End this private sector austerity

 

           I am going to write a few posts over the next week  about the Budget, as  I compile my budget submission to the Treasury.

            The government’s stated policy is to eliminate the government’s structural deficit, mainly by cutting public spending. It intends to promote a strong private sector led recovery, to create more jobs, cutting the welfare bills and employing labour shed from the public sector.

             I entitrely agree with the stated policy. It think it would work well. As readers of this site will know, the problem is not the strategy, but the fact that the government is not following it.

             Instead of the stated policy, the first two years have seen a tough squeeze on the private sector, and continued expansion of public spending. Annual current public spending is now £52 billion a year more than in the last Labour year, an increase of 8.7% in cash terms.(Red Book 2011 p 93, Autumn Statement 2011 p 77)  When I first pointed this out the government and media response was that there would be real overall cuts despite the large cash increases. Now the latest government  figures confirm my view, that the first two years (2010 and 2011)have seen a real increase in overall current spending. (Autumn Statement 2011 p 17 Table 1.1). Individual departments have been cut, but others have grown.

            The private sector has been squeezed partly by policy and partly by inflation. Large increases in tax rates on incomes and capital gains have hit the people most likely to set up and invest in new businesses and create jobs. Increases in VAT along with big rises in enegry prices and other basics have cut living standards and reduced disposable incomes.

               My pre budget posts will explore what can be done to lift the squeeze on the private sector, to get control of public spending, and to get back onto the planned policy track set out  at the beginning. If you want a private sector led recovery you need to have bank facilities, tax rates and cost levels that facilitate faster growth. You need optimisim and confidence. Lifting the squeeze on the private sector is necessary to bring that stronger recovery about.

               Now is the time to take action to do this. Inflation is at last coming down. Energy prices have started to fall. Food retailing is going to become ever more price competitive. The government needs to reinforce these favourable trends by a number of policy actions. I will be looking at the tax action, the bank action and the regulatory action the government could take to assist.

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66 Comments

  1. Ian
    Posted January 14, 2012 at 6:40 am | Permalink

    If it’s EU policy to make transport pay for itself, then why on Earth is the government prepared to spend taxpayers’ money on HS2 – like HS1, a local line in the EU’s TEN-T transport network?

    Surely the private sector is able to invest in transport that pays for itself? Is the decision to use such an obvious public donation something to do with that bribe-paying German firm, Siemens, influencing too many unaccountable decision-makers?

    I have similar reservations about RBS paying all those “lobbyists” and getting away with bonus murder. That bank is only accountable to Cable and a few other people, and who watches them?

  2. lifelogic
    Posted January 14, 2012 at 6:42 am | Permalink

    Just perhaps £100,000 when lend to sound small businesses (who still struggle to borrow at sensible rates at the moment) can create perhaps 5 or more real jobs. Just imagine what HS2’s £35 billion could do. The government would also get the £35 billion back with interest (unlike HS2) and hugely increased tax take and reduced benefits too.

    Why on earth do they continue with private squeeze and public waste when the real growth alternative is so much better for all?

    • lifelogic
      Posted January 14, 2012 at 7:48 am | Permalink

      Interestingly on BBC questiontime Paddy Ashdown claimed there was “no better way” than HS2 and “at present there is no cost” (as we were already paying for cross rail). What planet are these people on?

      Justine Greening then assures us what “people in the north think” (She clearly has a special insight – they are in favour she thinks needless to say). Mathew Parris (nearly always on the wrong side in any issue) in the spectator says “no one regrets a railway once it’s build”. Well perhaps not, but they may well regret having to pay back £35 billion plus interest and overruns for so little of any real value. For a train line they may never even use and the huge opportunity costs of not investing it on something sensible.

      • oldtimer
        Posted January 14, 2012 at 10:15 am | Permalink

        They regret it if it bankrupts them.

      • Alan Wheatley
        Posted January 14, 2012 at 12:16 pm | Permalink

        Obviously Paris has never heard of the railway speculators who jumped in on the early railway building bubble, only to loose their socks. Not all of these private initiatives proved to be financial winners.

        • lifelogic
          Posted January 14, 2012 at 4:55 pm | Permalink

          Indeed and that was when railways actually had a big competitive advantage over the horse. Now they have little going for them they are coaches that can only go on one route, are hugely inflexible and very dependent on unions.

          They are only quick if they do not stop at stations on route – which means you have to travel further than you want too and so, door to door, so are not fast anyway.

      • A.Sedgwick
        Posted January 14, 2012 at 12:18 pm | Permalink

        The Conservative Party seems to have a death wish and HS2 is another example of its slide away from its raison d’etre. Justine Greening, who was very impressive on the back benches, has lost the plot too. There does not appear to be any financial case for this line and the opportunity cost and political distraction are enormous. I would use the train more but the rollup prices are ridiculous so I either don’t go, use the car and any distance fly. The ticket prices for the line will be so high that even business travellers will baulk, certainly not pay first class, which should be abolished anyway to increase useable capacity throughout the network.

        • Martyn
          Posted January 14, 2012 at 2:36 pm | Permalink

          “…. pay first class, which should be abolished anyway to increase useable capacity…” Exactly so, this has long been a tantrum of mine since the days (mercifully long since passed) of having to commute to London daily, seeing train after train come in with maybe a dozen people in the 3 x 1st class carriages whilst we poorer people more often than not had to stand in the grossly overcrowded cattle-class ones.
          Don’t get me wrong, I am not against there being a 1st-class facility, it is just that the numbers involved defies common sense and significantly reduces capacity, let alone the fact that hundreds or thousands of gallons of diesel fuel are being burnt in pulling virtually empty 1st-class carriages along the length and breadth of the UK.

        • dan
          Posted January 14, 2012 at 3:49 pm | Permalink

          The Conservative Party has been wrong on pretty much everything since Cameron’s u-turn on Lisbon made people sit up and take note that his word wasnt worth much.
          They gained power by default, on account of the Labour Party just being so bad, any alternative was worth a shot.
          Since coming to popwer, its been one disaster after another…whilst the career politicians in the party have shown themselves to be doing nothing more than serving their time until lovely big pension day comes.

    • Single Acts
      Posted January 14, 2012 at 10:01 am | Permalink

      Yes, as I am sure you appreciate, £35B ha ha ha…..

      Remember then olympic minister Tessa J telling us the games would be £2.3B and now we are assured it won’t be more than £10B.

      If HS2 ever gets built (I doubt it to be honest, as financial reality will intrude* even on these clowns) I will offer anyone odds that the final outturn costs are at least double what we are now told.

      (* the reality I refer to is the demographic nightmare bearing down on the ill prepared political classes. Thus far, national insurance has been a significant net contributor to the national purse, when this goes negative in a few years time as boomers retire, the current “austerity” will seem like a time of plenty as revenue declines and committed pension expenditure explodes. So don’t worry too much, they will waste money on studies and the like, but this is total la-la land stuff).

    • lifelogic
      Posted January 14, 2012 at 11:12 am | Permalink

      Good to see that Boris is in favour of a new Thames crossing near the Blackwall tunnel. This need not be a big project/bridge/tunnel and is desperately needed and has been needed for over twenty years. He could also usefully get rid of all the “anti car”, congestion causing traffic light phasing, installed by traffic “experts” in Central London and many other towns.

      Both at least 100 times better value than HS2.

      • Bazman
        Posted January 14, 2012 at 6:29 pm | Permalink

        The lorry guards on the Blackwall tunnel are something else. A criss cross of girders in a # shape coming towards your face at 50 mph+ if you are in the wrong lane, better than hitting the bridge I suppose, and when you are in the tunnel…Ding! Ding! Ding! You’re’ in the wrong lane! These poles hanging down wrecking your lorry will help you to remember.
        The rainbow of paint on these guards is telling.

    • Disaffected
      Posted January 14, 2012 at 12:24 pm | Permalink

      Lifelogic, spot on. Osborne is thinking of borrowing more money to give to the IMF for the EU when in October he categorically told us he would not.

      The Coalition are turning out to be as bad as Labour both financially incompetent and untrustworthy.

      • BobE
        Posted January 14, 2012 at 6:19 pm | Permalink

        “The Coalition are turning out to be as bad as Labour both financially incompetent and untrustworthy.”

        But who can we vote in to do any better!!!!!!

        • Bob
          Posted January 15, 2012 at 2:42 pm | Permalink

          UKIP.

  3. figurewizard
    Posted January 14, 2012 at 7:06 am | Permalink

    Small businesses, which are generally the quickest off the mark to respond to improved cash flows with investment and jobs have been severely disadvantaged in this respect since Brown’s budget of 2005. By scrapping the 0% rate for profits up to £10K and marginal relief for profits for profits between £50 and £300K he effectively increased taxes at that time for these while reducing them for larger businesses.

    The impact of the abolition of the 0% rate in particular will have had an especially severe effect on start up enterprises. These represent the nursery for the equivalent of Germany’s Mittlestadt; the medium sized producers and suppliers that are the largely unacknowledged resource over here which stand behind that country’s economic success.

    As you rightly point out, the government’s aim of reducing the deficit is not bearing fruit as yet but at least measures have been and continue to be put into place to enable this in the coming year and beyond. When it comes to rebalancing the economy though, the lack of radical action on tax to enable this by restoring tax incentives for the very sort of private sector enterprise that can get that process underway is as yet seriously unaddressed.

    It’s not all about the banks.

    • Bill
      Posted January 14, 2012 at 2:39 pm | Permalink

      Cameron has talked about ‘rebalancing the economy’ by which he appears to mean investing in start-up technologies so that we might have a hope in the future of selling things to the rest of the world again.

      Since these start-up technologies aim to become small businesses, can we give them tax breaks (I am agreeing with figure wizard)?

  4. Mike Stallard
    Posted January 14, 2012 at 7:23 am | Permalink

    This is an excellent idea.
    The Labour party seems to be in the same state that the Conservatives used to be in 1998. Instead of going – like you – to the root of the problem, they are still bleating about cuts which do not exist. The media – the BBC naturally – but also even the Telegraph and Mail simply haven;t noticed the mismatch. We badly need some opposition.

    I suspect that a lot of the trouble is the Civil Service which seems to me from afar to be totally at odds over the EU, the Education policies, the Welfare scandal and the Treasury. While the Ministers genuinely believe one thing, quite another seems to be being put into action.

    • alan jutson
      Posted January 14, 2012 at 8:47 am | Permalink

      Mike, could not have put it better myself.

      Just one other point, as well as encouraging the private sector to grow and expand, you need to retain those businesses who are trading, on keep on trading.

      Many small businesses have had their level of trade decimated over the past couple of years, with customers cutting back on purchases through either lack of disposable income (increased taxation) or more importantly the fear of being made redundant.

      Tax rises when companies who are struggling to stay in business, is in many cases putting them out of business, thus disposable income is further reduced as these workers also cut back and fear of the unknown spreads.

      • Mike Stallard
        Posted January 14, 2012 at 3:48 pm | Permalink

        I could not agree more. Here in Wisbech, Cambs, I was walking this morning through the town centre. It ought to be full of small businesses with their own little outlets.
        Instead we have empty whitewashed windows, charity and Poundland shops and the (thriving) market.
        The Council is so useless it cannot even make up its mind about whether or not there should be parking in the main square. But that doesn’t stop it encouraging enormous business rates.

  5. Javelin
    Posted January 14, 2012 at 8:09 am | Permalink

    Cut the 50% tax BUT stop the greedy FTSE directors giving themselves such unjustifiable pay rises first. Then simplify the tax system. It sucks.

  6. davidb
    Posted January 14, 2012 at 9:29 am | Permalink

    I was put on hold when calling a pressure washer company on Friday. I got to listen to one of those positive messages so popular instead of the music I understand the PRS likes to charge businesses for. I was informed that it was law for washers to be tested every 6 months.

    I cannot recall seeing anywhere that pressure washers were responsible for a spate of deaths and serious injuries, although I am sure they will be involved in some incidents, most likely due to people tripping over them. It caused me to think however about the growth of this petty regulation. All this testing and certification costs money. Some I can see the point of, but surely the cost benefit for much of this must fall on the side of it being a waste of money? If it was individuals ( like the MOT test ) and not businesses who paid for this stuff, how much of the testing would be tollerated?

    A major benefit would be to tackle all this industry lobby driven regulatory crap. Apart from giving work to pressure washer servicers, just what benefit is there to testing pressure washers every few months? I know its the case with industrial doors too, and I’m sure there are other cases.

    Cut the regulatory crap.

    • Mike Stallard
      Posted January 14, 2012 at 3:49 pm | Permalink

      I do hope, comrade, that you are not criticising the European Union.

    • dan
      Posted January 14, 2012 at 3:54 pm | Permalink

      I’d like to see a list of the laws the Coalition have removed with the soundbite ‘one in one out’ rule.
      Any chance of a blog on that Mr Redwood?

      Reply: I would need to ask that question again of all main departments – I did blog about the results last time I asked it.

  7. Rebecca Hanson
    Posted January 14, 2012 at 9:44 am | Permalink

    Where can we find figures on which department have been cut and by how much and which have overseen increased spending?

    Could you provide more details of your proposals to ease the squeeze on the private sector John? I’m sure a lot of us would like private sector pensions reformed to counter Brown’s changes but I suspect that’s not what you’ve got in mind.

    Reply: I am doing a series of blogs on the Budget to show how to ease the squeeze on the private sector

    • Rebecca Hanson
      Posted January 14, 2012 at 5:16 pm | Permalink

      When? Have I missed some?

  8. Paul Danon
    Posted January 14, 2012 at 9:48 am | Permalink

    Let’s abolish employment-law so that firms can hire and fire, and pay people as much or as little as they want. Unless we’re going to be self-sufficient, we must survive on trade. To trade, we must sell the world what it wants, which means imitating Germany and China. That means good products and low prices, meaning, in turn, low labour-costs and a flexible workforce. Among other benefits, a true market in labour would clear.

    • uanime5
      Posted January 14, 2012 at 6:38 pm | Permalink

      The laws you’re promoting are the opposite of the laws in Germany. Maybe we should copy Germany’s employment law which would make it more difficult to fire employees, increase minimum wage, and have half the board of a company made up of Unions that represent employees.

      Also good products and low prices are what all the world wants. Those with money want expensive products, such as designer clothes, simply because so few people can afford them. These high quality products are not made by low education, low cost, low motivation workforces.

      • libertarian
        Posted January 14, 2012 at 11:53 pm | Permalink

        You are just plain wrong and I’ve already told you this before.

        The silly German labour laws ONLY apply to massive companies as any fule no more than 80% of private sector employment is with companies of 10 or less employees. The things you suggest are unworkable at that level.

        I agree with you on the need for highly motivated, high quality workers

    • Bazman
      Posted January 14, 2012 at 6:39 pm | Permalink

      You would have a flood of people coming here and working for nothing. Would the British be expected to do the same? Companies are free to pay as much as they like and if they cannot pay minimum wage their business is no use to anyone. You can live like a Chinese or Indian slum dweller if you like, everyone else finds it unacceptable. The British will quite rightly will not work like East Europeans living five to a room and five to a car. Imitating Germany would mean lots more regulations and higher wages.

      • alan jutson
        Posted January 15, 2012 at 10:09 am | Permalink

        Bazman

        “The Britsh quite rightly will not work like eastern Europeans living five to a room and five to a car”

        Absolutely agree, but here is the conundrum.
        Because they can, (some immigrant labour) they do, and this is what is driving more and more workers (especially self employed building workers) out of work.

        A contractor who I used to employ before I retired, tells me he recently lost a job for a large extension in Windsor to an Eastern European team, they set up their home (a caravan on the customers drive for 3- 4months) whilst work continued, and of course they worked very long days, not wishing to sit in a caravan for too long, they used local public facilities (when not using the customers) for toilet and washing.

        He in contrast lives in a house for which he pays a mortgage, council tax, heat, light and power, income tax, national insurance, carries Public liability insurance, and has a landline telephone so that he can be contacted by the customer at an address that is known.

        Thus, before he even starts work, his fixed costs are huge by comparisonto the above.

        The simple solution is to stop the people you describe from entering the country in the first place, but it would appear that we cannot due to being members of the EU.

        Yes I know there is supposed to be laws against working as I have described, but it is not policed well, and it is difficult to bring to book people who are prepared to operate this way, and then send all of their money out of the Country.

        We are already in a partial race to the bottom, unless we change.

        The customer is of course partly to blame, as they would have no guarantee that they would be able to make any further contact after their builder left (sim card in the skip is normal) but the attraction of a much lower price is always very tempting especially when the government wants 20% of the total cost in VAT from the legitimate builder.

      • Bazman
        Posted January 15, 2012 at 8:53 pm | Permalink

        This requires a reply from right wing apologists. I am a nutter too.

  9. StrongholdBarricades
    Posted January 14, 2012 at 10:10 am | Permalink

    I actually believe that the government should do as little as possible.

    The tax system is there to provide the “nudges” to get the private sector moving.

    What needs improvement is a commercial property sector which is basically bust, with unrealistic rents and way too high Business Rates in certain areas because of the blanket nature of the foolish tax. Tackle that big barrier and some of your “growth” may magically appear without anyone spending anything.

    Then inform the Treasury that it must look to itself, see where taxes, etc can be streamlined thus making tax less taxing, actually taking more money but needing fewer people to administer.

  10. D K McGregor
    Posted January 14, 2012 at 10:12 am | Permalink

    I have just seen a draft of my company’s last years accounts and under nearly all aspects of expenditure it is pretty much the same as the previous year , however there are two categories which have significant inreases , namely rates and water +12.6% and cleaning amd trade waste +12.9% . It is not difficult to see who is causing the problems we face today.

  11. Nick
    Posted January 14, 2012 at 10:14 am | Permalink

    . Inflation is at last coming down.

    =============

    But prices are 7% above where they should have been if the BoE had done its job.

    Instead they bet that they would fail by moving their pension funds into inflation linked gilts. The biggest inside trading scam going.

  12. Nick
    Posted January 14, 2012 at 10:15 am | Permalink

    Interestingly on BBC questiontime Paddy Ashdown claimed there was “no better way” than HS2 and “at present there is no cost” (as we were already paying for cross rail). What planet are these people on?

    ============

    Planet Bonkers.

    It costs 100 million for a DLR extension.

    35 bn for HS2, 17 bn for Crossrail. 52 bn.

    You could have 520 DLR extensions. Not even London needs that many, so you could do the same in Birmingham, Bradford, Leeds, Liverpool, Manchester and Bristol, and still have change.

    Which gives the biggest bang for your buck?

  13. oldtimer
    Posted January 14, 2012 at 10:18 am | Permalink

    You have summed up the Coalition`s position very clearly – spin one policy but act out another.

  14. Rebecca Hanson
    Posted January 14, 2012 at 10:54 am | Permalink

    “As readers of this site will know, the problem is not the strategy, but the fact that the government is not following it.”

    Quite.

    The horrific, heartbreaking and extreme extent to which this is true in education is simply overwhelming.

    While many in education understand that this is just sheer London bubble ignorance and hubris, many others are concluding that the government is in fact pursuing ulterior motives and the divide and disrespect between society and its government is rapidly increasing. This is being fuelled by Gove’s increasingly disturbing abuse of and attacks on those who he things are criticisoing him and his relentless verbal diarrhoea of changes and visions based on only partly digested recent observations.

    The extent to which Michael Gove is still being eulogised about by those in and associated with government is making things substantially worse: http://www.spectator.co.uk/coffeehouse/7398163/the-spectator-parliamentarian-of-the-year-awards-winners.thtml

    The essential issues of professional freedom in education remain vital. Hacking local planning and accountablity to bits and random, inappropriate reforms to Ofted are making things much worse, not better.

    What’s needed is

    firstly proper, professional reform to Ofsted in line with the recommendations of the Hampton review and the laws which came from it to which Ofsted is obliged and which is systematically obfuscating and ignoring: http://mathseducationandallthat.blogspot.com/2011/08/ofsted-part-3-cultures-of-inspection.html

    and secondly a move into the future from narrow high stakes assessment for <14 to systems which allow a much wider range of valid objectives in education efficiently and effectively for formative, summative and central government diagnostic purposes. https://www.ncetm.org.uk/community/thread/94964?start=21

    • Mark
      Posted January 14, 2012 at 5:43 pm | Permalink

      I disagree with your assessment of Gove.

      Firstly, he has managed to put a stop the the appalling waste of the Building Schools for the Future programme that planned to rebuild every school in the country in little more than a decade. Surely school buildings should be and have been built with much longer lifespans in mind? Moreover, the process and design objectives under BSF and procurement methodologies were all invitations to setting up tablets of concrete and massive PFI debt. This was achieved despite every attempt to embarrass him by supplying inaccurate statistics coming from his department and associated quangos.

      Second, he has refocused the quality of education debate onto our poor and worsening performance in international comparisons, rather than the fiction of grade inflation and ever greater dumbing down.

      Third, he has pushed hard for rigour in the curriculum, and tougher exam standards. This has great potential to reduce the cost of education if it is pursued to its logical conclusion, because children will once again achieve given standards in less time, saving the need to stretch out the syllabus through to “university” rather than complete it at school.

      Fourth, he has signalled a major effort to tackle some of the worst schools and teachers. That includes ensuring that Ofsted has a more suitable focus.

      Given the parlous state that our state school system had fallen into there is a huge amount to be done to put it right. He certainly hasn’t addressed all the issues yet – in particular, ensuring that able children in the state sector get an education that rivals that provided in the private sector as was the case in the heyday of grammar schools, or ensuring that there is adequate provision for dealing with disruptive children.

      By contrast, Willetts has done nothing to alter the university system for the better, except make it more expensive for students.

      • Mark
        Posted January 15, 2012 at 1:36 pm | Permalink

        I’m surprised this is still in moderation…

  15. william
    Posted January 14, 2012 at 11:24 am | Permalink

    Budget submission to the Treasury.1.Rein back public sector employment and spending to 1997 levels in real terms over 3 years.2.Maintain aggregate demand by matching cuts in income tax over the period.3.Be prepared for a large increase in unemployment.4.Watch the private sector grow.5.Rejig the MPC’s mandate to encourage interest rates to be set at a level to encourage savings.^6.Accept the fact that southern house prices will have to fall by 20 percent.

    • uanime5
      Posted January 14, 2012 at 6:41 pm | Permalink

      Given that there are more people in the UK than in 1997 reducing the public sector to 1997 levels will result in it being understaffed.

      Large increases in unemployment result in large increases in welfare, which need to be pay for with more borrowing or higher taxes.

      • libertarian
        Posted January 14, 2012 at 11:56 pm | Permalink

        You are making the false assumption that workers laid off from the public sector won’t get jobs in the private sector and this isn’t true. At the moment there are large scale skills shortages in the private sector that are having to be filled from overseas, this would diminish if skilled workers move from public to private

  16. David John Wilson
    Posted January 14, 2012 at 11:46 am | Permalink

    There must be action taken to remove the end of year spending rush that is found in most departments in the public sector. Huge amounts of money are wasted making sure that the annual budget is spent before the end of the financial year. While some of the purchases are simply brought forward from the next year, others are of items that are never actually used. Even in the first case this means that interest is paid on unnecessary borrowing.
    This problem applies at all levels from small items like stationery to major capital purchases.

  17. David John Wilson
    Posted January 14, 2012 at 11:55 am | Permalink

    Taxation of the private sector needs to be re-examined so that it reduces the need for borrowing to maintain cash flow. This requires taxation to be moved as late as possible in the business cycle. Thus for example employer’s national insurance needs to be reduced rather than VAT or corporation tax. NI reduction has the added advantage that it mitigates against imports and reduces the cost of exports.

  18. Pete the Bike
    Posted January 14, 2012 at 12:06 pm | Permalink

    It all boils down to one thing. Too much government.

    Plus I wouldn’t be too optimistic on the lower energy costs. Production of oil is falling and the Yanks are doing their best to start a war with Iran. If they succeed we’ll have $200+ a barrel oil

  19. Alan Wheatley
    Posted January 14, 2012 at 12:23 pm | Permalink

    JR, I hope your words on the budget will encompass capital spend and the relationship with deficit reduction. Ministers are saying that spending £33B on HS2 does not have any impact on the deficit for reasons I do not understand, but on the face of it make no sense.

    Reply: They do not start serious spending on HS2 until 2017, well after the current planned spending period and after their planned removal of the structural deficit.

  20. Richard1
    Posted January 14, 2012 at 12:35 pm | Permalink

    It is often asserted that several hundred thousand jobs have gone in the public sector since this Govt came to power. Is this true? We know Labour added 1m to the public sector payroll. If its really true that several hundred thousand have left the public payroll (which would be good if true) how can spending still be rising as much as it is? Its all rather confusing. Are there any cuts or not?!

    • Brian
      Posted January 14, 2012 at 4:26 pm | Permalink

      Like Richard I am very dubious about the headcount.Nobody likes making people redundant but surely we have to get rid of more public service employees.
      I propose a headcount tax -let’s call it a NI employers surcharge .
      It can vary eg
      Front line ; soldiers ,police, nurses 0%
      Administrators 25%
      GayLesbian and TransGender Community outreach Project Directors 50%
      It may well be that some of these posts are deemed essential-if so reduce the numbers to the minimum
      Clearly this surcharge would come out of existing budgets -not added as a supplement.
      Hopefully this would concentrate budget holders minds on getting rid of the huge burden built up by the last lot.
      For the Unions it may be pointed out that the Coalition have imposed surcharges on Banks and Oil Companies -now it is the turn of the public service to do their bit.

  21. Iain Gill
    Posted January 14, 2012 at 12:59 pm | Permalink

    I hope your submission asks that they increase the price of ICT work visas, remove all national insurance dispensations for foreign work visa holders in this country, increase tax paid by foreign workers in this country to the same level that Brits pay by removing the many wide and various allowances they are allowed tax free which Brits working away from home in the UK do not get.

    I hope you ask them to review spending, cut free NHS to anyone without indefinite leave to remain in this country who is not from a country which gives reciprocal benefits to Brits, remove free school places to foreign nationals here on a work visa from countries which do not offer free schooling to Brits working in their home country

    I hope you ask them to leave index linked savings certificates for sale all the time especially to pensioners who are most vulnerable to having their savings devalued

    I hope you ask them to leave family allowance alone but cut international “aid” especially with countries rich enough to afford nuclear programmes, aircraft carriers, and the rest

    🙂

  22. A different Simon
    Posted January 14, 2012 at 3:44 pm | Permalink

    The UK establishment needs to pull it’s head out of the sand and look what’s happening in America before it really is too late .

    Energy prices have dropped , unemployment is falling , chemical industry is growing .

    The common factor ; shale gas .

    U.K. Govt should change the law w.r.t. onshore shale gas exploration :-
    – so that surface land owners cannot block fracture stimulation
    – to streamline the planning process . Planning per well with 9 month appeal processes it too slow .

    Cuadrilla’s major shareholder is A J Lucas , an Australian outfit . I have been so mightily impressed with them that I’ve become a minor one .

    Where are the British companies rising to the challenge of underground coal gasification and UCG ?

    How could the British establishment have got everything so wrong and concluded the UK’s future lies in financial services , windmills , nail salons and coffee shops ?

    • A different Simon
      Posted January 14, 2012 at 3:54 pm | Permalink

      As well as reducing the cost of energy , the Govt needs to reduce the costs of premises and accomodation .

      To do this they will need to flood the market with land , ease planning and implement measures to prevent monopolising of accomodation .

      Interests of landholders cannot continue to be given priority over those of potential land users .

    • uanime5
      Posted January 14, 2012 at 6:45 pm | Permalink

      Your change to the law which would allow companies to undertake fracture stimulation against the wishes of the land owners will never happen. The land owners own the land and they have a right to decide how their land will be used.

      • A different Simon
        Posted January 14, 2012 at 9:03 pm | Permalink

        In Britain landowners do not own the mineral resources to the land like they do in America .

        The Crown does .

        You don’t own the air 6,000 feet above your house so why should you own the land 6,000 feet below it ?

  23. Alan Wheatley
    Posted January 14, 2012 at 4:12 pm | Permalink

    As to budget related posts, I would welcome an exposition and debate on what is the optimum percentage of GDP for the Public sector.

    Reply: 38% is the maximum tax revenue as a proportion of GDP that post war governments have collected, so any level of spending above that is beyond our normal means.

    • Alan Wheatley
      Posted January 15, 2012 at 9:31 am | Permalink

      Thank you for the reply. I have not come across this figure before. This is amazing as it is an easy figure to understand and is so telling that I would have thought it would have been frequently referred to in media debates on the deficit and debt. But then that is the media for you!

  24. outsider
    Posted January 14, 2012 at 4:43 pm | Permalink

    Yes, Mr Redwood, we need growth in the private sector but please do not fall into the trap of assuming that this can feasibly come from higher consumer spending in the short to medium term or even, to the extent that is needed, by creating more business-friendly conditions. It will only come, if at all, from innovation and investment.

    It is folly to think that British business is panting to be let off the leash. We are in a far worse state than even you Mr Redwood seem to believe let alone Mr Miliband, whose “realistic” relaunch speech seemed to assume, in a sentence, that the enterprise economy would provide if Government behaved.

    Outside a few industries, such as drugs, mainstream banking and defence systems, our big-money industry mainly consists of branch factories of foreign multinationals with their own global agendas. To take two examples:

    a) the UK leads in advanced engineering for Formula 1 but we have no domestic motor industry to exploit its innovations. They go to boost innovation in Germany, France or Japan.
    b) The UK government cannot decide to invest in nuclear power – only to ban it. The French government, via EDF, will decide whether there is sufficient advantage to its nuclear building industry to take the risk. Even windfarms are imported because the last government failed to plan an investment programme ahead in co-operation with UK companies such as Rolls-Royce

    This is replicated to a greater or lesser degree across the board. Unless the City of London is again to become our chief growth engine, which seems unlikely, we shall need to rebuild from the bottom. And if you start from the bottom, the risks are greater (or at least more fatal).

    Where we have the ideas, there is a shortage of the risk capital that used to come chiefly from the retained earnings of big companies. It cannot sensibly be provided by banks, however much the small business lobby seems to think. Their task is to avoid undue risks to depositors’ assets.

    Government has a part to play in procurement. But that means cuts in public spending should, where possible, ring-fence orders to UK businesses rather than, as is now happening in defence and elsewhere, taking the easy option of letting UK business take the strain.

    Rebuilding a truly dynamic and powerful UK private sector, rather than just boosting local demand or cutting business taxes, would take an heroic national effort. I doubt that we are up to it.

    • A different Simon
      Posted January 15, 2012 at 12:36 pm | Permalink

      “we shall need to rebuild from the bottom. And if you start from the bottom, the risks are greater (or at least more fatal). ”

      Is that the case though ?

      Don’t almost all successful organisations evolve naturally from the bottom up rather than top down ?

      Look at the EU for a classic example of top-down engineering .

      In order to rehabilitate that organisation it would be neccessary to level it and start again .

      How much of the demise of the UK has been due to decisions made at a supra-national level ?

      E.g. France will be responsible for Nuclear , Germany for engineering , the UK for finance , India for I.T.

      It seems a bit far stretched for instance to believe that the demise of the British software industry came about by accident .

      • outsider
        Posted January 16, 2012 at 1:18 am | Permalink

        Dear Simon , Take your point. I only meant that it is more feasible for a £10 billion company to take a £100 million risk on an innovative development than a new company. With the exception of the resource sector, I do not think we any longer have the corporate infrastructure to undertake major blue-sky projects as, for instance, Racal did with Vodafone. The most recent examples that come to mind – BSkyB and Primark – were both promoted by (sadly rare) family-controlled corporations.

  25. MajorFrustration
    Posted January 14, 2012 at 4:45 pm | Permalink

    I could vote for Iain Gill – its not long until 2015 so perhpas some Tory MPs better start seeing the light – what do you think JR. Torys have had ample opportunity to act on previous promises – red tape, NHS,immigration. Guangos – as a Texan might say – “A talk and no cattle”

    • Iain Gill
      Posted January 15, 2012 at 9:16 am | Permalink

      thanks

  26. uanime5
    Posted January 14, 2012 at 6:50 pm | Permalink

    The problem with private sector tax cuts is that it leads to a loss of tax revenue until these companies grow large enough to make up the lost revenue. This low of revenue needs to be offset by public sector cuts or higher levels of borrowing. So if the Government gets their sums wrong we end up with a smaller public sector, less tax revenue from the private sector, and higher levels of borrowing.

    John is the Government going to calculate the amount saved by cutting the public sector, then try to reduce private sector taxes by a similar or lesser amount?

    Reply No, because the public sector spending rests on excessive borrowing.

    • libertarian
      Posted January 14, 2012 at 11:58 pm | Permalink

      I guess you never heard of a laffer curve?

  27. joe ashley-wade
    Posted January 14, 2012 at 6:58 pm | Permalink

    Joe (Leeds)
    hi John, I will always believe a lesson lived is a lesson learned.
    you should take a closer look at Germany and what they did in the credit crunch a few years back.
    German companies were allowed too reduce workers hours / days and keep all employment taxes in exchange for no lay off’s. thus experienced and highly skilled workers ready to start at the first signs of any improvement
    call it “essential workers act”
    encourage companies to register with HMRC with an added incentive outlawing industrial union action.
    encourage work councils and company share saving schemes for private limited as well. if a employee is more financially attached he or she will be more than positive with cost efficiencies and product quality
    win win

  28. Electro-Kevin
    Posted January 15, 2012 at 12:16 am | Permalink

    You’re fighting against a socialist establishment, John.

    Well. A curious combination of socialism in thrall to uber capitalism: Superstar bankers, celebrity lawyers, Premier League footballers, pneumatically enhanced bimbos of low IQ and with a predilection towards the colour pink and abusive partners …

  29. Lindsay McDougall
    Posted January 15, 2012 at 12:17 am | Permalink

    You will get nowhere in achieving your objectives unless you recognise that substantial public expenditure cuts are necessary – and not just efficiency savings. Health and welfare have increased and ought to diminish. Expenditure on the retired elderly will have to be contained. You simply cannot rely on the economy growing because it might not.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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