What should the government do now to help the economy?


                I have repeated many times the likelihood that the economy will grow much more slowly than government OBR forecasts. I have said the government will borrow more than is desirable. I have called for a stronger growth strategy.

                 Last year’s figures showing just 0.8% growth were disappointing to the official forecasters. They expected 2.4% growth for 2011-12 in June 2010, reduced that + to 1.8% in March 2011 and to 0.6% in November 2011.

                They are forecasting 0.9% growth  in 2012-13 and 2.4% in 2013-14, down from 2.9% and 2.8% forecast in June 2010. The IMF has now downgraded its forecast for the UK to a lower figure for 2012. If 2012-14 growth is still overstated by say 1.5% over the two years, that adds another £10 billion to the deficit in the second year.

                 The government knows it needs to do more. It is still working on  the credit easing scheme promised in the Autumn Statement. It has relaxed its borrowing limits to accommodate cash increases in public spending in every year despite the shortfall in revenues compared to  budget. The government needs to intensify its search for better value for money in what it spends, and for less desirable budget items that can be removed or delayed.

                   It needs to relax the squeeze on the private sector which we have often discussed. Falling inflation will help. So would some reduction in tax rates, as we have argued before.

                    Above all the government needs to understand that it has to tackle the problems of the banks. There is not enough competition or capacity in HIgh Street banking in the UK. The government owns many of the important banks that service the businesses and public. It needs to split them up, create new competing banks, and float them off with sensible balance sheets so they can get on with the task of financing the recovery.


  1. alexmews
    January 26, 2012

    Sam Cameron has more business experience than the front benchers responsible for business and growth does she not? Can they ask her the challenges she faces in creating wealth?

    The business secretary seems fundamentally anti-business and the oft mentioned cuts, as noted so often on this site, are not ‘too far, too fast’ but rather the state continues to grow in absolute and relative to the private sector. Growth will not happen until these are reversed. It is like Churchill’s quip about a man in a bucket trying to lift himself up by the handle.

    Like Canada in 1990s – the government needs to exit whole areas of activity and reduce taxes to allow wealth creation and growth.

    Interestingly – I saw stats yesterday showing our GDP growth figures as the worst in the western world. The policy is not working. That is not because Ed Bals is right – it is because the government is not doing what it is spinning.

  2. Ralph Musgrave
    January 26, 2012

    JR, Your suggestions are all perfectly reasonable. But they won’t DRAMATICALLY increase economic growth.

    Frankly there is not much the government CAN DO, given the state of the world economy. The Euro troubles which don’t look like being resolved for two or three years yet, don’t bode well. And the control of US economic policy by the crooks on Wall Street aided by those Neanderthals in Congress doesn’t bode well either.

  3. Sue
    January 26, 2012

    Petrol, energy, the EU, taxes and our welfare system pandering to foreigners. Do you not think that the Costa del Sol and French Riviera would be full of British long term unemployed if they got a house and benefits?

    We need to get out of the EU, we get nowhere near back the amount that we put into it. It’s not a viable membership for us, in fact it costs us way too much money (and we haven’t even got a say in the matter). On top of the estimated £65 billion contribution pa, we are being ripped off for £42 million unpaid NHS bills by foreigners, £47.4 million in unpaid loans for EU students and goodness knows how much in benefits.

    Open Europe has just released a report “Between 2007 and 2013, Britain will pay around £30bn into the funds, but get back just under £9bn”.

    This is British Taxpayers money. On top of all that the EU would still love to tax us more for their “own resources”..

    Between the British Government and the EU, we have nothing left after a hard days work.

    1. Graham
      January 26, 2012


      Certainly I detect that more and more taxpayers feel that way but how do we get them to demonstrate their frustration. There is no conduit for this unfairness to find its way back to those that ignore the problem.

      1. lifelogic
        January 26, 2012

        Indeed as you say there is no “conduit” or real democracy in place. As we have see Cameron and others can gather votes with “cast iron” promises then betray the voters – fully knowing they have nowhere else to go.

      2. Bob
        January 26, 2012

        While we keep voting Lib/Lab/Con the direction of travel will remain the same.

        1. lifelogic
          January 26, 2012

          No one, other than Labour and Conservatives, has any chance of being elected outright. The only real hope is a sensible Tory party. True that looks very unlikely at the moment but that is the only hope there is.

          1. Bob
            January 26, 2012

            If that’s the only hope, then we’d better start packing!

          2. Timaction
            January 26, 2012

            With EU net aid at £11 billion and rising and foreign aid due to rise to £11.5 billion thats a whole lot of money being thrown away to foreign people. We ran a trade deficit of £50 billion with the EU last year alone so the doom mongers saying 3 million j0obs at risk if we leave is frankly nonsense. The EU is a bureaucratic, undemocratic monster. Who needs its £9 billion in administration charges to implement its directives. Why can’t we trade with Africa not aid so that its people help themselves and get out of the unreformed French CAP! When is immigration being brought under control? Millions more people costing us a fortune on our health, housing, education budgets. I’m afraid I’m loosing patience with the Tory Party and Mr Cameron. All spin and no action. Out here it is much the same as before the election with more tax. In office but NOT in power.

    2. uanime5
      January 26, 2012

      In 2009 the UK contributed €62.7 billion to the EU, but due to rebates we received €58.8 billion back so out net contribution was €3.9 billion. Funny how Europhobes always forget that the UK gets back most of the money they give to the EU.

      Reply: Much of it comes back in the form of inefficient spending on things that may not be our priorities. We still need to raise the tax to pay these bills.

      1. lifelogic
        January 27, 2012

        Indeed much comes back just to pay for EU flags and “funded by the EU” (indoctrination) signs. Much is wasted or for things we did not need or want anyway or it has silly restrictive strings attached. Much goes to the BBC for further indoctrination (I assume).

  4. lifelogic
    January 26, 2012

    Action that was needed in May 2010 and certainly is way over due now.

    Tackle the problem of the banks, with some measures to actually encourage lending to smaller businesses rather than clawing it back as now. The banks are clearly not really in the lending to UK business at all if they can avoid it.

    Get rid of IHT and 50+2% to set a pro business, pro private, wealth vision.

    Get rid of turnover taxes like stamp duty.

    Get rid of 90% of regulations (particularly employment) and restrict all employment claims to six month pay.

    Reduce the 50% overhead of the state that renders the private sector unable to compete

    Create confidence that Labour will not return in 2015 and that the Tory government then will be a real one not just pro EU socialists in a poor disguise.

    Stop tipping cash down the PIGIS, HS2, the EU and all the green over priced energy nonsense.

    Build a runway at Heathrow and Gatwick and a fast train link

    Stop tax, borrow and waste everywhere.

    1. uanime5
      January 26, 2012

      How is removing inheritance tax (IHT) going to help the economy? We should be encouraging entrepreneurs rather than letting the rich horde wealth.

      Why do all your solutions for improving growth involve making work as unpleasant as possible for employees? Germany and Japan achieved strong manufacturing industries because they treat their employees well and protect employee rights.

      If the Conservatives wish to ‘create confidence that Labour will not return in 2015’ they should fix the problems in the economy, rather than introduce policies that alienate the electorate. Their plans for forests, benefits, the NHS, public sector pensions, and tuition fees mean that they will face an uphill struggle in 2015.

      1. lifelogic
        January 27, 2012

        You ask “How is removing inheritance tax (IHT) going to help the economy? We should be encouraging entrepreneurs rather than letting the rich horde wealth.”

        If entrepreneurs know they they can pass on their wealth it does encourage them. It gives a positive vision and says we welcome investors and the rich here and so they come (or do not leave) and spent or invest their money.

        Wealthy people do not “horde” wealth (under the bed or something) they invest it well that is why they are rich in the first place in general. Even if it is just in the bank it will be invested or lent by the bank or given away to relatives or charities. All preferable to the government wasting it.

        1. uanime5
          January 27, 2012

          There’s more to being an entrepreneur than trying to accumulate vast wealth that will remain in your family for generation.

          Unless these investments cause growth in the economy they’re a poor substitute for spending money.

          1. lifelogic
            January 28, 2012

            The investments will almost certainly cause more growth than idiotic government ones like HS2 and quack “green” energy would as they will mainly be sensible done with ones own money and not absurd political ones.

  5. Geoff
    January 26, 2012

    “The government knows it needs to do more.”

    No it doesn’t.

    It needs to do less. Less tax, less spend, less regulation, less interfering.
    The only thing we need more of is repealing laws, tearing up tax codes and sacking useless public sector paper pushers.
    Get off our backs and give us a chance to run our businesses and lives for ourselves.

    1. lifelogic
      January 26, 2012

      Exactly had I not had to spend the last 3 weeks doing my families tax returns I could have spent the time expanding my business. Not that the Cameron vision and prospect of Labour soon inspires me to do so.

      Just leave us alone and leave some money with us let us fire useless staff if needed and we will grow.

      1. uanime5
        January 26, 2012

        Why didn’t you hire an accountant? Surely the money you would have made from 3 weeks of expanding your business would have been sufficient to pay for the accountant’s fee.

        1. lifelogic
          January 28, 2012

          I have three accountants you still need to get the information to them and work on it. In fact they often create even more work.

  6. Mike Stallard
    January 26, 2012

    It seems to me that the government is running out of money and that means two things: first of all it means scrabbling for new taxes and secondly it means a bigger and bigger bill every month for interest repayments.
    Add on the vast mass of directives and regulations and advice pouring every day out of Brussels, and you have the makings of serious discouragement.
    On top of that you have personal and business debts piling up too.

    You personally, Mr Redwood, have written out means of reducing the bureaucracy without revolution by natural wastage etc. It is urgent that these things are dealt with soon. So why is the debt mountain simply growing?

    And growing?

    And growing?

    And growing?

    1. lifelogic
      January 26, 2012

      Because it is, in effect, government by the state sector for the state sector. The private sector is just a cash cow to be milked and bled to death and that is what is being done.

      Like most of the state sector government is run mainly for the benefit of its employees.

  7. oldtimer
    January 26, 2012

    The UK is now an uncompetitive economy. The government is responsible, through its tax and energy policies and the very high level of government spending and debt, for a significant part of this uncompetitiveness, although not for all of it. Unless and until they change these policies, there is no hope for a recovery. My suggestions are:

    1 Adopt and extend your 20/20 idea to embrace £20k as the threshold at which both income tax and CGT start to be paid; and 20% as the base rate of tax for corporation tax, CGT and as well the existing personaltax and VAT. Start to implement these changes and set a clear timetable for their implementation.

    2 Repeal the Climate Change Act and remove all the absurd taxes and subsidies that have neen spawned by it. Failure to do so will result, in the long term, in the decline and death of much industrial activity in the UK.

    3 Cut the government spending cloth to a maximum 38% of GDP, to reflect the long term taxable capacity of the UK.

    Yesterday Alistair Heath of City AM posted this comment on UK corporate tax rates:
    “Take a theoretical UK company. In extremis, its £100 of profit will be taxed at up to 26 per cent per cent; its remaining £74 could be taxed at up to 42.5 per cent if distributed as a dividend, leaving just £42; and then gains on the sale of the shares in the company (which capitalise future profits) will be taxed at 28 per cent. This is an extreme example; average corporation tax rates are lower. But it shows why so many countries tax capital gains less than employment income: it is to prevent the total tax rate on capital income being absurdly high.”

    1. lifelogic
      January 26, 2012

      38% is still way too high, governments spend hugely inefficiently they less they spend the better beyond the basics.

  8. Gary
    January 26, 2012

    What should govt do ? Slash taxes and get out of the way.

  9. Falco
    January 26, 2012

    What should the government do now to help the economy?

    Get the hell out of the way. No other action would be remotely as helpful.

  10. alexmews
    January 26, 2012

    BTW – i like and have always liked the libdem policy of a higher basic personal exemption to get low paid families out of tax altogether. It is good this is being trialled today. i was happy as a 40% taxpayer to make slightly higher contribution to cover it. what we need to get them off is the idea this is paid for by mansion taxes or even higher rates than the 52% already implemented. it needs to be funded by a smaler state.

    1. Bob
      January 26, 2012

      I was pleased to hear the personal tax allowance was being raised to 10k, but I had hoped that it would be funded by a reduction in EU contributions, foreign aid, public sector Pilgrims, the welfare budget or scrapping HS2 and a few quangos.

      Instead it’s just a case of rob Peter to pay Paul.

      When are the govt going to consider ending tax and waste?

  11. Shiney
    January 26, 2012

    Banking is not the issue.

    1. Raise tax free allowance to level of min wage
    2. Raise NI threshold, both employers and employees, to level of min wage
    3. Remove the need for non LTD Co, i.e partnership and LLP, micro businesses (< 10 staff) to run a PAYE system = less admin when employing staff
    4. Raise the VAT threshold for business registration to £250,000 so boosting GP of small business who tend to spend more on local services
    5. Scrap all other 'employment support' initiatives and 'release' the civil servants/quangocrats into more productive employment (inc HMRC staff who now have less employers to deal with)

    1. Lower paid people tend to spend more of any extra money they get (their MPC is usually higher) – boost to aggregate demand
    2. Simplifies the calculations for employers – boosts employment – boosts aggregate demand
    etc etc

    John – I assume your comments system captures my email address. I run a manufacturing SME in Mr Liddell-Grainger's constituency and know what is holding us back. If you want me to expand on these ideas and to get a view from the 'coal face' contact me.

    Reply: Thanks for your helpful ideas. These are part of the current pre budget discussions about tax stimulus to business/employment

    1. lifelogic
      January 26, 2012

      Lack of banking and high margins certainly are the main issue for many, particularly in property development.

      1. Shiney
        January 26, 2012

        Property development? so what?

        We want real wealth creation, not propert speculation. We’ve had enough of that over the last 15 years.

        1. lifelogic
          January 26, 2012

          Building offices, houses and flats for people to live and work in is real wealth creation and provides real jobs and real places for people to live and work in.

      2. Mark
        January 26, 2012

        Surely the issue in property development is waiting for the shoe to fall on unwinding the bubble? When bubble valuations are no longer an issue projects will look much more attractive. Meantime they have to factor in the potential capital loss and lower yields.

        1. Bob
          January 26, 2012

          The stamp duty rates are stifling turnover.

    2. Caterpillar
      January 26, 2012

      On Shiney’s 2 and 3

      2. Dump NI and combine with income tax.

      3. Insist banks offer a new product called the ‘Income Bank Account’ – if you work for a company that doesn’t have a PAYE system have a legal obligation that you have to have an ‘Income Bank Account’ and that earnings must be paid into it, then let the bank do the calculation … have the banks do the calculation to show tax owed and a minimum payment each week etc…
      (No need for the microbusiness to look for payroll outsourcing company or to do itself.)

    3. Mark
      January 26, 2012

      I agree with your comment that banking is not the issue. Businesses that have the option are doing everything they can to avoid dependence on banks for funding that risks being withdrawn when the bank gets into difficulties. Larger businesses prefer to use retained earnings or to issue their own bonds, taking advantage of low market interest rates. Equity funding is shunned, because it is so heavily taxed at every turn. Asset disposal can risk a CGT bill. Cable seems unable to consider the idea that businesses could have many other funding options were the balance of tax disincentives redrawn.

      However, the real problem is that businesses do not foresee a future of growth in the UK to invest in. The cushy number of supplying the state is no longer a growth prospect, as eventually the state will be forced to cut its spending. Businesses that cater to global markets find themselves suffering from Eurogulation (strangulation by regulation mainly from Europe – I suggest to be pronounced with the first ‘o’ short, as in dog or urology) that makes them uncompetitive.

      I think it will be interesting to get the fuller analysis of the causes of the Petroplus bankruptcy. Clearly they were pushed over the edge by banks withdrawing $1bn of funding they were using to buy crude oil, and had been making losses for some time. It is possible (though there has been no public suggestion, and therefore seems unlikely) that the company lost money on speculation. To some extent, high oil prices have reduced demand and thus utilisation rates. EU refineries have been facing all the added expense of carbon charging and ever tighter environmental regulation that makes them uncompetitive. Already the major oil companies have disinvested. Will we become increasingly dependent on importing oil products from refineries outside the EU, reducing our security of supply?

      1. Mark
        January 26, 2012

        The above Petroplus discussion is couched to raise possible issues, rather than trying to make any specific conclusion: I don’t know the balance of the answers. However, the risks of green policy leaving EU countries exposed to oil product imports on the back of refinery closures are a real issue that will become more important as carbon taxes rise – especially with Huhne’s carbon price floor.

  12. Electro-Kevin
    January 26, 2012

    What to do for the economy ?

    – Improve energy independence. Shale gas extraction, power stations …

    – Get British workers off benefits. The likes of Pret a Manger should not be allowed to ignore UK applicants. Where they are shown to do so they should be made to contribute for the benefits paid to each unemployed worker.

    1. Electro-Kevin
      January 26, 2012

      PS, Prevent us from being draw for unemployable and criminal people from around the globe.

      This is adding massively to the welfare and prison bill.

    2. Mark
      January 26, 2012

      More shale gas discovered right next to a large power station site (Ince)….


      Obama backed shale gas in his State of the Union speech:


  13. Richard
    January 26, 2012

    Higher rates of interest, tax cuts, reduced Government spending and keeping inflation down to a low targeted level of say 2%, are four things that might help bring growth back.

    1. Caterpillar
      January 26, 2012

      BoE/MPC hitting a target inflation rate, I think this is hilarious. The BoE/MPC completely ignores its inflation remit and still cheekily has the “The Bank sets interest rates to keep inflation low to preserve the value of your money” on its home page.

      But I think the Chancellor and Shadow Chancellor have somewhat failed here as well. The Chancellor can take control of rates back if the situation warrants it, and it did, the MPC have failed – CPI inflation rate does not come down even within the MPC’s own medium term time frame. The Shadow Chancellor has not demanded the Chancellor to act.

      In terms of JR’s “Falling inflation will help”, I think this will take too long too happen, and a lower rate of change would not be a quick effect. I believe in downward sloping demand curves and would therefore prefer a small amount of deflation, indeed I wonder whether the BoE target should not be inflation rate targeted but price targeted (so target a the prices levels of a 2% curve).

  14. JohnOfEnfield
    January 26, 2012

    There are two small successful businesses in our extended family. Their turnover is around £1m p.a. each and they employ of the order of 6 people each – one is in professional services and one in industrial services.

    They are based in the North where the economy is very weak.

    The biggest blocks to them employing more people are – in descending order: –

    1. Labour Law and the permanent threat of being taken to an Industrial Tribunal. This looms largest in any decisions to employ a person. It is expensive to counter. It ensures that an offer of employment is made only after great heart- searching.

    2. Maternity law. In the professional services business this has the effect that an offer of employment to nubile young women is judged very carefully. Maternity laws can lead to great disruption and costs. And this is in spite of the fact that young people are carefully trained and passed on into the surrounding financial services ecosystem when they qualify and become too expensive to employ by their current employer.

    3. Minimum wage. This – combined with point 1 above – means that the industrial services company employs no youngsters. This policy is also “policed” by apparently insensitive idiots.

    4. Employers National Insurance. Is seen as a tax on employment. It is money that could be paid to the employee and/or kept in the business.

    5. Jobs are often turned down by perfectly capable people – because they “can earn more on the benefit”.

    All these laws and taxes are seen as untouchable shibboleths by the left – but I contend that they have the opposite effect to what is intended.

    If you are looking for ways to address youth unemployment, then creating enterprise zones in run-down parts of the country where the small businesses are entirely relieved of the obligations under items 1-4 would have, in my opinion, a startling effect.

    By the way – ONLY ONE of the 7 very capable children of the successful businessmen who set up and run these small businesses is interested in following in their footsteps. They have seen – first hand – all the problems that have to be dealt with.

    1. lifelogic
      January 26, 2012

      Exactly – doubtless the capable children will aspire to the BBC, civil service, or become lawyers, go overseas or something similar. We need businesses and business people we should not be killing them or pushing them away with endless tax and regulations. And bashing them with the socialist/BBC politics of envy if they do succeed.

      1. Bob
        January 26, 2012

        Radio 4 news announced that the Lib Dems are pushing for a tax reduction for the poor by taxing the rich more.

        Sounds great! So will Lakshmi Mittal, Alan Sugar, David Beckham and Richard Branson will be funding it then?

        Thank you BBC.

        1. Bazman
          January 28, 2012

          What has that got to do with the BBC? Should they have not reported this Lib Dem Idea? Shows how you think though.

          1. Bazman
            January 29, 2012

            Sorry Bob. This needs an answer.

          2. Bazman
            January 29, 2012

            This needs an answer.

    2. alan jutson
      January 26, 2012


      Whilst I would aree with all of your comments, your last paragraph unfortunately sums it all up, with the final nail in the coffin.

      The risk is now not worth the reward, such is the size of the goverment take in tax, and in the increased overheads caused with too many laws and regulations. !

    3. Mark
      January 26, 2012

      Maternity law should be revised so that smaller employers have an ability to insure the risk with the state. Since it is the state that deems it socially desirable to provide maternity pay and the holding open of jobs, that insurance should be at a subsidised rate.

      On average, the proportion of workers giving birth will be less than 800,000 in 29 million (number of births and numbers in employment) because not all mothers are working – call it 2-2.5%. In a large organisation – unless they specialise in employing potential young mothers – the proportion will not be much different to the national average, and reasonably consistent from year to year. Small organisations face much larger proportionate costs should one or more of their employees require maternity benefit (including the cost of temporary cover – now made more expensive and fraught for employer and employee alike by the new regulations that promote sacking temps every 12 weeks).

      1. JimF
        January 26, 2012

        You’re right this is one obvious mainstream Conservative area which has received zero attention in 20 months.
        Why would a micro-business employ somebody who could wander off for months on end paid for by the business?
        I’d steer well clear.

        1. Bazman
          January 28, 2012

          Why would a micro-business employ somebody who could wander off for months on end paid for by the business?
          Wouldn’t happen to be a woman would it? Maybe they could be forced to reveal their plans for children or sign something? I don’t think some employers need the promotion of sacking someone before twelve weeks. It’s called a revolving door recruitment policy. Helps keep wages down and employes desperate.
          What about ludicrous child labour laws? Any ideas on them?

          1. lifelogic
            January 28, 2012

            What about ludicrous child labour laws? Any ideas on them?

            Yes it is absurd that young people even over 13, in the UK cannot work, other than in a very restricted controlled way and with silly Sunday and other absurd restrictions. It would do them good to do a paper round or serve a few cream teas on Sunday afternoon and be more use to them than much that they do at school in many cases.

    4. forthurst
      January 26, 2012

      “Maternity law” The transfer of the costs of maternity to the employer is a typical Cultural Marxist subterfuge: the objective is an ‘ideal’ in which women can live their lives independently of men, thereby destroying the need for the nuclear family. (The nuclear family is a conspiracy against the state).

      1. lifelogic
        January 26, 2012

        Indeed all this and similar transfers are just more back door taxes as are the new no retirement rules.

    5. Bob
      January 26, 2012

      “5…. they “can earn more on benefits”.”
      I don’t think “earn” is the right word.

      “…creating enterprise zones…”
      Just make the whole UK an “enterprise zone”, otherwise it just creates artificial barriers, unfair competition (like tax free status for charity shops).
      Cut govt meddling and avoid unintended consequences. The market will sort things out if some of the passengers would just hop off of the cart and help to push.

      1. JohnOfEnfield
        January 26, 2012


        Thanks for your points: –

        “can earn more on the benefit” fully conveys the attitude of the would be applicant and is almost a direct quote. Benefit dependency is incredibly corrupting of our citizens as we have seen in recent debates.

        “…..creating enterprise zones”. I fully agree with your point – I just thought I would prove the success of the idea first before taking on the vast array of vested interests.

      2. lifelogic
        January 26, 2012

        Indeed – why make business go to the wrong places with silly enterprise zones – they will only move again to the right place when the tax benefit runs out.

    6. uanime5
      January 26, 2012

      Let me see if I’ve got this straight, you’re proposing enterprise zones where employees cannot take their employers to tribunals for any reason including discrimination, harassment, or unfair dismissal; where women lose all maternity rights and can be fire for being pregnant; and where people can be paid below minimum wage. The effect will be startling; no employee will work there because they’re not stupid enough to work in such a terrible place. All this will do is drive the capable people out of the enterprise zones and into the surrounding areas where they have employment rights and better pay.

      One of the major problem with asking those who run businesses for advice is that they’re incapable of seeing things from the employee’s perspective. Thus they come up with ideas that might be good for businesses but make people less willing to work for these businesses. Seriously the way to fix the problem of people earning more on benefits than working (point 5) is not to abolish minimum wage (point 3). If people can earn on benefits then wages are much too low.

      1. JohnOfEnfield
        January 27, 2012


        Thanks for your comments:-

        I admit to problems with separating out enterprise zones from the surrounding areas (see the above made above). Perhaps the solution lies with specifying that the rules should apply to new employment only. If the “good” people can find jobs outside the enterprise zone – best of luck to them – but I think that the problem is that they cannot get any work at all under the current regime. The idea of the experiment with enterprise zones is to see what rules work and then apply those that do to the rest of the country.

        Private sector wages are set by the market, unlike benefits, which I presume are ultimately set by a bureaucrat in London. If benefits are more attractive to an individual than wages, then it is the benefits that are “too high”.

        My point is the employment rules, tax and benefit structure are crushing the ability and even the willingness of small businesses to employ people. With one million unemployed youngsters we have to think the unthinkable. Otherwise the unthinkable might happen anyway! Riots, burglary and families on benefit for generations, just for a start.

        1. Bazman
          January 28, 2012

          Private sector wages are set by the market. Oh really? The market sets Tesco wages. You are in wonderland. Tesco sets Tesco wages.

          1. JohnOfEnfield
            February 2, 2012


      2. Bazman
        January 28, 2012

        What they are proposing is a race to the bottom when there is no bottom. Starving people into working for poverty wages and little rights. Creating non jobs in effect. There would be riots and quite rightly so. The idea that millions of twenty somethings do not want to work is a fantasy. In keeping with the ideology of it is ‘all your own fault’ Except when this ideology applies to the middle classes. Go on. Start telling us about East Europeans. I will explain this phenomenon again many do not to want to understand.

      3. lifelogic
        January 28, 2012

        The reason wages are too low is because the companies cannot compete, due to they fact that they have to carry the non workers on benefit, and a hugely wasteful government.

  15. Nick
    January 26, 2012


    You’re spending more and more and more money, that you don’t have.

    You won’t even admit to owing people a state pension in your accounts.

    It’s a basic fraud.

  16. David Williams
    January 26, 2012

    1. A 10% Corporation Tax rate (like Gibraltar)
    2. Abolish the 50% income tax bracket
    3. No migrant worker caps but no benefit entitlement for the first two years
    4. Third runway at Heathrow urgently
    5. Join Schengen
    6. No more money printing
    7. Foster business links with Commonwealth and BRICs
    8. More emphasis on science and engineering at Universities
    9. No HS2
    10. No money to EUR bailouts

  17. Iain Gill
    January 26, 2012

    its not just about money, its also for instance about intellectual property, we do for instance need to take a good hard look at all the leading british IP we are allowing the outsourcers to (go abroad-ed) only to undercut the british workforce and the countrys earning potential

    its not just about money, its also about fairness for brits who have paid into the tax system for years, its not good failing to provide basic healthcare to them for lack of funds while we can all see hospitals full of the families of (overseas-ed) nationals here on work visas

    its not just about money, its also about incentives, if you give big tax perks to ICT work visa holders of course employeers will bring lots over in preference to hiring brits

    its not just about money, its also where the govt chooses to get its loans from, why drop national savings interest rates so low and loan instead at hirer rates from the international lenders, you may as well let national savings customers have as much interest as the govt is paying elsewhere (and if the banks need to raise their rates to match good!)

    its not just about money, its how you spend it, throwing money at “aid” as a government message is getting more and more laughable, do any of the govt ministers believe we take this nonsense in? they look more and more like pinocchio every day

    its not just about money its what you do with it, more should be being spent on real investment which increases our future earning potential and less on nonsense like road thinning measures which will do the reverse

    unless and until some of this is resolved we will get nowhere

    1. Iain Gill
      January 26, 2012

      and stop spending money on regulators that fail to deliver any basic service, i am prepared to bet a weeks wages that O2 will suffer no sanction from the infromation commissioner for letting the entire planet know the phone numbers of its customers accessing their web sites

  18. alan jutson
    January 26, 2012

    Perhaps the reason why we are still in a mess can be summed up with a simple example of work completed by my Council this week.

    All street lights/lamposts are now being replaced on the A329 to the west of Wokingham.

    They are being placed within 2 ft (600mm) of the originals, so same gap exists between lights, the posts are larger in diameter than the originals, they are higher than the originals.

    I asked a local Councillor why, when the existing ones seemed to work fine, and all original lamposts which are now to being removed, had only been repainted last year.

    He suggested that yes, the originals did seem to work ok, but perhaps the Council needed to spend the budget before the end of the financial year, as it was perhaps a case of use it or lose it, and certain departments budgets could not be transfered to other areas or run over for the following year.

    Not really much else you can say !

    Other than what a complete waste of taxpayer money, which has been taken from businesses and residents, who themselves are facing hard pressed times.

    The last straw, the new post outside my house has not been put in plumb/vertical !

    Reply: I will investigate. Year end spending can be a curse

    1. alan jutson
      January 26, 2012

      Yes its that time of year again.

      I see some paths are being resurfaced like mad all over the place whether they need it or not, whilst other areas in dire need remain untouched.

      Doubtless we will have more white line repainting, and green tarmac spread for cycle lanes again, as this also now seems an annual ritual between January and the end of March.

    2. lifelogic
      January 26, 2012

      Meanwhile the government owned RBS is clawing money back from sound business and destroying jobs all over the place.

      1. uanime5
        January 26, 2012

        Then giving the money to its executives, such as Stephen Hester’s who got a bonus consisting of 3.6m shares in RBS worth £963,000. Oddly the Government, which owns 83% of the shares, didn’t complain despite calling on shareholders to do more to curb the high bonus culture.

    3. alan jutson
      January 26, 2012

      Reply to reply.

      Thanks John, will be interested to hear the result of your investigations.

      If you are given the argument that the new lamps will be more efficient, I am sure you will ask by how much, and then do the calculation of return on capital employed, against the cost of purchase and installation of a completely new pole.

      I wonder if the Council have any of those simple calculations, and what the timescale is, if indeed the new lamps are more efficient at all.

      Did not by posting my comment expect you to get involved, sure you have bigger fish to fry, but thought it a good example of non necessary expenditure, when we are all supposed to be using all assets to maximum advantage.

      The more simple solution (if running costs were the argument) would be to use more efficient lamps (bulbs) with a more sophisticated time management system/control, which could have been installed within the existing poles.

    4. forthurst
      January 26, 2012

      “Year end spending can be a curse”

      I’m sure we all agree, but only legislators can do anything about it. Can there be no general imperative on civil servants not to deliberately waste money? (Obviously, they must still be allowed to waste it due to ineptitude).

    5. Tedgo
      January 26, 2012

      This year end spending thing is not only in local government, it is rife through central government, police forces and fire services. They simply need to roll the budget forward into the next year if it turns out that the expenditure is not essential in the current year.

      When I worked in manufacturing I remember we had large, very expensive, gearbox nearing the end of its life. We put its replacement cost in the capital expenditure budget. It did not fail in that year nor the next so the budget item was effectively rolled forward two years before it was needed.

      1. zorro
        January 26, 2012

        Unfortunately, central government spending is less agile in forecasting its necessary capital expenditure at department level and lower.
        Sometimes units can change their function and purpose, or move accommodation and cannot address the budget requirements properly and sometimes may come well under budget.
        This can often be the case in times of austerity when there can be an over-reaction with no spending on some essentials and it’s not properly profiled. In these cases, sometimes departments or units can have a large under-spend, and then attract the attention of accountants who state that they should rely on less money and threaten their future budget unrealistically. Ideally, one should be able to run over a certain amount, but it is difficult to justify that at times, or it is expressly disallowed.
        In any case, what matters most is that is invested in useful equipment rather than being spent for its own sake…..


    6. JimF
      January 26, 2012

      My parents in Sussex actually had 2 lights outside their bungalow where one was added but the other not taken away. Wokingham is clearly one step more efficient.

  19. Francis Irving
    January 26, 2012

    John – I don’t understand this distinction you keep making between public and private sector in the context of which will boost the economy (and I’m a private businessman).

    If I give some money to, say, a nurse (public sector) and she immediately spends it on a Dyson (private sector), why is that better or worse than if I give some money to a Dyson engineer (private sector) and she immediately gets taxed and spends it on a nurse (public sector)?

    Surely what matters is rate of flow (velocity) of money? Which creates more flow?

    Lots of private sector recipients of money make very bad use of it – at least the Government by and large immediately spend it. Or do they? I’ve no figures on how fast this happens, and it is all that matters. Do you have figures?

    Finally, one other thing matters, *location of spending*. If we’re being selfish for our country (i.e. patriotic, which you generally seem to be) then what matters is where the overall flow gets spent.

    One advantage of public sector spending is that it looks like it would be mainly spent on labour in the UK (policemen, doctors, nurses, bureaucrats). Lots of private sector spending ends up abroad (iPhones, chocolate…)

    Reply: The problem with more public spending is it will require more taxation, which in turn reduces demand from the private sector. Temporary boosts to spending via borrowing become self defeating, as they can lead to higher interest rates and losses of confidence, as we see in Euroland. We have lived through four years of big “boosts” to demand through higher public spending and borrowing, yet the overall result has been less total output. In the past it has needed spending cuts in the public sector to trigger conditions for a decent private sector led recovery. – 1976, 1981,1992 etc

    1. lifelogic
      January 26, 2012

      The distinction is that the state sector often/usually wastes the money on pointless or damaging activity (HS2, solar grants, the Olympics, £670K plus pension for the BBC DG, transfers to the feckless ……….). Individuals and business do sometimes too but far far less often and spend far more efficiently in general.

      See the street light example above. Doubtless the policy next month will be to switch them off to save electricity anyway.

    2. zorro
      January 26, 2012

      More public spending would require more taxation to pay capital and interest charges on the money borrowed. The other options would be to tax less to encourage more wealth creation, or to QE (weakening the relative value of the currency)/print debt free money as a way to stimulate the economy. The problem is knowing when to stop….

      USA/UK are pursuing the QE route but are using this tactic mainly to fund (by the back door) their own spending rather than to use it to stimulate spending in the real economy to encourage demand. The ECB are bowing to the inevitable, having so far publicly defamed any idea of QE….whilst fighting with one hand tied around the back.


    3. Robert K
      January 27, 2012

      The other point about private sector vs. public sector relates to pricing mechanisms.
      In the private sector, the supplier of a good or service seeks to enter into a mutually beneficial exchange with a customer. Myriad such transactions amongst competing suppliers and discerning purchasers creates a market which optimises the good or service and finds the right price for it. This is a process of trial and error – the successful supplier makes a profit; the unsucessful one loses money and ultimately could go bust, if it does not pay attention to the information it is receiving from the pricing mechanism and adapts its prices or product.
      In the public sector, no such mechanism exists. A society needs a healthcare system, but one that is provided by the state has unreliable mechansims to determine what is needed and at what price. The only mechanism the state has to work out whether it is meeting the needs of the users of the services it provides is the amount it spends. That is why, in a nutshell, state spending always increases but the public perception is typically that public money is being mis-directed and wasted (see the post elsewhere here about lamp posts in Wokingham).
      In your example, it may not seem to matter where nurses get their salaries from, on the ground that a nursing service is necessary in society and nurses will buy their vacuum cleaners irrespective of which sector they work in. But the fact that they have a choice of buying a Dyson or an Electrolux or any other brand is a neat illustration of the difference between public and private. The allocation of the resource the NHS nurse provides is directed from the top, remote from the recipient of the service. In contrast, the nurse is ideally placed to determine which type of vacuum cleaner is best for him or her – that decision is idiomatic of the way in which the pricing mechanism stimulates the innovation that is so characteristic of Dyson.

  20. Leslie Singleton
    January 26, 2012

    The Government should simply annihilate the administrative baloney that hampers enterprise at every turn. Friends with small businesses would rather die than hire staff and I don’t blame them. They would rather stay up to the small hours doing even the most routine jobs themselves. In medium sized entities ambition to go up the General Management route is scotched for the most entrepreneurial by the need to be an expert in Maternity Leave and all the rest–by “need” I mean the very real fear of being sued right and left for expensive sums over trivia. Apart from the money what a waste of time. Large businesses devote great chunks of unproductive resources to Personnel, sorry HR, Divisions. There is enormous scope for reducing unemployment if we could cut this nonsense, not to mention the hardly believable NI tax on jobs. People would risk job security if they could be sure of readily getting another job. The Unions do not see any of this as their problem looking only as they do to preserving Members’ jobs already in place.

  21. Paul Danon
    January 26, 2012

    Do you agree with Mr Clegg’s call for higher tax-thresholds? It seems to me that it might both help the poor and stimulate the economy – far better than vanity-projects and Keynesian pump-priming.

    Reply: Yes, I am all in favour of cutting taxes. I would reduce the rate of increase in public spending at the same time.

  22. Shade
    January 26, 2012

    I agree with the main theme of the comments so far which is that the government is too large and is taking far too much out of the economy and that taxes are too high and are a discouragement to enterprise – at all income levels.

    Ideally the state should not take more than a third of the economy but getting from over 50% will be tricky without some fairly blunt instrument cuts – which won’t happen until the bond markets decide that the UK is a basket case.

    However a start could be made on cutting tax based on the principle that the current value of the reduction should be matched on day 1 by an equivalent cut in government expenditure. This would have a double benefit that government would be immediately cut and that the tax take would probably rise thereby further boosting deficit reduction and, ultimately, reducing national debt.

    It’s not going to happen of course since turkeys don’t vote for Xmas.


  23. English Pensioner
    January 26, 2012

    The trouble with government spending is that it is generally very inefficient and rarely gives value for money. If a government department gets some extra money to spend, the first thing it does is to take on some extra staff, which may be good for the unemployment figures, but does nothing for the economy.

  24. Paul
    January 26, 2012

    Scrap the climate change act.
    Silly me, Cameron is a fully committed believer so no chance of any change there.

  25. StevenL
    January 26, 2012

    Two words on this – shale gas.

  26. julian
    January 26, 2012

    2 suggestions:
    1. Promote manufacturing and boost city centre retailing in one package by…
    Giving incentives to developers to create high tech manufacturing parks on
    out of town shopping sites which are economically borderline and brown field sites. Link with Universities which are strong in robotics to create high tech robotic driven industries. Encourage companies to repatriate production from China.
    2. In areas of coastal erosion create coastal barriers using household waste. Use the resulting gases to generate green electricity. This helps to solve 3 problems: lack of landfill sites, insufficient electricity supply and the rising sea-levels.

  27. David John Wilson
    January 26, 2012

    The government needs to change the tax system so that it penalizes imports and helps exports. This cannot be done directly as it would break international agreements but it can be done indirectly.
    1) Reduce employers national insurance rates.
    2) Reduce or even remove VED on commercial vehicles. This can be balanced by a small increase in fuel tax and a similar removal of VED on private vehicles. This points to a plan to get rid of VED completely with insurance companies providing a certificate to be displayed in windscreens after checking for valid MOT and reporting as they do at present to Swansea.
    3) Removing government regulations which are causing imports of some products to increase. For example milk.
    4) Not implementing EU regulations on earlier timescales than the rest of Europe. For example the British pig and egg industries are being decimated by other EU countries failing to implement new EU animal wealfare regulations on reasonable timescales. We need to see the UK taking more of these other countries to court.

  28. Peter van Leeuwen
    January 26, 2012

    (off topic) My compliments to Mr. Redwood for a very intelligent and measured contribution in today’s “the daily politics – BBC) tha t by chance I happened to watch: no public running commentary on the euro’s perils, but, probably much appreciated off the record financial advice to EU partners. In such a role, the UK might be surprised to find an ally in Mrs. Merkel concerning Greek default, the difference remaining whether after restructuring or bankruptcy Greece should stay in the eurozone. The UK should never expect the German to leave their Rhinelandic model (its social market economy) but it could decide to side more with Germany or more with other eurozone parties at the table. At the table, because that would be a much better place than the dogs house, performing self-satisfying bulldog-barking. Now that the international pressure on the eurozone turns to growth, this is an excellent time to pressure for opening the single market for services, for which Mr. Cameron would certainly find allies and for reducing EU and national red-tape for SMEs.

  29. Acorn
    January 26, 2012

    The only thing the UK economy will respond to is a residential housing construction boom. The nation will not take off until house prices take off. We need to blow a decent bubble (again) that will get you past the next election and before inflation takes over in the second half of this decade. That is, when everyone realises that all the temporary QE and bail-out money that has been printed will prove impossible for the BoE – or the ECB for the Euro – to withdraw leaving the currency permanently debased.

    1. Liz
      January 26, 2012

      People on decent incomes can’t afford homes now let alone if they “take off” again. Housing booms are one of the reasons we are in a mess now with all the inappropriate lending that went with them. Let house prices fall to a level averaged income people can afford and not keep them artificially propped up by low interest rates which is what is happening at the moment.

      1. JimF
        January 26, 2012

        Or let the currency take the strain so that wages rise too, just not quite as fast as prices. Everybody’s kind of happy. Hello 1977.

    2. Caterpillar
      January 26, 2012

      What might need to change?

      (a) Too low interest rate and banks not foreclosing so market broken?
      (b) Building land too expensive? (Make brownfield green, greenfield brown)?
      (c) Planning process, building regulations, cultural norms of brick & tile?
      (d) Transport and water infrastructure? (geographical monopolies)?
      (e) Capital gains on residential hones even if owner occuopied but scrap stamp duty?
      (f) Dynamic loan-to-value as anti-cyclical policy, consistent with how the UK uses houses as a savings device?

  30. Neil Craig
    January 26, 2012

    I have said this many times before but no politician, “expert” or commentator has ever been willing to dispute that it would work or to suggest doing it.

    Getting out of recession is perfectly simple and could be done in days if those in charge wanted it. All that is required is to end the gfovernmental regulatory parasitism that engulfs us. Stop preventing the building of nuclear power stations and extraction of shale gas. End the parasitic H&S bnureaucracy – regulations cost the regulated 20 times what they cost government so the 200,000 H&S parasites destroy the work of 4 million Britons. Allow housebuiolders to build without the “planning” regulations that quadruple the price of housing. Etc etc.

    The detailed 24 point programme is here http://a-place-to-stand.blogspot.com/2011/11/we-could-get-out-of-recession-in-days.html in case anybody feels getting the economy moving would be in some way difficult if our masters wanted it.

    1. uanime5
      January 26, 2012

      All removing health and safety will do is make workplaces more dangerous, resulting in employers receiving more lawsuits from injured employees. It will also lead to more people needing NHS treatment for food poisoning (H&S ensure food is safe for human consumption).

      1. Robert K
        January 27, 2012

        Funnily enough, employers don’t want their employees to be injured or killed at work. Even if their morality wasn’t up to it, they don’t want to pay for sick leave or fight lawsuits from staff with tummy bugs.

      2. Neil Craig
        January 27, 2012

        Unimeg 5 it is easy to demonstrate statistically that the extra deaths from having a poorer country outnumber the few dozens of lives the H&S bureuacracy may save by thousands of times. How fortunate we are that none of these thousands of unnecesary deaths weaken us in any way as a nation & thus are of any concern to our masters!!!

  31. badgerbill
    January 26, 2012

    It will be interesting to know how many who come to this country can support themselves or are here just for the money. I see IDS had his wrists slapped for mentioning the number on benefits form abroad.

    Is it policy for government to hide the truth from British taxpayers?

  32. Auror
    January 26, 2012

    I agree with much of what has been posted here by the many followers of JR’s blog. Of all of the problems that have been identified I feel that what is the most serious is the matter that JohnOfEnfield addressed, namely the creation and expansion of new enterprises.

    The large number of regulations and legal complexities that exist nowadays are often dismissed as being no problem for business. Well as long as you live in a world where businesses are gargantuan corporations who can easily devote entire teams to take care of regulatory matters at relatively small cost then this might be true to a certain extent.

    We don’t though, and of course the body of red-tape and regulation poses the biggest problem to people who are trying to either start new enterprises or grow small business concerns.

    What is worse is the effect it has on dissuading younger people from starting businesses. Amongst my peers I don’t think that anyone would seriously consider trying to build up their own business. Largely because it is believed that the barriers are just too big nowadays. People would much rather just create very small concerns, such as consultancies, or try to sell businesses at an early stage.

    I find it hard to imagine that a healthy economy can really exist if it is difficult to create new businesses. If we don’t take this problem seriously then I doubt that we can have any sort of real recovery any time soon. I would be interested to hear how this can be addressed and how soon.

    1. uanime5
      January 26, 2012

      Young people generally don’t start businesses as they lack the capital or skills to start one. Both of which cannot usually be obtained with working in a management level position for several years.

      Also what’s wrong with not growing a business? Some people want a business so they can control their own working hours and are satisfied with being able to live comfortably. Not every business owner wants to be the next Richard Branson.

      1. Mark
        January 27, 2012

        So how old were Steve Jobs and Bill Gates when they got started? 17 is positively ancient!

        1. uanime5
          January 27, 2012

          Bill Gates: born 1955 to a wealthy family, started learning how to program computers in 1968 aged 13, went to Harvard in 1973 aged 18, started a company (Microsoft) in 1974 with Paul Allen aged 19, left Harvard in 1975 to work for Micro Instrumentation and Telemetry Systems (MITS) aged 20, Microsoft became independent in 1976, 1980 Microsoft buys 86-DOS from Seattle Computer Products (SCP) then turns it into PC-DOS, 1980 sells PC-DOS to IBM (Gates is 25 years old), 1985 creates Microsoft Windows, 1991 Microsoft becomes independent of IBM (Gates is 36 years old).

          Bill Gates succeeded due to developing skills at an early age, and having rich parents who were able to give him a high level of education and support his company. Also Gates bought the operating system that later became MSDOS, he didn’t make it.

          Steve Jobs: also born 1955 to 2 students, adopted by another couple, enrolled in Reed College in 1972 but dropped out after 1 semester, 1976 Steve Wozniak creates the first Apple computer (Jobs aged 21), 1980’s Apple Lisa computer is created, 1985 Jobs removed from being head of the Macintosh division and he resigns, 1985 Jobs founds NeXT Computer and convinces billionaire Ross Perot to invest in it (Jobs aged 30), 1997 NeXT acquired by Apple, 1997 Jobs becomes CEO of Apple (Jobs aged 42).

          While Steve Jobs didn’t have the financial resources of Bill Gates he also had a lot more problems. He also resigned from the company he helped co-found because they didn’t like him and didn’t have independent success until he was 30.

      2. Auror
        January 27, 2012

        @unamine5 : Well I’m not talking about your average 15 year old starting a business, hence the “younger” as opposed to “young”. I’m more talking about enterprise as an option for people who have perhaps already gained some experience and maturity in standard employment, but who have the spark and ideas that could become a business.

        To pick up on Mark’s reposte : I think Steve Jobs was around 21-ish and I don’t think he’d finished at uni when early Microsoft got going. Similarly Jobs was about 21 when Apple was founded. Michael Lynch the founder of Autonomy probably founded his first company around the age of 25 (which is closer to my meaning of “younger”). So I agree with Mark : Lets not be too quick to write off entrepreneurs whether they be young or younger.

        As regards growing business : There is nothing wrong with not growing a business. Its entirely the owners choice. My concern is with those people who would like to grow their businesses but find regulation an impediment. Surely that can’t be right?

  33. Dr Bernard JUBY
    January 26, 2012

    I’ve said this before so won’t say it again – just forget about the minority of big businesses, remember that the bulk of businesses in the EU are micro (95%) and please read the Manifesto/Budget submissions of the Federation of Small Businesses. I have to declare an interest as I was National Chairman for three years.
    All the answers are there but governments don’t take any notice since they get large donations from the big guys and want to keep them coming.

    1. Richard
      January 26, 2012

      I totally agree with you having been involved in the small business sector all my life.
      Government concentrates its policies on the requirements of big business.
      If it were to reverse this policy and focus on helping small companies, they would spend less and gain far more.
      Help new companies set up and expand because if every small business in the UK was to employ just one or two extra people unemployment would be largely eliminated.

      1. alan jutson
        January 26, 2012


        The government simply does not understand the needs of a small business, full stop.

        Just look at the make up of the cabinet Ministers, and the opposition front benches.

        Not a clue between them.

        So what do you expect.

        That is why nothing much is done to help them, or should I say plenty is done to hinder them.

      2. Tony Hammond
        January 26, 2012

        Money printing rewards the government and the biggest businesses – As they can sell bonds cheaply raise huge amounts of cash and get thier hands first on the newly printed notes before the unsuspecting sheep have all theirs devalued.

        Indeed, in Weimark Germany there was a massive rise of speculation in the stock of companies becoming bigger and bigger through consolodation and comgolmeration as these companies could borrow and buy up assets with cash before it devalued. The most famous of these was Hugo Stinnes.

    2. nicol sinclair
      January 26, 2012

      yes, and I was a ‘small’ businessman until it became too difficult. I have now closed down and laid off the staff (Country House Hotel)

      1. Robert K
        January 27, 2012

        What was your experience of the regulatory environment when you were running your hotel? Was that a significant reason behind closing it?

    3. Alan Wheatley
      January 26, 2012

      One way for a large company to increase its market share is to take business from other companies. If large companies can change the business environment in such a way as to make operating more onerous, then they are much better placed to cope and small business will wither or fail.

    4. uanime5
      January 26, 2012

      It would have been more helpful if you posted a summary of your suggestions and a link to the full Manifesto. This make it much easier to determine what you’re proposing.

      1. Electro-Kevin
        January 28, 2012


        May I ask – what is it that you do for a living ?

  34. outsider
    January 26, 2012

    1) Strongly agree with most of what Shiney and JohnofEnfield say. To mop up unemployment, the smallest businesses should be exempted from most employment laws and the under-21 minimum wage needs, at least, to be cut to the apprenticeship rate. There is already much abuse via volunteering and work experience.

    2) In the short run, the best the Government can do is to help confidence and reduce uncertainty. We need less talk about spending cuts that are not happening.
    Even now, it would be much better to stop most compulsory redundancies in the public sector and, as you wisely suggested, rely on a three year ban on recruitment, except for front line workers, particularly under 25s.
    We need the Chancellor to tell us that turmoil in the eurozone poses little threat to the UK economy, rather than using it as an excuse. He also needs to remind us that in real terms (IE gross value added) the economy is still expanding at more than 1 per cent a year on a rolling 12 month basis and is likely to continue doing so.
    It is fine to boast about low gilt yields but to most people in the private sector that just means lousy pension prospects.
    The Bank of England needs to stop claiming that we are still in a state of permanent emergency and revert to a conventional Taylor-rule type policy. How can anyone save for a deposit on a home with zero interest rates and above-target inflation?
    At the same time, the Chancellor/Biz Sec needs to come to an agreement with the main mortgage lenders that borrowers will be allowed to cap payments (if necessary to interest-only) for at least a year if and when interest rates rise.
    Any radical change disrupting the private sector (eg banking reform, cuts to solar subsidies) should be scrapped.

    3) The biggest burden on most households is housing costs and the easiest way to stimulate output in the short run is via the construction sector. So cut VAT on construction, home maintenance and extensions to 10 per cent (which will not cost too much) . And set aside £1 billion a year for a £20,000 per home subsidy for what I hate to call “affordable” homes until the next election in 2015, repeating the successful Conservative policies of Macmillan and Chamberlain.

    Sorry that is “cut tax and spend” but I think it will quickly pay for itself. It could be recouped by announcing that this 10 per cent VAT will apply to new homes after 2015, encouraging the big housebuilders to use their generous banks of land with planning permission. Thereafter, it will effectively be a fairly painless tax on planning gains and should not affect the price of new homes unless there is an (unlikely) housing surplus.

    As I have suggested before, our long-term economic problems are tremendously intractable but, hey, let’s at least get things moving a litle faster.

  35. Bernard Otway
    January 26, 2012

    I have said it before and will do so again NOW. The cost of government,and by that I mean all of it,National and local can be cut by at least 20 % WITHOUT losing a lot of staff.
    This last week I PERSONALLY have ANOTHER example of this GROSS INEFFICIENCY
    among MANY that have happened to me and ONLY since 2008 when I arrived back from 30 years in South Africa,AND I CANNOT BE A SOLE MAGNET FOR THIS TYPE OF THING,
    there must be many many thousands.I had an appointment with the local cataract clinic for Saturday 21st Jan which I had to postpone,I duly telephoned at least 10 days before,they would not give me a new appointment over the phone but said they would confirm by post.
    I received this new appointment duly a few days later, included in the envelope were duplicate EXACT copies of the 5 forms and information leaflets sent with the ORIGINAL appointment signed by the SAME clerical worker.I will take the duplicates UNFILLED IN

    1. Bob
      January 26, 2012

      Due to the cost and inefficiency of Royal Mail, I now send all invoices, statements etc. by email, and payments by electronic banking.
      Saved a lot on stamps, envelopes, letterheads, laser ink and time.
      But efficiency is not a concept familiar to the public sector.

  36. sm
    January 26, 2012

    Well it wont happen but..

    1) Stop contributions to the EU and preferably exit to an EFTA arrangement.
    2) End all immigration for work purposes-unless the the work visa is priced to include all social costs and the training of a legal resident to equivalent standard.
    3) Restructure the systemic banks more quickly, so they can fail.
    4) Steve Keen a, modern jubilee- debtdeflation blog linked prior.

    Simplify the tax/benefit system to a flatter system to encourage work,economic activity and to reduce tax avoidance & evasion activity.

    a) Merge NI/Paye, bring in a general anti avoidance rule,cap tax reliefs,consider a minimum tax % proposal.
    b) equalize income tax for individuals with small company rates and other entities.
    c) Limit the amount of leverage available to buy a property based on its rental yield.(Steve Keen)
    d) Remove the tax relief available on existing builds for BTL, unless property is unlikely to attract owner-occupier interest.
    e) Reduce the tax relief on new BTL mortgages over say 10 years or as they naturally unwind.

    Finally if we haven’t already unofficially asked the IMF , it may be worth getting to know their thoughts and publishing it. It may have a Greek flavour to it.

  37. Iain Gill
    January 26, 2012

    what do you think about Newt Gingrichs promise to build moon colonys if he wins the presidential election? any idea who we could nominate to go live there?

    1. alan jutson
      January 26, 2012


      Not heard of this proposal, but will they get involved with Quantititive easing of the dollar, or use their own currency.

    2. uanime5
      January 26, 2012

      Given that the colonies will initially be to house those who will be mining the moon I’d have to recommend someone with mining experience, preferably young so they’ll survive the journey into space.

      1. Mark
        January 27, 2012

        Unfortunately geologic surveys of the moon to date don’t reveal any kryptonite…

        1. Bazman
          January 28, 2012

          What about cheese?

  38. Mactheknife
    January 26, 2012

    “What should the government do now to help the economy”

    First identify the problem. People and businesses have money to spend but we are in a climate of fear and in such times we save rather than spend -even if we recieve nothing in the way of interest on our savings. Some government policies eg “Green” energy are causing major probelms. We must reverse this and address some policy issues:

    1. Personal taxation
    2. Energy policy
    3. Business red tape
    4. Benefits (25K is still way to high)
    5. Corporation tax
    6. EU red tape and contributions
    7. Immigration policy
    8. Deportation of foreign criminals (about 10,000 + in our jails)
    9. Local authority spending particularly on “non-jobs” such as “community advocates” or “Corporate literacy Officer”.
    10. Implement ANY policy which gets rid of Huhne and Clegg.

    Just about covers it I think.

  39. Max Dunbar
    January 26, 2012

    Does Cameron have the power to help the economy or is he just swept along with the rest of us in a tide of EU red tape, judicial interference and the malevolent “establishment” framework created by Labour? I really cannot see a way out at the moment unless he can ditch the Lib-Dems and have a mandate to get a grip from the electorate, and that includes getting a grip in Scotland too; because if he loses the UK that is all he will be remembered for – not the economy.

  40. lola
    January 26, 2012

    And what about scrapping all the sclerotic reg-yew-lay-shun that strangles enterprise?

  41. Tony Hammond
    January 26, 2012

    Your faction of the Party is NOT getting the message across about what exactly the private sector squeeze concept is ; The private sector, by growth in Government Spending is squeezed by the growth of the subsequent tax burden on consumers incomes or it’s own profits, or higher interest rates if borrowed.

    All I have seen in the Newsnight and other debates this past week is the conclusion by the bigwigs and Labour party spokesmen who failed to spot the huge credit bubble that more government spending is needed (Keynsean Stimulus) and more Money printing (QE).

    I would also be agruing more forcefully that the inflation and handouts from savers to mortgage holders is also a great cause of slow growth and is squeezing consumers and creating malinvestments in resources.

    What happened to the Conservatives standing for Sound Money, Fiscal Prudence, and limited immigration?

  42. Jon
    January 26, 2012

    There is an area I think where this government is spot on. Trade missions, lots of them, good that the Mayor of London does the same.

    After all is anything else largely just shuffling money around. We need new money and that’s a sale job. Its plenty of tickets and shoe leather, business delegations anywhere and everywhere.

    Okay there are ideas to over heat the economy but you pay for that later. After the war America did really well from all the scientists who escaped from socialist tyranny. Its more long term but create a similar encouragement perhaps in our universities for the best brains in the world to find sanctuary and a good lifestyle here., something like tax free sponsorship funding.

  43. Rebecca Hanson
    January 26, 2012

    What about creating the infrastructure for the big society then? If that’s in place people will thrive and become more constructively active.

  44. Bob
    January 26, 2012

    “I have never understood and nobody has ever explained to me effectively how the Treasury can justify taxing somebody who is on the minimum wage.
    … Nigel Farage

    Read more:

  45. Adam5x5
    January 26, 2012

    It’s simple.
    Cut taxes and cut the size of the government.

    To quote a couple of great Americans:

    Great Government Quotes

    “Those are governed best who are governed least.”
    — Thomas Jefferson

    “Government is not reason, nor eloquence. It is force. And like fire, it is a dangerous servant and a fearsome master.”
    — George Washington

    The quickest, easiest and best way the government/politicians can help to get the economy out of trouble is to cut the size of the government and hence the taxes required to support it.
    The state sector is in many areas which would be better left to the private sector – or left undone. Areas where the state has to be the sole provider should remain as are(defence, police). Everything else (health, admin) can be contracted out to private firms who are more efficient.
    These contracts will have to be renewed regularly, open to competition and subject to strict criteria with severe penalties for failure. But the end result is cheaper and better service for the taxpayer.

    Some areas can be dropped from the state sector/government remit altogether. We do not need many aspects of the meddling at all. Do we really need advertising campaigns telling us to eat 5 portions of vegetation a day, funded by the taxpayer? Or to have publicly funded awareness campaigns about the latest fashion of cancer on the radio every day?

    (Side note – I stopped listening to one local radio station recently because they were playing an advert for bowel cancer repeatedly at breakfast and in the evening after work. The advert seemed to just be a test to see how many times someone could say ‘poo’ in 30seconds, with descriptions. Puts you right off your all-bran… Even more galling when you realise you’ve paid for it.)

    I realise that the politicians are not going to suddenly decide to cut the size of the government – ie. cut their own jobs. This is why the country has no hope left until the next revolution.

    More money in our pockets = more growth as we have more to spend.

    If you want a quick one though – cut the tax on fuel and energy. Could be done in days. Noticeable difference in prices would follow through in weeks – it would reduce inflation considerably and put a lot more money back into the pockets of those who actually do the work.

  46. sym
    January 26, 2012

    I think the government has it all wrong. They keep thinking about how to spend our money to generate growth, when their spending is mostly a value-destroying exercise, thus a non-starter.

    Want growth?

    Reduce the size of the state to no more 35% of GDP. Anything else simply requires so much taxation that it’s a huge drag. People and businesses currently feel like they’re working for others, not for themselves. Reduce taxes, drastically.

    Introduce a pro-business agenda. Not the hogwash Vince Cable does. Since when the business secretary’s single preoccupation is class warfare? How does that help? We need sensible and flexible employment laws. The minimum wage should be adjusted, as unemployment is too high. Get rid of payroll taxes, they are counter-productive. Stop with hypocrisy of pretending that NI is any different from the normal tax. We know it’s just a way of splitting a bigger number into several smaller ones, so we might not notice how much you take from us.

    Just stop with the “green” madness, another value-destroying operation. We need cheap and clean energy such as shale gas. That’s the future. There’s no man-made global warming, the average temperature stayed about the same for the past 10 years. The models predicted a 4 degree rise and Holland underwater. The models are wrong.

    Open up large bits of the economy, currently under underperforming, expensive state monopoly, to the private sector. The NHS should be optional – there’s no reason why anyone shouldn’t be free to choose his or her own health care provider. Unless of course you’re terrified that too few will actually stay with the NHS. School vouchers should be introduced and it should be easy to open a private school. Not only rich kids but all kids should have a shot at better quality, private schooling.

    Drastically reform welfare. No person able to work should get unlimited welfare. You need to put time limits on it, otherwise it will always be a life style choice. The housing situation is very expensive for the tax payers and hugely unfair to them. Some work hard and pay mortgages, some simply get their house paid for by the former. It’s absurd. People are continuously punished for doing the right thing. Some buy a house and make sure they have secure jobs until having kids. Others use their kids as welfare currency, and the former are paying for it. Any such system is like gravity; you put in absurd rules, you get out absurd results. More and more on welfare, having more children than the tax payers.

    Of course you won’t fix anything, there’s no critical mass of politicians to pursue to a freedom, personal responsibility agenda. Instead they want to play with our money and tinker here and there, pretending they do important things and provide “services”. Class warfare is the zeitgeist. The reality is that the system is unsustainable and sooner or later it will crash completely. No growth will be possible until then, there’s no basis for it.

    1. uanime5
      January 27, 2012

      Reducing minimum wage will just make the situation worse as its akin to putting a tax on those who earn the least.

      Real science has shown that global warming is real.

      Giving the health service and education to the private sector will send the country back to the Victorians times when education levels were low and life expectancy was short. If you want to change the existing system I’d recommend using health/education system from countries that have better health/education systems than the UK, not worse ones.

      Unless you can magically create jobs putting limit on the length of time you can claim welfare won’t fix anything. If you don’t like the cost of housing benefit them figure out a way to reduce the cost of housing as rising house prices are the primary cause of rising housing benefit.

      1. Mark
        January 28, 2012

        Reducing minimum wage prices more people into jobs, so that perhaps they can improve their skills and productivity by getting some experience and justify a larger wage.

        Real science has shown that there is a pause in the warming trend that was evident in the latter part of the 20th century that has lasted a decade: climate models are now in a state of flux as some of the assumptions behind them have been shown to be wrong by real experiments such as CLOUD at CERN.

        Education in Victorian times was to more rigorous standards than today’s. Children of 9 and 10 had reading, writing and arithmetic standards that elude today’s GCSE candidates. I agree we might do well to achieve the standards in say Singapore, where health are outcomes are better and cheaper to provide, and where education standards are rather higher in public sector schools.

        The one thing I agree with you on is the need to deflate the housing bubble.

        1. Bazman
          January 28, 2012

          A job paying less than minimum wage is worthless to the employee and the state. If the job cannot pay six quid a hour then it is not viable.

    2. Bazman
      January 28, 2012

      It might be a lifestyle, but how much of a choice is debatable. Starving em’ aint going to work. What you are proposing is to make uneducated and often desperate people more desperate with your middle class ideals.
      What is need is more education and a greater difference between benefits and work. This means higher wages not lower benefits.
      A company paying poverty wages when making multi million pound profits is unacceptable. Often the wages are so low the employee can claim tax credits. In effect a subsidy to the company.

  47. uanime5
    January 26, 2012

    My recommendations are as follows:

    1) In order to ensure that companies spend their money more efficiently introduce legislation that bonuses should be limited to 25% of the person’s base salary, and the maximum salary anyone can earn in a company cannot be more than 10 times the salary of the lowest paid employee. This will reduce the number of overpaid executives and give companies more money to spend on hiring employees.

    Under this system the CEO of RBS wouldn’t get a bonus of £1 million unless his base salary was £4 million and the lowest paid employee in RBS earned £400,000.

    2) It’s unfair that NI is 16% for earnings under £844 per week but only 2% for earnings over £844 per week. I recommend replacing this either with a flat rate of NI or a rate that is higher for those who earn the most.

    3) Scrap the 2 year long Work Programme for the unemployed which isn’t working and use the money saved to retrain the unemployed so they have the skills employers require. Obviously the unemployed person should be free to choose which course they want and have the option to select none of these courses if none are suitable (making a person attend a course they don’t want to attend for a job they don’t want to do is a waste of time and money).

    1. Mark
      January 27, 2012

      Wouldn’t it be better if the base salary was just the benefits maximum, with everything else dependent on performance?

      Don’t you think schools should be doing a better job of turning out people who are employable, with basic skills such as reading, writing, arithmetic, punctuality, ability to concentrate on the job in hand, polite behaviour…?

    2. lojolondon
      January 27, 2012

      Why should a ‘richer’ person pay NI at all?
      ‘Richer’ people contribute to Bupa, fund their own pensions, send their kids to private schools, so never draw on the NI.

      If life was fair then ‘richer’ people would would be exempt from NI.

      1. uanime5
        January 27, 2012

        Just because rich people choose to have private health insurance, pensions, and schools is no excuse for not paying taxes.

        If life was fair everyone would earn the same salary, like in Sweden.

      2. Bazman
        January 28, 2012

        They are often rich due to the infrastructure of this country which includes healthcare and even if they are not, live under it’s umbrella. We are not just ‘The Help’.

    3. JT
      January 27, 2012

      3) Scrap the 2 year long Work Programme for the unemployed which isn’t working
      and scrap all work / training programmes.

      They give no better outcomes than if unemployed people followed their own route.
      If employers want skills, train staff — out of the profits of the company.

      Don’t socialise the costs and privatise the profits.

      And bear in mind how firms like A4e are stripping money out of the system for no real benefit .. (and bear in mind the stats that are thrown out, are just numbers manipualtion)

      Create a Social Insuance system — which covers all benefits
      Managed from a department of the same name

      DWP is scrapped… Inland Reveue gets back to collecting money

      Rememer 80% of all welfare recipients are working.
      Remember how disasterous the scrapping of the 10% tax band was – was it 5 million pulled into tax
      Put those two together …. its the hard workers round the fringe that are getting squeezed badly…. so raise min wage and raise tax threshold to £14k
      tax after then at 15%, 25% and 40%
      and tax all personal income the same… ie income, interest, divi’s, cap gains … add up the total and tax it

  48. Do we need the BBC?
    January 27, 2012

    I may have missed it. Has there been a single piece of red tape removed by this government?

    I heard about a bonfire of the quangos, but didn’t that turn into the removal of a couple of blokes and a dog?

    I heard about cuts, but all I see is transfers of money from useful services to less useful services. And spending rising.

    Clearly Labour are an absolute joke, but we shouldn’t pretend that this is anything like a Conservative government. I’m not convinced the liberals are genuinely holding the Tories back, I just think they give them an excuse not to fight the hard battles.

    1. APL
      January 27, 2012

      Do we need the BBC?: “I just think they give them an excuse not to fight the hard battles.”


      But honestly, can you see Cameron sticking to a policy in the fact of rising unemployment and public spending cuts?

      The man has no spine!

  49. Robert K
    January 27, 2012

    How should government help?
    Get out of the way.

  50. Robert K
    January 27, 2012

    Some of the answers to your question are quite specific, but many fall into the category of wanting the government to get out of the way.
    Trouble is, that’s not what governments want to do.
    So my question is this: how can the state persuade and be persuaded that its most fruitful course of action is to diminish itself?

  51. F.Cunctator
    January 27, 2012

    Many ideas put forward in these posts for how one might stimulate the economy. While improving the economy might have some small effect on the cultural failings of a declining nation there must be, in parallel with economic improvement, measures to effect a change in social attitudes. The heart of the national has systematically been destroyed, either by ‘mission creep’ and small debilitating changes one after the other or by a Frankfurt School agenda. In truth it is probably a combination of both. However, the real question is skated over and brushed under the carpet, until there is a realisation that we have a population which is at least 10,000,000 too many large, any of the solutions suggested above will merely shift the focus of our problems from one sector to another. Without some means of population control and reduction all other discussion is futile. Since any form of population change is other than continual increase and further destruction of homogeneity is immediately condemned as fascism and racism by the centre left cohort, there will be no discussion of the problems we face and hence no long-term solutions will be found.

  52. Conrad Jones (Cheam)
    January 27, 2012

    The Government needs to understand where money comes from.

    Mr Redwood, forgive me the direct question but do you think that it is good for the economy to have Banks create 97% of our money supply, given the International Nature of Banks?

    (from the Bank of England, 30 Nov 2011)
    M4 money supply = £2,110,601,000 [2.11 BILLION pounds]

    M0 (Table A.1.1.1) = £61,167,000 [61.17 million pounds]
    2.89% of M4.

    If we had the same amount of debt free money (issued by the Government) as we did in 1963 (approx: 20%) – this would represent a total of £ 422,120,200.
    an additional £361 Million that could be spent into the economy.

    What I find hard to understand is – and perhaps you’ll help me understand this; if Public spending reached £512.2 billion and the money supply only contains £2.11 billion, where does the £510 billion come from ?

    Reply: Money circulates rapidly in year. Wider money is higher than your figures.

    1. Conrad Jones (Cheam)
      January 27, 2012

      Thank you.

  53. DiscoveredJoys
    January 27, 2012

    I may have missed it, but has there been a recruitment freeze for civil and public servants?

    If not, why not. If there has been, is it working or is it being worked around?

  54. RD
    January 28, 2012

    Could start with rebuilding the army.

Comments are closed.