberal Europhiles. His central control style for appointments appear to have come unstuck in Scotland- good, serves him right.

        2. uanime5
          October 3, 2011

          The Tories didn’t win the election as they don’t have a majority, so if they don’t keep the Lib Dems happy the Lib Dems will form an alliance with Labour and constantly thwart everything Cameron tries to do. Cameron will not oppose the Lib Dems because he’ll become a lame duck without their support.

      2. Morvan
        October 2, 2011

        Wife one, you nil.

        Anyone who keeps parroting; “It is the right thing to do”, is obviously void of any decent ideas.

      3. lifelogic
        October 2, 2011

        I see Cameron claims to have “a strategy for growth” and is firing up the engines. What is the strategy and will the engines finally be started before the next election.

        I see some more silly enterprise zones hastily announced – near BAE sites in Warton and Samlesbury in Lancashire and Brough in East Yorkshire. So more businesses encouraged in the wrong place and more unfair competition for those businesses just outside.

        Just make the whole of UK an enterprise zone instead of this silly tinkering please.

        Some interesting BBC pronunciations of Samlesbury (perhaps they are better at “Mumbai”, “Beijing” or similar) – though now the BBC is in Salford/Manchester and about 25 miles away then surely someone could help them out with it.

    2. lifelogic
      October 2, 2011

      What is really needed is not so much new banks as some method of releasing the UK business lending arms of the existing banks to actually lend to business again. Often they have already have good security in place and some lending – but are just not lending freely enough due to the new restrictive Basel III and other pressures on them.

      Of course sensible pro business regulations, a positive uplifting, pro business vision, cheaper non green energy, lower taxes, less tax and waste and a sense that the Tories might win the next election would encourage bank lending too. But we just get more daft regulations virtually every day.

      1. Mark
        October 2, 2011

        They are keeping (and recently even increasing) their funds in mortgages at the expense of businesses.

      2. John Wise
        October 2, 2011

        Banks will not lend to British Business because so many are high risk..The fixed costs are to high, council tax, Rent, health and safety, pregnancy paid leave, list of EU regulations, to compete with the tin shack factory’s in China.. Only a fool would start manufacturing anything in Britain. Ask Dyson the UK company which pioneered the “bagless” vacuum cleaner, moved its manufacturing to the Far East with the loss of about 800 jobs..
        If Cameron wants to help British business he should impose a import tax on all goods from The Brutal Regime Of Communist China..

        1. lifelogic
          October 2, 2011

          I agree that the government has made some risk too high but it is even worse than that. Many UK banks are not even lending where very good security is offered and the risk is negligible!

    3. JimF
      October 2, 2011

      Yes indeed this 2 years instead of 1 is on the margin of the margins of being useful. Meantime, 65+ yrs people have the right to block younger replacements in the workplace, which really serves nobody well.

      1. Elephant_Never_Forge
        October 2, 2011

        and the work ethics of the youngster never mind their ability to do the job as well as the person leaving

        This is mostly down to the cost cutting strategy of poaching suitable workers from other firms rather than training new

        1. uanime5
          October 3, 2011

          Which will lead to major problems when the older staff finally retire and there’s nobody left to replace them. Unless businesses start training up new staff their will be a major skill shortage in 5-10 years time.

    4. Public Servant
      October 2, 2011

      The no retirement law as you put it is very interesting. On the one hand getting rid of productive members of staff just because they have reached age 65 does not seem logical. But then there is the point about making way for younger people to consider. Whatever the rights and wrongs of it one thing seems clear to me. You cannot tell people that they are expected to work longer to 67 or 68 for example by increasing the state pension age, whilst at the same time allowing companies to summarily dismiss them on reaching 65. The compulsory retirement age would surely need to rise in step with the state pension age, would it not?

      1. lifelogic
        October 2, 2011

        I would like to see any employer be allowed remove anyone of any age with a pay off of 2 months maximum if it was not working. But also keep them on to 120 if the employer so chose.

        The government should keep out of it.

        1. JimF
          October 2, 2011

          That is the way the Swiss do it. If the employer has lost confidence in the capability of the employee he is allowed to remove them according to their notice period. Small family firms cannot keep on no hopers.

          1. lifelogic
            October 2, 2011

            Indeed it is not in the interest of the company or even all the employees of the company to force them to keep on people who cannot perform for whatever reason.

        2. uanime5
          October 3, 2011

          So you believe someone who had worked for a company for 35 years should only be entitled to the same pay off as someone who has worked for 2 years. If this was implemented people would only work at a company for 2 years and businesses would have to pay vast amounts to find replacements for all their staff every 2 years.

          If you want dedicated employees you have to reward them for their dedication, not shaft them at every opportunity.

        3. Bazman
          October 3, 2011

          Obviously replys from desk jockeys.
          You will not be working on a building site of shipyard past 65, so any increase in the retirement age is just making people work until they drop and easy for the employers to dismiss them as ‘non productive members of staff’ as you laughably put it. Maybe they would work harder and longer if their benefits where cut after they where ‘retired’?

    5. lifelogic
      October 2, 2011

      How much longer can Cameron keep claiming that he is very business friendly while kicking them in the teeth all the time?

      1. Derek Buxton
        October 2, 2011

        As long as he has been praising the EU, and that will never cease. So we have a no win situation, Cameron and his clique, from which Mr. Redwood is excluded, want to support all thing EU whilst the EU puts obstacles in the way of growth, at least for this Country. Within the EU we have as much chance as a snowball in hell of getting growth.

      2. uanime5
        October 3, 2011

        Given how anti-employee your comments are I say all businesses need several good kicks in the teeth.

        Employees are not machines that can be used and abused to increase the profitability of the businesses. As long as employees loath their employers motivation will be low and the UK will continue to lose to their European competitors with better motivated workforces.

    6. uanime5
      October 3, 2011

      The no retirement law was introduced so that people could keep working, rather than claim a state pension. I wouldn’t say it was anti-business as it now means that companies don’t need to provide pensions as long as they provide jobs people can do until they die.

  3. A.Sedgwick
    October 2, 2011

    6. Exit the EU.

    1. Public Servant
      October 2, 2011

      Mr Cameron could not have been clearer today when speaking to Andrew Marr that he remains in favour of UK membership of the EU. He believes that the majority of the public agree.

      Reply: That is what latest polling shows – only a minority want out altogether.

      1. forthurst
        October 2, 2011

        The majority has not been apprised of the full facts: first of all they’ve been suckered by the, “in the EUSSR, but not ruled by the Central Committee in Brussels” slogan; secondly, they’ve been bombarded by propaganda from the BBC, which believes that it is entitled to take our money to then act as judge and jury in most matters of public interest, along the lines of, “if we left the EUSSR, we would be all alone and the Germans would refuse to sell us BMWs etc.”

        What chance has democracy to succeed, if undemocratic forces are continually acting against the public interest to frustrate it?

      2. David Hepburn
        October 2, 2011

        For Mr Redwood: What was the size of the poll? If we had a real referendum whereby we could ALL vote, the result might be quite different. Polls are just that – they take a snapshot of a (usually very) small proportion of the population and are, therefore, not more than a (very rough) guide of people’s views.

        Reply: It’s in today’s papers, usual sampling methods. It shows minorities in favour of withdrawal, renegotiation, and staying in on current terms. If you add renegotiation to withdrawal that gives Eurosceptics a majority. That conforms with my feel for present public opinion. It would explain why so few sign up for a debate on a referendum, and why so few vote UKIP. It shows the continuing Eurosceptic splits are not helpful.

      3. Derek Buxton
        October 2, 2011

        That I’m afraid is not a fair account of what people want. The government, the MSM particularly the BBC have kept from the public the effect of being in the EU. This has been deliberate policy from the start. Many, many people I talk to dislike the actions that emanate from this anti-democratic body who no one voted for, but they do not know just how much we have lost. They do not know for example how food prices are hiked up by EU regulations, the same with their energy bills and this is true right down the line. They are not computer literate so are dependant on the MSM who lie to a man, distorting everything that is happening.

        1. uanime5
          October 3, 2011

          How is the EU anti-democratic? All MEPs are elected through proportional representation.

      4. Duyfken
        October 2, 2011

        As “only a minority want out of the EU altogether”, and I presume that is Cameron’s stance also , we should be pressing the PM to explain just how far in or how far out of the EU we should be. He has given no clue on that score and I fear he has no intention (or guts) in withdrawing any significant powers which have already been ceded to Brussels. He is off my Xmas card list.

      5. zorro
        October 2, 2011

        Please permit me a clarification. Mr Cameron states that he remains in favour of UK membership of the EU (i.e. European Union and what it entails at present). Well, he has hardly exercised himself with trying to regain any lost powers. To the contrary, he has handed more over.

        I would suggest that the majority of the public do not want what Cameron says by the European Union. They want to be in an EEC where we have free trade, but minimal (if any) political control.

        All the supposed advantages that I have ever spoken to anyone about ‘what being in Europe means’ can be achieved by our membership of an EFTA


      6. lifelogic
        October 2, 2011

        If, in and out, were the only choice available then “out” is the way to go and I am sure the peole would vote “out” – given a fair referendum. That is clearly why one has not been granted. Also the BBC and the political parties will all bias the question and the propaganda so no fair referendum is really possible.

        Too many of the powerful have been bought by the EU.

        Reply: Yes, Eurosceptics need to be careful what they wish for. I will vote for an In/Out referendum if that is what the vote is about, but I think a referendum about renegotiation would be a better first start which would carry easily in favour of changing the relationship, and force the government then to negotiate a different relationship and put that to the people. Moving straight to an In/Out might see all 3 main parties line up in favour of In – certainly Labour and Lib Dem will- with CBI, TUC and others probably doing the same. Conservatives would be wise to make it a free vote issue. The Out campaign would then face a similar problem to 1975, and starts on today’s poll with less than one third of the votes.

        1. Jon Burgess
          October 2, 2011

          Personally, I think if all three of the ‘main’ parties lined up in favour of In that would pretty much guarantee an OUT result. The public have had enough of politicians thinking they know what is best on this subject.

          But the Europhiles know this all too well and will resist such a referendum with all the tricks in their locker.

        2. lifelogic
          October 2, 2011

          To the reply:

          I tend to agree any in out referendum would not be a fair fight with the unions, the BBC, charities, some of big business, a lot of money and most political parties almost certainly on the stay in side.

      7. Bob
        October 2, 2011

        Polling? What polling?
        Is this another straw poll like the one on Any Questions last week where it turned out that the majority of the audience have never exceeded the 70mph speed limit?

      8. matthu
        October 2, 2011

        Reply: That is what latest polling shows – only a minority want out altogether.

        Only a minority voted for the Conservative Party at the last election. And that was after a full electoral campaign.

        Reply: True, but the Conservative party gets more support in the polls than pulling out of the EU does

    2. Disaffected
      October 2, 2011

      I fail to understand why Clegg and Cameron publicly supported the assassination of Bin Laden against the rule of law and justice. Presumably also against the HRA that spoke support of in words of one syllable. Both claim to be opposed to the death penalty? War criminals from the second world war, who instigated worse atrocities, were allowed a right to trial. In contrast both are content for convicted terrorists to remain in the UK and seek asylum under the HRA?? Most bizarre.

      1. zorro
        October 2, 2011

        The USA has been engaged in extra judicial killings for a while it seems…… If what the USA claims to have undertaken in May against Bin Laden (alleged creation of the CIA) is correct and more recently in Yemen against Al-Awlaki (the Pentagon dinner guest), we have two more recent examples. I suppose it’s even more strange bearing in mind their recent support in Libya of LIFG bedfellows. Indeed, one of their former ‘renditioned’ detainees is now military commander of Tripoli…funny old world.


      2. Single Acts
        October 2, 2011

        Surely it is obvious why they supported the killing – precedent.

        Demonize someone and do away with the tiresome necessity of a fair trial. Decide who lives and who dies, a la Edward the first and you have ultimate power.

      3. BobE
        October 2, 2011

        The USA could never have put Bin Laden on trial. He knew to much and would talk to much. He had to die.

  4. alan jutson
    October 2, 2011

    More competition between banks.
    Less public spending.
    Less regulation.
    A more proffessional purchasing system for goverment services and contracts.
    Reduction in overall tax rates.
    Increase in personal tax allowance to £15,000
    A real cap on total Benefits of £20,000 for any one family.

    Not in any particular order, but any or all of the above should help get the country moving again.
    The more that are used, the quicker we get going.

    Cannot see why others cannot see it.

    Can add to that:
    A complete block on all immigration.
    Scrapping of the green agenda and taxes on fuel and transport.
    The immediate building of gas/coal/oil power stations for immedate power concerns.
    An investment in genuine infrastructure improvements, not the obstruction chicanes, humps, lines and traffic light management schemes of the past.

    Aware that these extra things perhap do not meet with EU approval, but I would tell them to like it or lump it, and if they want to fine us, we simply do not pay and withold our contribution, in other words, tell them to get stuffed.

    So thats that, sorted. NEXT Problem !

    1. roger
      October 2, 2011

      Alan. Couldn,t agree more with everything on your list. You get my vote.

      1. Richard
        October 2, 2011

        Alan, please can I vote for you?
        Totally agree with all you have said.

    2. Elephant_Never_Forge
      October 2, 2011

      How to get HM Treasury to restore equal treatment andsignificantly increase or REMOVE the UPPER EARNING LIMIT for NI Contributions

    3. waramess
      October 2, 2011

      Sedgwick and Alan Jutson have the only remedy.

      No point creating new banks whilst the old ones are still in such a mess. We can no longer see clearly which banks are solvent notwithstanding audits and have to rely on the test of liquidity.

      Probably all or most of our banks are worthless and their bad assets funded by unsuspecting depositors. Unless and until these banks are allowed to fail the situation will continue and the economic recovery will be constrained by the continued inability of the banks to lend.

      It must be plain for all except the blind to see that in consuming fifty percent of our productivity the government must reduce in size and must get out of the way and let the economy rebalance.

      Allow the process of liquidations get rid of bad investments without hinderance; permit the private market to determine what we do best and build upon it and allow politicians to go back to the business of ensuring fair competition.

      There will be no growth now until we free ourselves from this crazy political system where the politicians always know best and think they and only they can steer business onto the road to success.

      Laughable were it not so sad.

      1. zorro
        October 2, 2011

        John will tell you that our world class regulators state that they are solvent….


    4. Morvan
      October 2, 2011

      “So thats that, sorted. NEXT Problem !”

      Getting Cameron to agree to any one of those points is beyond the wit of man – that is the next problem.

      1. alan jutson
        October 2, 2011


        John just asked for a solution, he did not ask me or anyone else to action them !

        That said, I reckon if JR could get 24 hours with Cameron and Osbourne on their own, and run through 20 fully costed ideas which would stimulate the economy, we may at least get a few past both of them. Providing Clegg would allow it.

        So there is the rub, its a very nice defence position to be able to blame another Party for not being able to action any policy.

        At the moment we have a government without the political will to take real action, so it will go on and on and continue to get worse, until the real brown stuff hits the fan, and we are then ordered to take the real action by outside forces like the IMF.

        Dithering politicians have cost us a fortune over the years.

        1. Morvan
          October 2, 2011


          Cameron wouldn’t allow JR to get within 500 feet (sorry 153.85M) of him let alone spend 24 hours in his company. Why is JR languishing on the back benches? Could it be that his views are an anathema to DC?

    5. wab
      October 2, 2011

      “Less public spending.”

      Sure, but be more precise. Funnily enough, most people are against government spending that doesn’t specifically help them somehow, but otherwise are very keen on government spending, as has been shown with the comments on this blog over and over again. (What a surprise.)

      (For example, the government is about to throw 250 million pounds at weekly bin collections. That is a serious waste of money, which could go on far more productive things such as science and engineering research. But I wouldn’t be surprised if many people here support that waste of money on bin collections.)

      “Reduction in overall tax rates.” “Increase in personal tax allowance to £15,000.” “Scrapping of the green agenda and taxes on fuel and transport.”

      Sure, but are we not supposed to be worried about the deficit? Or are you going to so decimate public spending (so making the Tories completely unelectable) to counteract all the taxes you want reduced? Some ballpark figures would be useful. Scrapping taxes on fuel and transport in particular would introduce a huge hole into public finances.

      “A real cap on total Benefits of £20,000 for any one family.”

      What is “one family”? (For example, what happens with divorcees?) Why 20k and not 10k or 30k or some other random number you are willing to pull out of the hat?

      “A complete block on all immigration.”

      Real smart. Turn the country into an international laughing stock which is willing to stick two fingers up to prevent talented people from coming here. Are Little Englanders so hateful of foreigners as to introduce such a ridiculous policy? And presumably you are happy that your ancestors were allowed to immigrate into this country but want to pull the ladder up now that your family is here.

      1. alan jutson
        October 3, 2011


        More than happy to expand the theory on the headline ideas listed, but then my post would have been so long and would have waited in moderation for ages. (not a complaint John)

        So lets take a couple of simple ones which do not take ages.

        A cap of £20,000 a year for a family on benefits, and a £15,000 tax allowance

        I suggest no one on the minimum wage should pay income tax, so on 40 hours a week that is just under £15,000. it would be a policy that helps all people in work keep most of their pay to spend as they like, not the government.

        A cap on maximum benefits of £20,000 equates to far more take home pay than the minimum wage, as it is Tax Free, and if two people work (even at the minimum wage) then they would be better off than on benefits. I am suggeting that those who can work, should be encouraged to work, and be rewarded for such and not stuck in the benefits trap.
        It is an absolute bloody nonesense that we allow people to claim housing benefit of thousands of pounds a year to live in a big house in a reasonable area when they have absolutely no intention of working because they would not be capable of holding down a job which would even pay the rent., and then to add insult to injury, to ask a minimum wage earner who is really struggling to pay for anything in their lives, to pay for that persons lifestyle out of their taxes.

        Its not slash and burn, its fair and its commonsense.

        Happy to explain more if you do not get the drift.

    6. BobE
      October 2, 2011

      Cut all public saleries to max at £100k
      Cap all pensions to a max payout of £100k

  5. For goodness' sake
    October 2, 2011

    The unremarked attribute of this crisis is productivity

    If the debt had gone into productive investments it would be generating a return, and there would be no problem.

    Debt for consumption or asset inflation or political pet projects is not productive, but malinvestment.

    1. lifelogic
      October 2, 2011

      In short “Tax Borrow Waste” has been the policy ever since Major buried real Tory government for three (or perhaps four/five/six?) terms with his ERM fiasco (and not even an apology).

      This still continues under the coalition and Cameron.

  6. Sue
    October 2, 2011

    Quick way to save a minimum £40 million A DAY and prove your a democratic government. We demand a referendum.

    On top of that we’d be saving money on red tape, saving money on foreigners benefits, open options on worldwide trade and tighten rules on overseas employment which will free up thousands of jobs/housing for Britons.

    We buy more than we sell to the other members, so they’re not going to stop trading with us.

    We will also have complete control over all our laws again and the Conservatives can pretend to stop moaning about things they know they have no control over.

    Your esteemed colleague Roger Helmer has a post entitled “CAMERON JUST DOESN’T UNDERSTAND THE CASE AGAINST THE EU”. (http://bit.ly/r7gBMD).

    He’s right, Cameron and many of the others live in another world to the rest of us. Not only are those in politics insulated against public opinion, most of them are rich beyond any of our wildest dreams, so aren’t affected by it.

    A pre-requisite for being a politician should include “living in the real world”, that means having had a PROPER JOB.

    1. zorro
      October 2, 2011

      Mr Cameron lives in another world and is not at all troubled by monetary or economic issues so will never understand how it is to struggle (apart from his unfortunate experience with his son who died so young).


    2. Electro-Kevin
      October 2, 2011

      I have to disagree.

      I don’t care where our leaders come from or how hard they’ve grafted. I just care that they are exceptional and patriotic and are proud of our country’s history and achievements.

  7. Public Servant
    October 2, 2011

    Mr Redwood perhaps things are not as bad as you and Mr Tyrie suggest. I have just listened with interest to your party chairman , Baroness Warsi, speaking on BBC news. She stated with some pride, when asked about Mr Tyries remarks, that the UK had the second best growth rate in the G7 group.

    Reply: Not saying much when you look at the state of Euroland.

  8. JimF
    October 2, 2011

    How do you guarantee with these three new banks that the money won’t go into bad investments? Indeed, without the supply side reforms you suggest in 3., there will be fewer worthwhile prospects.

    My recipe would first be supply-side reforms, coupled with reform of the banking sector, and incentives for them to lend to good business prospects instead of ex-Council house owners who will need mortgages under their right to buy.

    Reply: the 3 new banks would be owned by private shareholders, who would pay the losses if they get it wrong. No bail outs.

  9. davidb
    October 2, 2011

    Remove business rates from industrial premises. It could be offset by local sales tax or a rise in corporation tax, but perhaps best compensated for by cutting state expenditure.

    Simplification of Tax code.

    First item would help start ups greatly, second would help everyone.

    1. Bob
      October 2, 2011

      The problem with simplification of the tax code is that taxpayers could get cross to see clearly how much tax they actually pay; for example if you merged NICs (employees & employers) into income tax as most employees are not even aware that employers pay NICs, so it’s a rather useful way to hide the truth from the average voter.

      The new compulsory pension scheme is another case in point, the government seem to be setting up employers to gradually take over the pension liabilities of the state, another example of government failure, like British Leyland, British Steel, British Coal, British Rail and the Post Office.

  10. Public Servant
    October 2, 2011

    I see that Mr Maude has taken a leaf out of Mr Oborne’s book when it comes to describing those who do not share his opinions. He is reported to have said that those opposed to the government’s relaxation of the planning regime as talking ‘bo….ks’. Are we seeing the emergence of a more aggressive and less courteous communications strategy? Should we prepare for any intemperate outbursts from Mr Redwood? I doubt it somehow.

  11. Mike Stallard
    October 2, 2011

    I have been in the government’s position personally. I was in debt for some £2,000 with no hope (as a teacher) of recouping the money. The Bank was stroppy too.
    I changed banks, made a plan to which we stuck, and the money was repaid within six months.

    The government just isn’t trying hard enough. I think it wants to be popular by spending our money. I think it wants to be popular with the Libdems who are all over the place. I think it wants to be popular with the Unions who are in charge of the decaying Civil Services. And I think that Mr Cameron et al are all “gents” so they think things are all right anyway and that complaining is for wimps.

    Not encouraging.

  12. Public Servant
    October 2, 2011

    Mr Cameron has just said to Andrew Marr that the UK should be in the EU, that there will be no referendum on membership and that the majority of the population agree with him. I think he is right. I suspect fellow contributors may differ.

    1. backofanenvelope
      October 2, 2011

      That is what he thinks and it is what you think. Both of you have opinions but that is all they are – opinions. Why not put it to the test? Three weeks to argue the case and then we vote.

      1. Public Servant
        October 2, 2011

        Absolutely I am only expressing an opinion and have no say in the matter. Mr Cameron on the other hand has complete power over whether to hold a referendum or not. If Mr Redwood is right and that polling suggests a clear majority in favour of EU membership what is the point of a damaging and bitter referendum campaign?

        Reply: The latest polling shows a minority for immediate withdrawal, and a smaller minority for staying in on current terms, with a significant number wanting a renegotiation which falls short of complete withdrawal.

        1. British National
          October 2, 2011

          I agree with a major and fundamental Re -Negotiation and not a complete and isolating withdrawel. We need to remain friends with Germany and also need to balance or negate the massive “French Influence” on EU Policy. We need friends in turbulant times, not more enemies. However, right now Euroland particularly the Eurocrats actually need Britain to stay in

        2. backofanenvelope
          October 2, 2011

          Polling also shows something like 70% think there should be a referendum. Personally, I think there would be a majority for staying in. But that is not the point is it? The point is that most people want to have a say.

          I must also point out that this matter has poisoned the politics of this country for over 40 years. It can’t be a good thing as far as the EU is concerned either, to have its third largest member country continually bitching about everything.

          As I said, a short 3 week campaign and a vote.

    2. Mike Stallard
      October 2, 2011

      How right you are: I differ!

  13. Elephant_Never_Forge
    October 2, 2011

    Growth to the economy is only likely for a lot of people when they feel more secure with their current circumstances. In a lot of cases more certanty about retaining or improving their employment

    Those who know the electricity supply industry say UK Plc has to double its current generating capacity by 2020 when you include those to be decommisioned. The present way seems only to be construct expensive offshore wind that then also need expensive connecting infrastructure where producing any useful capacity is more than a few years down the line. A possible alternative that depending on the number of installation teams could have several streets worth of households benefiting would be Solar PV on every South facing roof and that would not require any new National Grid either. The certanty of sunlight is sometimes limited but by being able to generate from an earlier date than the wind turbines that is largely overcome

    Another comparison I calculated is that the £2 Billion per year for the construction of HS2 is the equivalent spend to the Treasury of ONE HUNDRED THOUSAND jobs at £30,000 salary when Tax, NI and VAT on products bought with the nett amount are taken into account. If these jobs (perhaps building and installing the above mentioned PV panels) were north of Birmingham it could have a more direct effect on reducing the North – South divide and certanly a great deal earlier than even the most optimistic start date for HS2

    The benefits do not include the knock on effect of likely increased retail jobs to deal with all that extra spending availability nor the non payment of benefits to those new (re)employed

    1. Mark
      October 2, 2011

      You do understand that solar PV is the most expensive form of electricity generation, don’t you? You might as well spend the money on digging holes in the road and filling them again.

      I presume you are also aware of the amount of industry that has been shut down in the North as uncompetitive energy and regulatory costs take their toll, hitting not only major plants but the other businesses that feed off them. I do agree that Toffrail will do nothing to help this situation.

      1. Elephant_Never_Forge
        October 2, 2011

        When you allow for the extra cost of
        all the “High voltage grid to the new wind turbines,
        the time when the wind isn’t enough to drive the turbines,
        the fact that the PV could be on stream the week after install for a whole street
        the costs of planning enquiries for “on shore” turbine sites
        the objections from locals to turbine siting in their locale
        the Tax & NI take from all the new installers not to mention the increased retail spend from those with more confidence in retaining employment

        I reckon the figures get a lot closer with all the above than just the cost of the electricity generation. Also not my calculation regarding the HS2 annual costs

        1. Mark
          October 2, 2011
          1. lifelogic
            October 3, 2011


            “The absolute minimum annual cost of the installation is therefore at least four and a half times the wholesale value of the electricity generated. (£330/£70).”

            Total economic insanity – even if it does not breakdown after 18 months or need cleaning of leaves moss and dirt several times a year.

  14. oldtimer
    October 2, 2011

    A combination of 3 (supply side revolution) and 5 (three new banks to boost competition and lending capacity) are the best bets on your list. I would add as #6: A revolution in energy policy and taxation is necessary. Failing that, it is but a matter of time before the lights go out and, as the CEO of Aggreko recently reminded us, the sewage station pumps will cease to work.

    Based on past actions, and past and present statements by the Coalition, I do not expect to see any on these happening. The various signals and reassurances, flashed daily by ministers to lead us to believe that they are doing something really useful, will make little or no real difference. So long as the coalition continues to drive the wrong way up a one way street we can expect, sooner than later, to experience an almighty crash.

    I thought Mr Tyrie did have some really useful things to say. Chances are he will be ignored.

    1. Morvan
      October 2, 2011


      100% correct, but the sewage pumps are the least of our worries; water supply, shop tills, ATMs, banks, telephones, computers – the list is endless, as everything these days requires electricity.

  15. Greg
    October 2, 2011

    Since only option 3- A supply side revolution has the faintest chance of working and Dave won’t do it we can look forward to, at best, a worsening situation with little hope of improvement for many years.
    Add to the list of problems the North Sea production collapse and if the situation merely worsens we’ll be lucky. Coalition inaction and ineptitude might just finish Sterling as a viable currency along with the Euro and then all bets are off.

    1. Mark
      October 2, 2011

      I noted that DECC tried to brush that under the carpet, blaming “maintenance shutdowns”. Osborne and Huhne need to be careful: it’s starting to look as though producible oil and gas will be left under the seabed because of the tax regime and the costly abandonment “reforms”. That’s about the same as trashing you personal possessions so they can’t be used to reduce your debts.

      1. A different Simon
        October 3, 2011

        Take shale gas and underground gasification of stranded coal (UCG) .

        The granting of exploration licences by the DECC is a sham .

        As soon as a suitable resource is discovered DECC state that they will refuse to grant production licences !

        Huhne even said he would block the UK’s “dash for gas” .

        In respect of UCG , a representative of an energy company told me that quote “The UK Govt does not seem very keen on it” .

        So there you have it . The Govt wants the UK to lead the way with energy poverty .

  16. Caterpillar
    October 2, 2011

    1. On aggregate I agree, crowding out is evidenced in UK. But if possible a shift of some public spending towards some infrastructure might be welcomed (e.g. JR’s more resevoir idea a shor while ago, or London monopoly breakers. The latter in why I tend towards HS2, but there may indeed be alternatives.)
    2. I agree no more QE, and hope the Chancellor sends a clear message on this in his Monday (?) speech prior to the Thursday decision. But I think the message needs to be one of a slight tightening, the MPC may still drop to another quarter point. (I don’t believe a short period of deflation would be a bad thing to bring the medium term average back in line woth target).
    3. I agree supply side revolution. Constraints can exist simultaneously on both supply and demand sides (anyone having ever run a linear programme will have seen multiple constraints). Inflation has been a demand limit, but there will be many ‘free’ supply side constraints that can be lifted – planning and regulations. [Tax breaks for disrupting firms, or even disrupting business units in large established firms would be nice to see – but I don’t know how it can actually be done.]
    4. I agree, I don’t like the idea of a state bank funded by more QE. But if funded by a twist on existing QE (as alluded to by JR and a contributor on a previous day), and additionally offering a bonus free, easy access competitive interest rate to savers*, with those making lending decisions not coming from a Govt/public sector background it may be possible. (*this is another saving behaviour the MPC looting may have caused, to obtain anything approaching a real term, at least zero interest rate, savers have to lock money up – and hence not spend.) So design, funding and decision making need to be just right, and at the same time quick.
    5. Still a good idea.

    (a) Dump stamp duty and add small capital gains to home instead.
    (b) Move the museum, gallery etc. attractions out of London
    (c) Simplify multiple job working (i.e NI and income tax are a pain if some work is carried out self-employed and some work employed. Just make paying ‘your share’ easy … simplify, simplify, simplify)
    (d) Europe?

  17. Vigilante teen
    October 2, 2011

    Hey John, moderate and answer my comment above please, your clearly ignoring it, feel free to delete this after

    1. forthurst
      October 2, 2011

      I think you’ll find JR had to perform some special breathing exercises before diving in.

    2. David Hepburn
      October 2, 2011

      I agree, it takes an eon to moderate comments on this site. Perhaps we should no longer bother to comment. Then, where would the site be?
      Nevertheless, I enjoy Mr Redwood’s blog and the comments (whenever they get through the moderator…). This innocuous comment will no doubt take a couple of hours to clear in which case I shall be tucked up in my bed in Kathmandu…

      Reply: I moderate the site myself and do have other things to do, so I cannot guarantee same day moderation in all cases.

      1. Electro-Kevin
        October 2, 2011

        I don’t think I’ve ever been moderated here and I can be pretty blunt.

        Just what on earth must other people be saying ?

        1. alan jutson
          October 3, 2011

          Electro Kevin

          It usually goes through lengthy moderation if the post is lengthy, and thus takes time to read.
          Thus understandably John (its a guess) probably deals with the shorter ones first, in order to get as many as possible published for debate

          Your comments are usually concise.

          Lifelogic also splits his up into a number of concise posts.

      2. David Hepburn
        October 3, 2011

        In that case, I take it all back!

  18. Gary
    October 2, 2011

    rules 1-5 won’t work. Rule 5 won’t work because it does not make the lender assume risk for the loans they make. This was the cause of the crisis. More lenders without risk, just means more irresponsible lending.

    We require rule 6 :
    Abolish taxpayer underwriting of ALL private business. That means abolishing the central bank,taxpayer bailout and deposit insurance.

    This means that you let the market set ALL rates, and the money supply is out of monopoly hands, and is subject to the market. Money that does not retain its value will be shunned by the market.

    It also implies that you would reduce all taxes and hence cut the size of govt.

    If you are a free marketer in deed, not just in word, nothing less will do.

  19. Richard
    October 2, 2011

    For Growth :-
    1 There needs to be a fair return on investment and for saving and consumption to be in balance
    So we need a rate of interest that is not zero.
    (Japan has tried zero rates for years and the result is stagnation and no growth.)

    2 Be brave and try lower tax rates, maybe the result would be higher revenues.

    3 Cut Government spending on overhead costs but balance this by increased spending on capital projects which produce assets for the spending rather than just increased Government payroll numbers.

    4.Encourage competition not just in banks but in all sectors by reducing barriers to entry.
    (just think how difficult it now is to be a start-up in many areas of commerce)

    5 The new banks idea that Mr Redwood suggested as many SME’s I know, cannot move forward with their growth plans because funding is not available.

    6 A bonfire of quangos and red tape – set us free to get going and make a living and employ others.

  20. Robert Taggart
    October 2, 2011

    Not wishing to sound ‘green’, but, can our economy really go on growing forever ?
    That said, we are growing… just !
    Better that than nothing… for now.

    Not wishing to appear ‘red’, but, would not a fairer share-out of our wealth help to ‘grease the gears’ ?
    Surely only the greedy need more than £100,000 pa ?

    Moi ? – c.£3,000 pa – thankyou taxpayers !

  21. Graham Jones
    October 2, 2011

    Option 4. Would just like to point out obvious flaws in your argument. The last state bank TSB was a roaring success and was sold off at a profit. Private banks got us in this mess. Finally they were the worst judges of bad credit and logic would lead you to accept public knows best. Completely ideological arguments with no basis or fact.

  22. Denis Cooper
    October 2, 2011

    I suspect we’re being softened up for more QE because the government knows there’s a good chance that at least one eurozone government will have to default on its debts.

    And while I don’t believe that this would result in the £1 trillion hit on UK banks which is being touted by pro-euro scaremongers I think that it could be as much as £100 billion; and then the government might have to act quickly to save one or more UK banks from an immediate collapse which could potentially lead to a meltdown of the entire UK financial system.

    The government would suddenly need a large extra chunk of money for that bank rescue operation, which it wouldn’t want to try to borrow from the markets, so instead the Bank of England would create it from thin air.

    Of course it would still be presented as being a good move anyway, in order to “inject extra cash into the system”, “boost the economy”, “free up lending”, etc.

    Reply: We are assured that UK Greek exposure is small and would not do great damage if they default.

  23. John Maynard
    October 2, 2011


    Nice blog-post. But !

    We have had the Vickers report recommending that “investment banks” should be walled off from their retail colleagues, and that more competition is urgently needed in the High Street.
    The government says that it will implement nearly all of the recommendations.

    However, in case you missed it, last week Goldman Sachs, the archetypal “(investment-ed) bank” was allowed to take a 20% share in Aldermore – a highly promising new high street bank, taking deposits and specialising in loans to small business and mortgages (and where I hold a deposit).

    How exactly are “new competitors” supposed to emerge on the “high street”, when the BOE (obsessed with QE), the semi-defunct FSA, and the attention seeking Business Secretary, blithely ignore the persistent predators ?

    1. forthurst
      October 2, 2011

      Surely Goldman Sachs became a real bank in order to qualify for TARP funds? According to the DT, it’s the Asset Management co. of GS taking a stake in Aldermore. However, this does raise the issue of whether, if new banks are to be floated, existing banks should be encouraged or discouraged from taking significant stakes?

  24. Neil Craig
    October 2, 2011

    6 – Allow the building of as many new nuclear power plants as there is a market for, where appropriate cutting tregulations or creating a legal m,ethod whereby regulations can be challenged for being more than 4 times more onerous, on a cost/benefit ratio, than those for other industries. It would take 3 years to complete the first reactor but the knowledge that electricity costs werre goi8ng to drop by as much as 90% would greatly encourage investment immediately. There are other industries where government Luddism is preventing progress (eg shale gas and GM) but this is the most obvious.

    6 – economist Arthur Laffer —Writing in the Wall Street Journal, Laffer argued that the best way to stimulate the economy is to have “no federal taxes at all.” http://thinkprogress.org/politics/2010/07/08/106670/laffer-taxes/
    This is a variant on #3 but goes so much further that it is effectively new.

    7 – X-Prizes. Put £10 billion annually into technology prizes, for example a commercial space shuttle, McCains $300m battery prize & the $1m laboratory extension of life M=Prize. This would make Britain the world technology leader in just about everything. In a way it is a Keynesian stimulus but instead of burying money in bottles to let people dig them up it would produce activity which is inherently the most produuctive of any and is insufficiently rewarded because of inherent limitations of the patent system.

    Does anybody doubt all of these woyuld work?


    1. David Price
      October 3, 2011

      Fully support the X-Prize suggestion.

      1. Neil Craig
        October 4, 2011

        I thank David Price for that, it is good to see somebody in Britain willing to look at new ideas on their merits. Bazman is engaged in fact free trolling. Uanime5 is, I believe, greatly overstating in the scare story about needing to dismantle the NHS (I doubt that would even be possible in that sort of timescale). Laffer’s proposal is for a short term tax holiday. In the long term if we achieved China’s 10% growth not only would the tax base increase 10% annually (doubling in 7 years) allowing repayment even if government spending is only kept flat, but also the ratio of borrowing to GNP drops fast (from around 70% to 35%), making it sustainable.

        The important thing from my point of view was that Mr Redwood did not choose to dispute that all 3 of these are credible ways out of the recession, less painful than years of cuts and far less painful than decades of faux “cuts” which seems to be government policy.

        I assume the reason he does not propose them is that believes, as I do, that they are simply too innovative, libertarian and incompatible with a massive overgovernment to be acceptable to the current Conservative party.

    2. Neil Craig
      October 3, 2011

      Then I take it that nobody does doubt they would work
      If tried.

    3. uanime5
      October 3, 2011

      While no federal taxes may stimulate the economy there’s no guarantee that the economy will grow sufficiently to make up for the loss in tax revenue.

      It would also require all companies to provide private healthcare for their employees because the NHS would be unaffordable.

    4. Bazman
      October 3, 2011

      No nuclear safety, no taxes and a prize for the largest marrow with no buyer. What a load of shale.

  25. Electro-Kevin
    October 2, 2011

    I fear that these solutions simply scratch the surface, Mr Redwood.

    I read an essay yesterday in which it was explained how banking became so complex that even bankers don’t understand it. Basically unemployed scientists ventured to the cities for work and were assigned to designing ever more complex computer programmes and financial products.

    Things got a bit out of control. The movers and shakers have made their moves and their shakes.

    We now have an unbelievable amount of wealth under the control of a clique of unimaginably wealthy individuals. More than Richard Branson wealth. More than pop star wealth. More than Arab wealth. More than national wealth.

    The power of debt over sovereign states.

    Fine. Tinker around the edges. Bring back Capt Mainwarings to run local banks if it makes people feel better. The game has changed and we’re all a bit Donald Ducked really – and on that note we’re talking about individuals even richer and ‘creative’ than Walt Disney and who are the type that have no interest in painting our world in the pretty colours he would have chosen.

    ‘We’ve been expecting you, Mr Bond’

    At least the denouement they might have planned for us will be quicker than the never ending garrotting the EU is inflicting upon us now.

    (Only joking – kind of)

    1. outsider
      October 2, 2011

      Dear Mr Redwood, I do not think that any of the solutions you mention, including 5, would have much impact on growth or government finances in the next three years. Here are two simple, politically practical suggestions that would do so, at no cost to taxpayers:

      1) Announce that VAT will be imposed on new housing from April 2015. This deadline would encourage developers to build on their expensive land banks with planning permission before then, creating lots of jobs in the building trade. The price of new development land would fall by the amount of the tax because, as has often been pointed out, the price of housing is determined by ability to pay (wages, mortgage rates and credit availability) and not by cost. So after 2015 the state would have a new source of tax without any impact on the housing market.

      2) Arrange a mass market privatisation of UKTI, the holding company for all the unintentionally acquired state banking assets, on the model of the privatisations (such as BT, BGas) that you so strongly advocated in the 1980s. Whatever the market price, this would cut the deficit now and interest payments into the future. It would also avoid selling UK banks abroad or flooding the market with shares in RBS or Lloyds ( although I realise that half of the stake in RBS would have to be excluded for competition reasons).

      These measures would create jobs now and cut the deficit now.

      At the moment, we are suffering from a cynical Ribbentrop-Molotov pact between George Osborne and Sir Mervyn King under which the Treasury promises to slash the deficit and fails miserably and in exchange the Bank of England promises to re-inflate the economy and fails miserably, except to raise prices to consumers and raise costs to business. What we need are practical measures that work, not theoretical ones that fail.

      1. outsider
        October 3, 2011

        UKFI, not UKTI. Sorry.

  26. Javelin
    October 2, 2011

    Explain to the British people the reality of India and China competing with us. Tell them we need to compete globally. Tell them it will take 10-30 years to get back to serious growth. You can’t escape reality.

    1. uanime5
      October 3, 2011

      Why should we compete with India and China? Germany doesn’t any they have one of the best manufacturing industries in the world.

      The difference is that India and China make things as cheaply as possible, while Germany makes things with the highest level of quality as possible.

      1. Bazman
        October 4, 2011

        Well. Maybe they used too. Made in Germany was the guarantee, but not now.

    2. Bazman
      October 3, 2011

      What are we going to compete on lack of health and safety, pollution regulations and standards of living? I’m out.

  27. Jon Burgess
    October 2, 2011

    The Tories will be remembered by a new generation as heartless service cutters, when in reality they are still spending more than Labour did. They will end up being shunned and unelectable again, but unlike the 1980’s, they will not have repaired the public finances by the time they are kicked out of office.

    It’s the best thing that could happen to UKIP.

  28. kennethrmoore
    October 2, 2011

    Mr Redwood, What is going on with the so called spending cuts agenda . Are the cuts real or just to create some kind of smokescreen to fool the media, public and possibly the money markets?.

    The line being taken by the coalition seems to be that:-

    1. Uk creditors are being reasured by the fact that the coalition is acting responsibly in controlling public spending.

    2. Because of the ‘tough action’ being taken on spending, Uk interest rates on the money she borrows are comparable with Germany’s.

    3. Visible and very public cuts will have to be made in armed forces numbers etc.

    But this sits oddly with the facts that “The government plans to borrow an additional £485 billion over the planned five years of this Parliament”.

    On point 1.

    Would Uk creditors accept the media position that the cuts are “savage”. and think ‘yeah the Uk is a pretty safe bet’ and keep interest rates low.
    If I was overdrawn at the bank and asked the manager to repeatedly extend my overdraft i would be told to go away and reduce my spending instead. Why does George Osbourne think this logic doesn’t apply to him ?

    On point 3, are the very public spending cuts being made in our armed forces etc. being made simply to demonstrate to the media (and the money markets ?), how tough the coalition is being on spending ?.

    Why is there so little intelligent discussion in the media about the true nature of the cuts. I get the impression that cabinet ministers and the PM himself are very reluctant to talk about figures even when being attacked over spending cuts . If they told the truth when talking about cuts in services and said ” well actually we are now spending more than Labour ever did” it would let the cat well and truly out of the bag.

    1. Gary
      October 3, 2011

      “2. Because of the ‘tough action’ being taken on spending, Uk interest rates on the money she borrows are comparable with Germany’s.”

      What with the FED explaining exactly how they sell short term bonds and buy long term bonds, which has the effect of capping long term rates, and mitigating against the plunging short term rates as cash is sought, I would not for a minute believe that long term rates here are low because we are doing so well as an economy. These central banks can rig anything they want, for a period. After which all hell breaks loose, as the market wreaks revenge.

  29. matthu
    October 2, 2011

    The argument for ever closer union has never been strong and it is weaker now than it has ever been. And the people can see it for what it is.

    The problem for Cameron and Hague is that they are now displaying exactly the same disdain for public opinion as the EU itself has been doing for years: witness what happened when the various referenda rejected the EU constitution.

    The original intention was to honour any petition supported by more than 100,000 votes by having a full debate in parliament. Now they would rather avoid such a debate.

    And if there is a debate which turns out to be overwhelmingly in favour of a referendum, this will not be binding on the government.

    The trouble is, if Cameron and Hague are not perceived to be part of the solution they will be perceived to be part of the problem. And they will taint the Conservative Party as being anti-democratic.

    Just like the EU.

    1. uanime5
      October 3, 2011

      According to the epetitions website only 3 campaigns have over 100,000 votes: rioters losing their benefits, full disclosure regarding Hillsborough, and cheaper fuel.

      As the referendum on leaving the EU only has 34,000 votes it is 66,000 votes short. Thus all politicians are not required to debate it.

  30. Sue
    October 3, 2011

    Things are getting way too serious and out of hand now. We need to leave the EU, it’s causing untold misery.


    Please read this entry on the EU Referendum site. Cameron and his millionaire buddies have no idea how ordinary people are now suffering. IT HAS TO STOP!

    1. uanime5
      October 3, 2011

      None of the problems in this article are related to the EU. Them to have been caused by poor domestic management.

  31. Iain Gill
    October 3, 2011

    get the licence fees and royalties for all the british intellectual property being used in china and india and watch our balance of payments transform…

  32. sm
    October 3, 2011

    More QE (for the banks benefit) without resolving the banks stranglehold on the economy, will just impoverish the population (via costs increase in basic needs) because of an increase in the money supply without other appropriate deflation in banking assets (house prices,rents and taxes)

    Why is Council Tax so high?
    Do we really get value for money from highly paid Civil Servants start at say + £100k level, then the £60k-£100k level.

    Lots of examples Council Chiefs, CEO’s, General to troop ratios, Admiral to Ship ratios. Excess numbers in House of Lords. Similar MP’s. Judges and the lawyers feeding of the taxpayer. We can then weep insanely when we look at the EU regime.

    Compare the tax free allowances given to sum of the above with taxable subsistence benefits? Look at the number of warrants and excess costs issued by councils to enforce Council Tax on low income households.

    Perhaps we need 10% cuts right accross the top – mandatory salary limits in the public sector?

    Cutting public demand for the barest of minimum public services (housing,health, utilities) whilst allowing uncontrolled immigration is impossible.

  33. Martin
    October 3, 2011

    As regards taxes can I take you back to the item you did earlier about a shopping trip where you mentioned everything was made in China or wherever.

    I think we need somehow to re-balance our tax system so that these items carry more tax. Items made in higher cost countries have lots of taxes on them to pay for various items of public spending (some we like, some we dislike). Taxes on business and incomes in the UK could then be reduced by a similar amount.

    1. sm
      October 4, 2011

      I believe this is happening in the US Senate and then Congress, it will leave Obama in a tricky spot. Mr R needs to make sure we are on the inside of a US/NAFTA/Mercusor tradebloc.

      We can still buy things off the EU if they let us! I dont think our exports to the EU would suffer any more than now under the current rules of the game.

      The global imbalances will balance its just

  34. uanime5
    October 3, 2011

    The problem with tax cuts is that there’s no guarantee that the economy will grow enough to enable the Government to recuperate the amount it will lose in tax revenues. Any tax cuts should be only as a last resort and temporary.

    Perhaps the Government should set a target of reducing borrowing by 10% each year.

  35. Conrad Jones (Cheam)
    October 3, 2011

    Looks like the Bank of England is yet again, going to create money (fine – no problem) and give it to Banks ? (Big problem with that)

    So if the Bank of England is creating all this money; why does the UK Government feel the need to borrow money and increase the National Debt by selling Treasury Bonds? Screw the Banks and spend the money directly into the economy. Invest the money in public works and education. Not Bank Profits. There are many Financial Institutions who would agree who are being shafted by their bigger competitors who have an unfair advantage.

    The Bank of England should be able to create enough money to increase liquidity to enable economic activity, but why give it to Banks who then hold onto it, or worse; gamble with it on commodity markets which inflates prices world wide?

    The Government has the means by which they can end these pointless cuts and tax increases but they choose to ignore it and divert our attention from the real solution.

    End Fractional Reserve Banking
    End Bank Bailouts (Socialism for the Financial Markets)
    Start creating money (in a controlled way) debt free and stop selling our children down the river.

    Yes – I am very critical but I offer a solution. If it’s a solution that’s good enough for Abraham Lincoln, John F Kennedy and King Henry I, then it’s good enough for us.

    King Henry the 1st debt free money lasted seven hundred years.

    Guernsey creates it’s own debt free money and has done so for two centuries.

    Politicians are not speaking for the public – who they allegedly represent, they are speaking for their masters and diverting us from the real solution to these problems. Ed Balls is a prime example. He says the Consevatives should be borrowing more money and spending it on more benefits. Government Spending will increase GDP and make it look like it is working. GDP, another illusionary economic measure.

    1. sm
      October 4, 2011

      Unfortunately fractional reserve banking, like the EU, like our current democracy v Swiss public referenda are absolutes. We have so many imperfections in the systems its hard to know what will pull us out. Talk about destroyed from within. Capitalism on multiple knock downs, and democracy tangled on the ropes.

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