There is understandable frustration that the Uk economy is not growing. It gives everyone interested in economics and government policy the opportunity to fly their favourite kite, offering it as a solution to the big question of how do we achieve a decent rate of growth. There is a danger in such a situation. Some of the ideas mooted have little or nothing to do with promoting growth. Some will be positively harmful. Yet they all get a showing on the media because it is the fashionable topic.
Recently we have heard the idea that we need a wealth tax. I know of no countries that have taxed themselves into greater prosperity. We already have three wealth taxes in this country – Capital Gains Tax, Stamp Duty and Inheritance Tax. Income Tax is steeply progressive, with the top 1 % of income earners paying 25% of the total tax take. The Chancellor is right to rule out the idea that an additional wealth tax would solve the problem.
We have also been told that building a third runway at Heathrow would do the job. As critics of this scheme have pointed out, even if the government did suddenly accept this proposal, no construction work would take place this side of the election, given the long delays which the planning process would impose. There is a big issue over London’s airport capacity which the government needs to solve, but this is no quick fix for growth in 2o13.
The Chancellor lets it be known that he is not suprised to be unpopular. He did in Opposition regularly predict just this development. He also used to predict that by now Conservative MPs would be queueing up to ask him to go easy on the cuts, pleading with him to spend more. Instead, more Conservative MPs are pleading with him to control public spending, and offering him list after list of items they would like to see cut, usually starting with some of the items in the overseas aid and EU budgets and going on to cutting subsidies to nationalised businesses.
This autumn will see, we are told, a new Bill to promote economic growth. It needs to centre on curbing the appetite of the state for more spending and regulation. It needs to allow the private sector to supply the broadband links, the new roadspace, the power stations and the gas and oil flows from domestic sources that we need to power an industrial and commercial recovery.
September 2, 2012
Spot on as usual,the cuts that are called for fine,but,who will be the first to call for the repeal of the 2008 Climate Change Act and to stop the subsidies to all renewables,if not no politician can will be taken seriously about this country being competitive in the global jobs market!
September 2, 2012
Indeed.
September 2, 2012
That was my immediate reaction, too. We need something that will put money back into people’s pockets so that they can spend it more wisely than the state does. There’s only a limited number of ways of doing this, and they mostly involve cutting taxes. So get rid of the green taxes on our power bills, that will help both hard-pressed individuals as well as companies. The companies that benefit from these ridiculous subsidies are mostly foreign-owned anyway, so their loss will be our gain. While we’re at it, how about slashing fuel duty by 10P, that will help motorists and truck drivers. And since the 2.5% hike in VAT has only allowed the government to continue to live in its over-spending, money-printing fantasyland, let’s really start some genuine stimulus by cutting VAT to 15% across the board. All this means a loss of revenue to the Treasury, of course, but since the current plan of cutting the deficit exclusively via tax rises has obviously failed, let’s indeed switch to Plan B and reduce the deficit via tax reduction funded by public spending cuts. That’s much more difficult than raising taxes, of course, which is why nobody in government really wants to try that route, but it will work.
September 2, 2012
We were told BEFORE the election that the deficit would be reduced by an 80% cut in the state and a 20% increase in taxes. We have only seen the increase in taxes, where are the cuts?
You are right to point out that we could save £22 billion annually overnight by stopping foreign and EU aid. Such an own goal that only the blinkered and inexperienced lifetime politicians could do this. Add the “Greenest Government ever” vanity project so that we have the highest possible energy costs driving our industry abroad, stopping our pensioners heating their homes all based on unproven science. More windmills/solar panels that don’t work and use more energy in their construction than they’ll ever produce and requiring back up power plants to comply with our EU masters 2020 directive. This would not have happened a generation ago as politicians had life experience, common sense, integrity and strength of character to resist the false profits in the eco religion. 0.034% CO2 in our atmoshere does not and cannot alter weather. Its a trace gas and plant food. Volcanoes produce more of it than we do, but they can’t be taxed.
Why don’t we add a few 1000 EU work regulations so that it doesn’t pay to employ someone or if we do make it cheaper to hire Eastern Europeans whilst leaving 6.5 million of our own economically inactive. Whilst we’re at it allow 7 million non EU people into the Country in the last 15 years to ensure our Health, education, housing, infrastructure and other public services are at full capacity.
No other Country on earth has abused its indigenous populations so much. It really is time for a change as the mainstreamers are all the same.
September 2, 2012
Osborne has implemented Darling’s spending cuts, but he has certainly not introduced the ones he promised or the 80/20 split. We have had tax rises to pay for welfare pay rises of 5.2%, VAT increase so everything is more costly and many turn to cash in hand to mitigate. Certainly no 80/20 split. Huge increases to the EU, no cuts there, MP pay pension and expenses continue at the rotten core of Westminster (Kelly reports collecting dust), no change there, civil servants continue to be paid huge bonuses, no change there, local authority bosses continue to be paid and paid off with huge sums of money, no change there. BBC employees avoiding tax as well as Whitehall staff, no change there.
JR has regularly called for proper spending cuts on this blog and actually points out the sham of the claims too deep too fast. Public spending is increasing. JR is wrong, Osborne does need to do something. it would be helpful if he took control of the budget rather than leave to civl servants while he goes on a jolly to the US to fly in his big plane to watch a basketball match. Obama is no friend of the UK. ANy doubt? Think of BP, think of the recent attacks on the British banking industry, think of the Falklands. Horrible socialist full of hot air and bluster. These are the only similarities I see between Cameron and Obama.
Osborne is unpopular not because of what he promised, but what he has failed to deliver and the incompetent manner in which his failure is seen as well as his, and Cameron’s, poor judgement on everything.
Rumours abound that David Laws will be back in cabinet- instant sigh of relief as our saviour or bewilderment why he is allowed to stay in public office without (further-ed) investigation??
September 2, 2012
I agree fully.
Also David Laws should simply resign as an MP not be given any position of trust at all. He did what he did, quite knowingly and even after all the MP expenses arrangements had been exposed in great detail – did he not? I am surprised it has not been considered (further-ed).
September 3, 2012
(Personal comments on David Laws deleted as they were not in my view accurate, but I have no wish to set out in different language facts that were clearly established by the enquiry into his conduct and are on the public record-ed)
If we have to have Libdems running the country, it would at least help to promote someone like Laws, who seems to have a little experience in finance and intelligence. He will be out of a job in two years time anyway.
September 3, 2012
One assumes David Laws will have the usual, ever bigger government, more green tosh, anti businesses line, pro evermore regulation of everything, anti any sensible airport or planning developments, antidemocratic, more HS2 and ever more EU. The usual Libdem/Cameron approach – so clearly better he is not given any job anyway.
September 2, 2012
Spot on the money. Where is the response from JR? Are you all on a Bank Holiday Weekend???????????????
September 2, 2012
Bang on there Brian
September 2, 2012
So is it not right then to ask Osborne ‘to do something’, when this ‘something’ is to reduce taxes and to cut spending?
I would have thought that Osborne would ask himself what went wrong when conservative MPs are not asking him to go easy on the cuts, as he predicted, but ask him for more cuts!
September 2, 2012
I’m reminded of a few air crashes or near-crashes – particularly a genuine Aeroflot one and a fictitious Michael Crichton one – where in fact, all the pilot had to do was let go of the controls and allow the aircraft to level out. In the Aeroflot case, 75 people died because the crew clung to the yoke and fought the controls – desperate to ‘do something’, frantically doing everything but the one thing that would have saved them: nothing at all.
In this case, just relaxing the state’s death-grip a bit would help. Does the small business (1.2 FTE) I work for really need to report and pay taxes on a monthly, quarterly AND annual basis (PAYE/NI, VAT and corporation respectively)? Likewise, does my student loan balance really need to be tracked by the Student Loan Company, but collected by HMRC, with periodic data and money transfers – don’t HMRC already have a system for collecting arrears which could do the job internally?
(Replacing corporation and payroll taxes with a flat turnover tax would help: simpler, easier to enforce, and fixes ‘unjust’ situations like Google’s substantial UK turnover getting transferred to Ireland.)
September 3, 2012
The only Aeroflot disaster I found that killed 75 people was one where the pilot thought it would be a good idea to let his children fly the plane. Then they disabled the autopilot.
http://en.wikipedia.org/wiki/Aeroflot_Flight_593
September 2, 2012
Spot on the money. Where is the response from JR? Are you all on a Bank Holiday Weekend??????????????? OMG – the bloody ISP has failed me – again. Nepal is not-so-good!
September 2, 2012
He should be increasing taxes and cutting spending, but even the cutting spending is shrinking the economy as spending is often via private companies. How was the Olympic stadium funded? I’ll tell you by the government paying private contractors who paid smaller contractors. My boss was worried last week as large supplier was refusing to pay our small company until the government had paid them, but still asking us for credit. Fortunately when further credit was refused, paid up. This knock on effect would have effected local shops and pubs if our boss had pulled the plug on the company, and as he is well past retirement age and wealthy, could easily do. Tory supporters cuts fantasy in a nutshell. As long as they do not effect you huh?
September 2, 2012
Karl Marx,
I suspect the late payment was due to the notoriously inefficient way in which public sector bodies are run. A good reason to keep as much money as possible out of state hands.
Your boss would probably decide to put his feet up if he was targeted for the tax rises you advocate after a lifetime of risk taking and striving to build a business. Or would you only squeeze a ‘super rich’ minority that are willing to work just as hard while paying more and more tax … a mythical group of individuals that only seem to exist in the minds of Labour voters.
September 3, 2012
Well unless the ‘super rich’ minority can find jobs in another country paying a salary of £150,000 to £1 million there’s nothing they can do except pay more taxes.
September 3, 2012
Most large infrastructure projects would not get built if left to the private sector and you assume my boss only runs the runs the business for financial gain and nothing else and something like a tax rise would be the end of it. What needs to happen is this ‘mythical’ group of the super rich who it has to said do not contribute anywhere near the amount necessary to fund this country, but get pandered to at the expense of democracy pay what they are supposed to pay and the companies making billions in profit from the state pay the share of the taxes required and stop hiding behind legal tax scams whilst receiving subsidies in many forms the worst one being allowed to pay wages so low that the state is obliged to supplement these workers in order to allow them to live at British standards.
Lots of people having money to spend is what creates jobs and businesses. That is the basic idea of demand-side economics and it works. In a consumer-driven economy designed to serve people, average people with money in their pockets is what keeps everything going. And the equal opportunity of democracy with its reinvestment in infrastructure and education and the other fruits of democracy is fundamental to keeping a demand-side economy functioning. This idea that a few wealthy people the “producers” hand everything down to the rest of us “the parasites” is fundamentally at odds with the concept of democracy and in democracy the rich are supposed to pay more to cover things like building and maintaining the roads and schools because these are the things that enable their wealth. They actually do use the roads and schools more because the roads enable their businesses to prosper and the schools provide educated employees. But it isn’t just that the rich use roads more, it is that everyone has a right to use roads and a right to transportation because we are a democracy and everyone has the same rights. And as a citizen in a democracy you have an obligation to pay your share for that. Ram it.
September 4, 2012
Don’t be so silly Karl Marx…
The idea that the non existent ‘Tory cuts’ could result in your gaffer not being paid for work that was already sanctioned is with respect, the most ridiculous argument I have heard in a long time. But lets put that aside.
I see the same old fashioned Lefty bitterness, and an ad hominem attack (“as long as they do not effect you huh?”) thrown in for good measure but I see very little logic in your arguments.
As usual with those on the left you seek to confuse and bamboozle your opponents with drivel rather than present reasoned arguments in a logical way.
Are you in favour or higher taxes or not I still have no idea ?. Do you want a higher minimum wage then ..how far above France and Germany’s do you want it to be ?
Your just advocating more of the giant ponzi scheme in which more and more people work for the state…that’s kind of thinking got us into this mess in the first place. It’s the logic of ‘pulling yourself up by your own boot straps’.
So who are these ‘fat cats’ filling their troughs that have the trillions needed to pay workers over minimum wage and keep the family credit/incapacity benefit/housing benefit gravy train rolling with tax reciepts..lets have some names please ?.Push that.
September 4, 2012
I did not say the reason for non payment was Tory cuts. Where does it say this in my post? My pint was that large infrastructure projects are government funded. The giant ponzi scheme is the subsidy of companies in particular Banks paying next to no tax whilst receiving subsidies from the state in many forms the most scandalous being the state subsidising their wages via the tax and welfare system. The idea that if the state reduced service and the private sector would fill in the gap is a fantasy. Modern society is much more complicated than this and as I have mentioned a certain standard of living is an entitlement ion this country. If you do not agree than say. Would modern Britain find 1900’s levels of state services acceptable? You know the answer.Robert Tressell’s Britain. Ragged Trousered Philanthropists? There would be riots. Lots of people having money to spend is what creates jobs and businesses. Not as I pointed out ‘parasites’ and ‘producers’. I f you are to stupid top understand this then ram it.
September 17, 2012
Karl Marx,
As is usual when defending a left wing position you have to resort to ad hominem attacks. Why ? – because you are trying to defend the indefensible.
You have no automatic ‘entitlement’ to a certain standard of living over and above someone in Asia or India . It has to be earned by doing something useful. If you think that the free money merry go round of the Brown years is an entitlement then you are ‘stupid’.
Yours is the logic of pulling yourself up by your own bootstraps. Why doesn’t the government employ another million people and solve our economic problems ?. Why not pay people to dig holes then fill them in again if it is that easy ?.
Unfortunately you and many other people in powerful positions are too foolish to see that if government perpetually borrows £1 and only gets back 75p then it is doomed to a spiral of debt interest it cannot repay.
September 2, 2012
Inheritance tax? Only paid by those without the wherewithal to avoid it by setting up family trusts.
Ask George Osborne and David Cameron if they are prepared to close this tax loophole and how many Cabinet colleagues are beneficiaries of family trusts.
Over time the average family, stung by care home costs, will pay less IHT as their equity is eroded faster than any other group i.e. those on benefits or those who put their wealth into trusts.
September 2, 2012
Avoiding IHT by trusts is not now that simple and there are capital taxes on trusts and the transfers to the trust too. More pointless work for lawyers and accountants.
September 2, 2012
Also the needless (other than largely for tax reasons) creation of artificial contrived structure that make the investments costly to administer, inefficient and distance the funds and the settlor/beneficiary needlessly and add risks and costs. All thank to daft tax laws and over tax, borrow and waste governments.
September 2, 2012
Again, spot on the money.
September 2, 2012
The government needs to really cut spending, not increase the debt by another £600m over the next few years. The deficit might have been cut a bit, but it’s still a deficit which means the debt is rising. Now it is true that a government can look to the very long term, longer than a typical 25 year mortgage, to plan things but in reality this hardly happens as changes in government mean that initial plans are thrown out the window by the new lot (typically Labour who spend instead of save).
It’s good that you recognise that infrastructure spending is not the way to get out of recession. Such projects always take many many years to finish by which time the recession is usually over.
And it’s also good that you recognise that wealth taxes don’t work. Taxes do need to be cut because it’s not government spending (cf. infrastructure) that gets the economy going, it’s business. And if business is paying taxes then they can’t lower the prices and make their products competitive in the world market. It also means that within the UK customers are also paying higher prices.
Lowering taxes doesn’t mean less tax income overall. You tend to get more as more transaction happen which means an increase in small bits of tax (VAT) rather than one or two bigs bits of tax (Mansion Tax). It’s the same thing that makes for a good company – turnover. A company can either survive on selling a huge number of products with a narrow margin or a small number of very expensive products with a large margin. Trying to emulate the latter with taxes means mansion taxes but there aren’t enough mansions to help the whole country. So it means the other method is the way to go. Another reason why lowering taxes means you get a bigger tax income is because it becomes less worthwhile to avoid it so smuggling and avoidance drops. So you also don’t need to spend money on policing either. A win/win situation.
The other nice thing would be to drop a lot more regulations. All regulations do is hinder the start up of new business as they have higher hurdles to jump to just get going. Regulations help large companies as they can afford to have whole departments just handling the red tape. Small companies cannot afford this cost and so it means that they can’t start. Regulations if ever really help the consumer.
September 2, 2012
Agree fully with your comments about a whole range of suggestions being aired in the media.
But perhaps George Osbourne has bought this all on himself.
The deficit is growing not shrinking.
The debt is growing not shrinking
The savings promised have not materialised.
Tax rises have been many, when it was suggested there would be few.
Benefits had an increase of 5.2% when many workers have seen a reduction in wages.
Banks are not lending because they have been told to strengthen their reserves.
Interest rates are at an all time low, except when you want to borrow.
Savings rates are at an all time low.
QE has devalued the currency, and reduced annuity rates.
These are all the responsibility of the Chancellor.
His response, almost silence.
No wonder people are suggesting all sorts of things, they perhaps just want a response !
September 2, 2012
These points are all indeed all true alas. But is the main problem Mr Osborne or the fact that Cameron lost the last, sitting duck, election and thus has Clegg (with his idiotic, green bigger state, LibDem policies), standing on his throat.
Or does he perhaps rather like this position.
September 2, 2012
I quite agree. There are few easy fixes to the problems in your list (apart from freezing the index linking of pensions and benefits for a temporary period).
Supply side reforms and tax cuts to encourage entrepeneurialism are more long term benefit and need doing but will take some time to feed through to growth.
In the short term we need to set the national budget based on no economic growth for the next few years. If there is no growth it will be prudent. If there is growth then we have a windfall to pay down debt and deficit.
September 2, 2012
@AJ
Solution: Goodbye Mr Osborne, hello Mr Redwood.
September 2, 2012
Hard to think of a better way of expressing where we are. Well done. I would add, however, that the result of all this is that the low-to-middle income workers and pensioners are paying for this lack of vision and drive on the part of the Chancellor.
Until he grasps that the substantial numbers of such caught up with it are unlikely to have spare cash to spend on anything other than essentials, nothing will change.
September 2, 2012
Well said Allan
John we have no growth because we don’t have Capitalism. Our economy is strangled by regulation. That is the one simple idea.
For and until the leadership of all the main parties realise this all that will happen is more borrowing, more debt and no growth. All the suggestions in the posts above are part of this concept, as is extracting ourselves from the EU which will take 10 years if we started today.
Its no good reducing a tax here and there if it doesn’t go hand in hand with reducing regulation. I’m not plucking these concepts out of the air, but the lessons of history are there to guide us if we care to understand them.
For those of us that read your blog I would guess the biggest worry is that there is not one sign the current Tory leadership has a single clue about what to do.
September 2, 2012
Alan – you’re spot on.
The question to ask is why is Osborne effectively implementying the Darling plan?
If we wanted that we’d have voited for it.
Ricght now it’s the absolute worst of all worlds… The BBC, Guardian et al are kicking the daylights out of the Tories for cust.. when there haven’t been any.
And the only comeback to the BBC, Guardian et al is for the economy to right itself… Well it won’t happen without supply side reforms, whihc Osborne seems intellectually unable to grasp…
Hence I and many like me will vote UKIP. IF the Tories cannot be responsible with the economy well out into the widlerness for you bozos…
September 3, 2012
@Johnnydub
“The question to ask is why is Osborne effectively implementying the Darling plan?”
For the answer to that question, google “The Collectivist Conspiracy”.
It dispels the notion that Labour and Tory are substantially different.
September 2, 2012
Spot on. Perhaps another idea is that people would like to know what Osborne and Cameron stand for other than socialist politically correct green babble that is costing us all a fortune. I can wait for the next round of elections, the sooner they go the better. Brown was better at the budget than Osborne and long after he leaves office people will remember him for that.
September 2, 2012
And again… Spot on!
September 2, 2012
Don’t forget that Osborne’s plan was high Government borrowing for 2 years in order to get the economy growing at 2% or higher, then with all the extra taxes revenue he could end the deficit, and eliminate structural debt in one Parliament. So far he’s borrowing more than Brown but because growth is flatlining he has no way to pay it back.
Osborne’s plan has failed and the economy has suffered as a result. This is his fault and no one else’s.
September 3, 2012
Zero growth is a consequence of reducing the horrific annual deficit inherited from Labour, and it may continue. The alternative was the road to ruin.
To deliver his deficit reduction strategy, the Chancellor must reduce total public expenditure by 5% in real terms, comparing FYR 2013/14 with FYR 2012/13.
Now will you take your head out of the sand? A horror story? Yes indeed it’s a horror story. The UK is about to experience a hard landing, and the more we dither and delay the worse it’s going to be.
September 3, 2012
Given that Osborne isn’t reducing the deficit and has been constantly increasing it why are we still having zero growth?
September 2, 2012
What is needed, as we all know, is far less of the state sector throttling the private sector and bleeding it to death. A sensible (non green religion) cheap energy policy, easy hire and fire, and an uplifting vision of sensible government and no chance return to labour in 2015. What we have alas is Cameron/Clegg and the anti business secretary Vince Cable.
Heathrow/Heathwick is no magic bullet and is indeed long term but it would show a sense of direction and a five runway hub airport at Heathwick with a 15min HS train link. This is surely the cheapest, best and fastest solution. It need not cost that much and would self finance unlike the Olympics, HS2, green energy nonsense and most of the nonsense from the state.
Still at least we finally have a no squatting rule. It is amazing to hear how many on the BBC are clearly in favour of people breaking in to and stealing other peoples properties. Some seem to thing these people are even doing the owners a favour and “look after it for them”.
Well certainly not in my experience where most of the woodwork around was burned to keep themselves warm and much was stolen. Worse still I even had to pay money to lawyers to rid myself of them always a rather painful thing to have to do and against my principals if avoidable.
Perhaps they should also be allowed to smash into peoples car too and sleep there in “BBC think” – preferably in the BBC car park.
Still I suppose soon the court of human right will decide that the squatter’s rights to a family life are superior to the rights of the property owner not to have his property stolen. With the BBC cheering on again perhaps.
As you say we have plenty of wealth taxes and those in place can (when combined) already easily steal 75% of people’s wealth (in real terms) for the state over perhaps just 20 years. Then it can be frittered away on green and other nonsense by politicians.
Just a sensible vision of less EU, less government, cheaper energy, less green religion, fewer regulations, fewer lawyers and no Labour government in 2015 is the quickest way to growth. But with Cameron and Clegg what chance is there of this.
September 2, 2012
Interesting to see the background behind Tim Yeo and hit recent, uncharacteristically sensible, outbursts on the development of Heathrow and his “Mouse or Man” rather sexist and animalist attacks on Cameron.
http://www.telegraph.co.uk/comment/9513677/The-Chinese-puzzles-of-chairman-Tim-Yeo.html
Also yet more horrendous stories about our “child protection services” what on earth is going on here? Sounds like the usual level of state sector competence, causing huge damage and harm and all at tax payers expense.
September 2, 2012
Also George Osborne, says “there is no easy road to fixing the economy” well perhaps not but he might at least tax the car out of reverse. With paternity leave, gifts to the PIGIS, gender neutral insurance laws, no retirement laws, green energy tosh, no sensible banking and all the rest of the regulatory nonsense inflicted on us all every day.
September 3, 2012
Given that the European Court of Human Rights rejected prescription in the case of J. A. Pye (Oxford) Ltd v The United Kingdom it seems unlikely that the ECHR would give squatters any rights.
http://sim.law.uu.nl/SIM/CaseLaw/hof.nsf/0/dffb7ed5c7c4b9dec12570b900408028?OpenDocument
September 3, 2012
Is any other source of news daring to question the squatters law? And what changes would you like to see to make it more easy to hire and fire given the ease at which it can be done now? Almost everyone in my trade is employed through agencies and can be hired and fired at will. I don’t talk to agents or agencies they have been fired.
September 2, 2012
Spin of which Alastair Campbell would be proud. Half way through the Parliament Osborne has just followed Brownomics, I hear he is being called Continuity Brown. He has missed the boat bigtime with his complete lack of appreciation of what is needed to overhaul our economy. He clearly is not a dynamic Chancellor and even if he had a change of approach a full Parliament is needed to achieve anything, that of course is assuming the dead weight Liberals are returned to where they belong on the back benches.
September 2, 2012
I’m sure I am not alone in despising the murine Cameron and his sidekick for kowtowing to the Liberals so making the mess we were in even worse. If the last two years have proved anything it is that a Coalition between totally disparate partners is impossible, indeed disastrous. Just how low can a third party be in the polls yet be allowed such influence solely on the basis that they hold the balance of power? The reductio must be 49.5, 49.5, 1.0. In future there should be an immediate second election. Anything is better than this lunacy. Of course it was Cameron’s fault allowing “grace under fire’ (no worries from Ashdown about why he is under fire) to have equal status in that debate. Cameron must have been using the same brain cell(s) he has used on Homosexual “Marriage” et cetera.
September 2, 2012
There is a real need to change to focus away from “more lending” to “more investment”.
We are in a mess because households, business and Government took on far too much debt and now have to reduce that to get back to sustainable levels. However, we hear business has “billions” sat in cash on its balance sheets and there are investment funds around the globe seeking returns greater than the paltry 1% being achieved from Government bonds.
We must change corporate tax rules and the CGT regime to encourage equity investment. This has two advantages. Equity is usually invested for the long term – and the right CGT regime will encourage that – and it creates increased capacity, boosts productivity and as such leads to higher profit and tax receipts.
That is where “the Government should do something about it”. Get private equity working again!
September 2, 2012
It is clear that the UK economy is overtaxed and that government spending takes an excessive share, crowding out the private sector. In the Mail on Sunday I read the PM claiming credit for some difficult decisions that should reduce pressures on public spending. But I was interested to read this:
“But we have to remember the fundamental truth at the heart of this debate: you cannot borrow your way out of a debt crisis. Countries across Europe have found there’s a tipping point where piling on more debt isn’t just counter-productive, it is lethal – because you slam the brakes on growth….We are pulling Britain out of that trap.”
The last comment about pulling Britain out of a trap surprised me. It seems to me that the hole he is digging is getting deeper and deeper.
He also says:
” We’ve cut the deficit by a quarter already, and we are sticking to this course: rejecting the easy path; restoring sanity to our finances; keeping Britain safe.”
How does he work that out?
It would be helpful to know by what means and definitions the PM calculates that the deficit has been cut by a quarter. Are you able to illuminate this claim for the rest of us?
September 2, 2012
Of course Osborne should be ‘doing something.’ Just not what the liberal-left, represented by Clegg and Cameron, want.
He should be cutting fuel duty – that will give the whole economy a boost.
He should be cutting the Quangos. There has been no bonfire – the few cuts don’t even represent a damp squib.
Overseas Aid should be cut.
Hague should be told that we will be funding no more foreign wars – let alone participating.
The ‘green energy’ taxes should be scrapped – along with subsidies for useless windmills.
We should start the process to detatch ourselves from the EU.
What was the point of a General Election in 2010? Labour was kicked out, but what we’ve got anyway is a Continuity Blair Government and a Continuity Brown Treasury.
This country needs REAL change and it isn’t going to get it via LibLabCON. You’re all useless.
September 2, 2012
George should do something. Cut tax and cut spending. The rest of the government should spend their time cutting regulation. That’s it. Nothing else at all. No stupid initiatives, no ridiculous meddling in the housing market, no grandiose white elephant projects. Just cut, cut and cut again.
September 2, 2012
Its the impression of Cameron et al present that worry me after 2 and half years. He appears weak and unable to control the government. The phrase get a grip springs to mind. In the forthcoming reshuffle there are 5 cabinet members who do not want to be removed. David Davis has made a strident intervention and will speak next week about more tax cutting and less spending which should have happened right at the start of this administration. The question for the remainder of this parliament is, does the government just carry on with more of the same or do they become more radical and conservative by cutting more and spending a lot less. There appears to be great tension within the Coalition with Clegg calling for a wealth tax. Osborne blames the EU for our double dip recession and pushes for the euro to survive in its present form which Davis disagrees with. At this time it is interesting that David Davis has surfaced and no doubt many contributors to this site will call Davis a Maverick etc. I think Davis has intervened at the right moment and would of been my chioce for leader anyway, could this be a leadership challenge in the making, I hope so. With Cameron and Osborne at the helm this government will not be elected, they are very out of touch with the electorate and need to be replaced, interesting times.
September 2, 2012
“And how about this quote from the good Federal Reserve Bank Chairman on 60 minutes for support:
(SCOTT PELLEY) Is that tax money that the Fed is spending?
(CHAIRMAN BERNANKE) It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.
The Chairman of the Federal Reserve Bank is telling us in plain English that they give out money (spend and lend) simply by changing numbers in bank accounts.” If you haven’t found this already, just have a read and don’t dismiss it until you have read it all. I propose it from a technical not a political stance. http://www.moslereconomics.com/wp-content/powerpoints/7DIF2.doc .
I said many moons back that the coalition had come into office with economic ideas that are two decades out of date. Osbo’ has yet to convince, or even tell me, what the f*** he thinks the problem is; and, what techniques he is using to repair the economy. Old style slash and burn Viking style, ain’t going to do it.
I still think we are at the stage where someone has pushed the car into a garage and said “it don’t go; what’s wrong with it; how much to fix it. The car has been in that garage for over two years and I am thinking, that garage don’t know how to fix it.
September 2, 2012
“The Chancellor lets it be known that he is not surprised to be unpopular. He did in Opposition regularly predict just this development.”
We thought he would be unpopular for cutting the dead wood from the bloated state, not for continuation of Gordon Brown’s tax, borrow, print and spend policies.
In opposition he said that Quantitative Easing was the last resort of a desperate government.
We needed a John Redwood as Chancellor of the Exchequer, but we got a Gordon Brown.
We needed a Maggie Thatcher as PM but we got a Ted Heath.
September 2, 2012
Business and social policies of the previous government have had a time lag that is affecting the economy now e.g.
Increasing Employers NI to 13.8%, fuel and energy taxes increasing, insurance costs increasing through extra taxation, extra holiday costs,
Encouraging flexible, part-time working then criticising the results of this policy by moaning now about too many part-time jobs, well if more people want flexible part-time work the other side of this is that the half of the job they no longer want to work has to be covered by someone else part-time! More part timers = less taxes due to personal allowances and potentially more tax credits and social benefits to be paid out.
Full holiday pay being covered by employers when staff are off work sick for long term increases the potential sick leave bill to small businesses of £3000 per employee (and more for those earning over £18,000 pa).
Age Discrimination legislation that means workers only move on when they want to or they are dismissed. Holding on to jobs that they want to change to more flexible terms that suit them but don’t suit the business, it causes a blockage in the promotion opportunities down stream and dampens ambition. Also the over 65 aged worker pays no Employees national insurance so the younger generations are expected to make up the tax shortfall with this reducing opportunity. I read recently that there are one million people over 65 working now and then people wonder why there are an increasing number of under 25’s out of work, to every action there is an equal and opposite reaction isn’t that the saying? This will take years to adjust if ever.
September 2, 2012
“to every action there is an equal and opposite reaction isn’t that the saying?”
Newton’s third law of motion.
September 2, 2012
There are potential advantages of stock rather than flow taxes, so to identify the ‘wealth tax’ terminology with existing taxes such as capital gains or other, alongside the DPM’s suggestion for an additional wealth tax, is in danger of missing the opportunity created for the Chancellor. The Chancellor could indeed consider decreasing existing taxes but introducing a wealth tax, some potential advantages are even listed on wikipedia – http://en.wikipedia.org/wiki/Wealth_tax – some problems are also listed there.
September 2, 2012
Osborne on Andrew Marr just now – some say you should make it easier to Hire and Fire:- Osborne in reply “I want to make it easier to Hire”. To make it easier to hire it clearly needs to be easier to fire too – is he too daft to see that or just too pathetic to have the courage to make the point?
He sounds far more like a central socialist, top down, tractor production planner than a lets get the government out of the way person to me. Still he is clearly a little better than Cameron, Clegg and Cable.
September 3, 2012
How difficult is it to hire and fire through agencies temporary contracts, self employed and many other ways? Compulsory redundancy is does not even cost much for full time employees who have been in the job for years. Do you want it made more easy to fire someone who asks about safety equipment? This idea of a legal cash in hand system is a fantasy.
September 5, 2012
It’s very difficult to fire permanent workers with one years service, especially if they go off work sick part way through the disciplinary process, thus some businesses use temporary agencies so they have longer to make hiring judgements or don’t hire at all and use contractors so that they can terminate contracts as the business changes.
Compulsory redundancy is very expensive and you can’t make someone redundant if you want someone else in a similar role.
Why would a company fire someone that asks about safety equipment? You’d be in a tribunal faster than you could say fired. It could be made easier to end contracts for staff that aren’t productive in your organisation and hate their jobs, demoralising others, generally being belligerent, not prepared to make effort or changes.
September 6, 2012
Why would a company fire someone that asks about safety equipment? Err! Let me think you can help too.
Compulsory redundancy is this expensive.
http://www.direct.gov.uk/redundancy.dsb
In many cases of what you are talking about and a worker with one years service has few rights is about firing workers to get in cheaper employees who can be manipulated more. There is often an underlying cause for workers taking the piss and more often it is the managers. “Is that all you’ve done? No matter how much work is done. Expecting definites whist not willing to give any themselves. Mainly wanting to hire and fire at will in revolving door recruitment policy using a command and control management system. They then wonder why the contractors are useless and why they can’t get the staff, blame the government and anyone else except themselves.
It is in fact a management technique that is of course denied. Exploitation the available workforce or avalible for what they are offering the customer is sometimes part of the game believe it or not excepting poor work for a low price. Prevent in the manufacturing industry where components are hidden and do not move as such. Like car subframes and chassis. I should know as I worked in this industry for 15 years. They rammed it and so did I with a fat cheque and no goodbyes.
September 2, 2012
The building of a third runway at Heathrow should not be trivialised as ‘on or off’ as it is by some according to its short-term economy stimulating effect. It is needed now in England’s long-term national interest and from which economic growth will follow, and the process to build it should begin urgently, because there is no doubt we need more capacity, and in London itself, not miles away. The infrastructure is largely there already. Short-termists and ditherers have damaged our national interest over this and many other things in recent decades. Other countries are gaining while we continue to delay to endlessly appease all manner of lobbyists and political interests. We need to be practical and realistic.
As for the economy, the answer is CUTS! CUTS! And a simplification of the tax system, and by that I mean fewer and lower taxes. The last thing we need is higher ones or wealth taxes demanded by the loony-left LibDems. And benefits reform. Set the people free, to earn more and keep more and thus spend more of their own money and reduce dependency. Do it quickly.
And cheap energy. And no more wind farms or hydro schemes. They are a colossal waste of tax-payers money, are very inefficient and an attack on the natural environment far greater than any new power stations. Secure and reliable generating capacity is needed.
We need courage in our leaders, people with strong hearts, where are they?
The time for social and political experimentation is over – there is a big problem to solve.
September 2, 2012
Indeed it is only a strip of land right next to the motorway get going on it they Gatwick and the HS link we need a real hub to connect short flights with long.
September 2, 2012
The economy is getting seriously scary.
In last week’s Spectator, Martin van der Weyden said that the biggest five US banks were up for over $250 TRILLION dollars in derivatives. They are, apparently, still trading them.
Our total government economy is somewhere in the region of £800 billion. (250 trillion is 250,000 billion.)
We hold a lot of guarantees and indeed control of a lot of British banks which are exposed to this coming disaster.
I am planning spending next Christmas in Iceland to see what happens when banks bring a whole economy crashing down.
PS we spend some 50% of our national income on non jobs according to Douglas Carswell too………..
September 3, 2012
I can tell you the bare bones about Iceland. After their banks defaulted, their GDP contracted by 16% over a few years. It was dreadful but growth is now positive again. You’ll need to buttonhole people in bars, cafes etc if you want to know about the bad times.
September 2, 2012
George Osborne strikes me as a likeable man. (So too David Cameron)
I expect that the State is more permanently and deeply entrenched than he ever imagined.
September 2, 2012
I think it a bit rich of Mr Cameron to criticise ‘Nimbys’ for holding up planning applications.
The people didn’t vote for a 4,ooo,ooo rise in the country’s population in ten years.
September 2, 2012
I’ve just had a preliminary look at budgeting for zero economic growth up to FYR 2015/16, working in 2012 prices. The Chancellor must not expect to maintain such low interest on government debt and I have allowed for it to double. To stick to his deficit reduction strategy, he needs to reduce total public expenditure by 4% in 2012/13 in real terms and by 2% in real terms in each subsequent year. Even that would leave total public expenditure in real terms higher than in FYR 2001/02, the start of the great binge.
Given that he is likely to miss the 2012/13 target by a country mile, he will need to reduce total public expenditure in real terms in 2013/14 by at least 5%. To retain the confidence of the markets, he will need to make the announcement in his next spending review (October?).
Now does everybody realise why I have been calling for an end to index linking of benefits and a freeze on public sector salaries as a contributory measure?
September 2, 2012
We urgently need a tax that is going to take more from those who actively engage in tax avoidance. One way of doing that is to tax their assets in the UK rather then their income. One of the assets that can easily be taxed is their property through a mansion tax or in my view a much easier tax to implement, namely higher council tax bands
September 3, 2012
David
Why do you want to raise taxes even more to encourgae more waste and spend.
Why not make them live within a known tax take, which is LOWER than now.
Do you really want LESS disposable income ?
September 3, 2012
The way to prevent tax avoidance is to avoid ruinous levels of taxation.
The problem with our economy is not that the government take too little in tax, but rather their excessive and reckless spending habits.
September 2, 2012
John , the two earth tremors at Preese Hall took place on 01/Apr/2011 and 27/May/2011 .
15 months later and the Govt still haven’t given the go ahead for hydraulic fracturing to resume and there is no timetable for them even to make a decision .
Gas prices are going down but Ofgem is approving price rises by and for the big 6 wholesalers in the middle of the harshest recession in memory .
Here is an easy plan that even Cameron could implement :-
i) Announce that Climate Change is important and warrants it’s own Department ; Department of Climate Change DOCC .
ii) Get DECC to split themselves up into DOE and DOCC .
iii) Close down DOCC .
Why must the whole country suffer so (privileged people-ed) can rake in loads of taxpayer money for wind turbines ?
September 2, 2012
Cameron sidelined a whole generation of politicians in order to create an almost entirely new party, the ‘not the nasty party’ party. Cameron clearly believed that good governance is the same as good PR. Why would he believe it to be anything else, after all that’s all he knows about outside politics?
This government, from the PM down, is not up to the difficult task it was bequeathed by Labour. Relying on his ‘Mainframe Computer’, Oliver Letwin to negotiate the Coalition agreement was a disastrous error of judgement, resulting in the government being riddled throughout with incompetents and wreckers and saddled with typically airy-fairy wet liberal agenda. Add to that the continuing reliance on Letwin and Osborne’s ‘brilliance’ in strategy and economic ‘competence’ and it’s hardly surprising that this government is a slow motion train wreck.
When people are appointed to senior positions in industry, they are assessed on their prior track record; it is hoped and expected that will learn on the job, but will also bring to it a wealth of experience and record of wise judgement. Is the present government even learning on the job? Does an almost complete lack of experience mean they are totally out of their depth?
September 2, 2012
@steve
IHT can be avoided by setting up a family trust-I wish, you obviously no nothing about family trusts, I do, because I am in one and we have paid huge amounts of IHT. The myth that family trusts avoid IHT needs to be exposed and they are not only for the wealthy, take note.
Reply7: Indeed, for a Uk taxpayer trusts do not offer a way round tax.
September 2, 2012
Indeed the best way to get round UK taxes is to be nondom, married to a nondom or not to live in the UK at all and take your money out of it. Or to live on benefits or the black market. That is what Osborne’s tax system tells people and that is what may do.
September 2, 2012
Cameron is now speaking of cutting through red tape and getting things done, but he’s said all this before. I read somewhere that 80% of new regulations come from the EU, so is Cameron prepared to so NO to the EU ? Of course he’s not, the LD’s and the mandarins in Whitehall will not let him ignore any EU directive or legislation.
Every other country in Europe ignores EU directives they don’t like, even the French and Germans who instigated them in the first place ! But will we…..no” its just not cricket old chap”.
Someone should remind Cameron that his popularitywas at its highest when he said no to Europe. Are his advisors paying attention ?
We now read that cutting through planning regs is on the agenda, and about time to. Our Soviet style planning laws are outdated and need a complete overhaul for the 21st century. As one who has been looking to build my own property for the last twent years I can not tell you how frustrating these laws and regulations are. You can find land but cant build on it because its in the “wrong place”. If you do find a plot where they will allow you to build the cost is massive plus some of the hoops you have to jump through for the local authority are unbelievable and clearly designed to ensure you will never build anything.
September 2, 2012
Increasing the Capital Gains Tax threshold would help a lot. Many people still do not know that cash in the bank is not earning as much as shares in say, BP, would, if only in dividends. An increase to something more in tune with present times would encourage people to invest their excess money in the private sector, to dare to take on the risk the banks are supposed to be avoiding. Creating growth involves risk and we are all in this together so reward us and let us keep the benefits of rewards for taking on risk and the economy will grow.
As for Heathrow and the busy airways over the Thames Valley – a lot of flights going over us are on their way to Amsterdam because Heathrow has not the capacity to take them all. There would not necessarily be more overflying but there would be more jobs and business in the Thames Valley servicing planes.
September 3, 2012
If you want significant extra capacity for London airports, Gatwick is the place to build first. We are permitted by planning agreements to open a new runway in 2019, so we have 7 years to do all the design, including any replanning of terminals, and the inevitable Public Inquiry.
Incidentally, I am not sure that transit passengers generate a lot of income. People coming to this country are much more important.
We should abolish BAA now and let the airports compete with each other. If Heathrow is popular, then a premium can be charged to sweat the asset.
If we go ahead with Gatwick, then it gives us a few years breathing space to think about other projects. Remember that we won’t have a mandate for a third runway at Heathrow until after 2015, even if we change policy.
September 2, 2012
“Yet they all get a showing on the media because it is the fashionable topic.”
Would that that were so.
One looks in vain for a discussion on the BBC state broadcasting monopoly of the options of cutting regulation, quitting the EU, cutting the £200 bn Labour added to government spending *after accounting for inflation), allowing the free market to work & in particulaqr allowing as much shale and nuclear power as there is market demand for.
This is (A) the policy of the 3rd party, UKIP & (B) one which would certaionly allow us to not only get out of recession but to match the non-EU world average growth rate of 6%.
If there is an explanation other than deliberate (word left out-ed) censorship, on party lines, by the state broadcasting monopoly I would be intereseted in hearing it.
September 2, 2012
John,
Love the website but you need to modernise it. If you make a contribution and make a spelling mistake or grammatical errror you have no opportunuty to self correct and suffer the consequences as I know to my cost, don’t just agree John DO something about it now and stop procrastinating. Even the DT has the aforementiond facilities, come on John get on with it and get with the new technological age. Final point , John, what about this referendum on withdrawal from the EU, make it happen!
September 2, 2012
“If you make a contribution and make a spelling mistake or grammatical errror you have no opportunuty to self correct and suffer the consequences”
What consequences? Is there something I need to know?
September 2, 2012
Are you all on Bank Holiday? Only 4 responses…
September 2, 2012
The coalition was formed to reduce the deficit was it not? I totally agree with the O’seas aid and EU budgets. Someone needs to go through these line by line and explain where this money is going.
On O’seas aid we know there are instances where agencies will put it to good use – we also know about the £300 million to India which they do not need. I would like someone to have a look at the schools budget in Pakistan, how many schools have been built with UK aid money with evidence of where they are etc.
On the EU its no good agreeing to increase their budgets a penny more when governments all over Europe are having to cut – If anything the EU budget should be cut at the same rate as overall UK government should be getting cut (5% PA) – If the Govt just enforce this, what could the EU do about it?
The message is if the Tories want another term and a majority, they need to show that they are looking after UK interests through actions rather than words.
And this fake green windmill thing, prove that building huge turbines cut overall emissions with good solid data shown from building the things, to moving them to situ from wherever they come from and erecting them, followed by the energy used to dismantle or throw the policy into the dustbin!
I accept the solar panel of roofs thing because you can show a long term pay back but the big turbines don’t cut it.
September 2, 2012
“solar panel of roofs thing” or Photo Voltaics do not make a real pay back without subsidy, they are clearly absurd. Putting them on a roof and in the cloudy northern UK is even dafter as they cost even more to maintain and clean.
But they are shiny and visible so do show the neighbours that you “care” and have more money than sense.
September 2, 2012
I agree Mr Redwood. This pressure is the oldest trick in rhetoric, identified by Aristotle and St Thomas Aquinas. I believe it’s called the “illicit major premise”, since the first line does not account for all possibilities, just one of many:
Something must be done.
This is something.
Therefore it must be done
– regardless of how useful “it” is or whether “it” really solves the problem. As for Heathrow, I’m in favour of a third runway because we need more capacity for planes, not because it will fix the economy.
September 2, 2012
“Mr Osborne is right to resist some of the pressures on him to “do something””
The whole Government should stop doing things – things like taking our money and spending it. It’s governments “doing things” that got us into this mess.
I firmly believe that most people don’t need incentives to make money any more than children need incentives to eat ice cream. Just get out of the way and let them get on with it.
September 2, 2012
A wealth tax… presumably to tax the wealthy. It would only hit those who cant afford to use professional avoidance tactics.
Why not just bring in a robust anti-avoidance rule? Make capital gains chargeable to income tax rates, with an indexation allowance? Then simplify with a flatter system with a higher taxfree allowances at the lower end.
1% of an estimated 21 trillion dollars is a lot of tax, all governments could use to pay for the current subsidized political/banking fraternity.
Meanwhile we could allow asset prices to fall? and as debt money shrinks we should spend the money on infrastructure funded directly by governments. Priorities should be import reducing/export enhancing improvements. Border security, visa handling etc.
If we have congestion at the Dartford bridge where is the relief bridge or extra tunnels, if needs be paid by the present toll? This type of toll should be hypothecated to bridge building maintenance.
As we deleverage the banks we need to replace the debt money extinguished with real money issued debt free by government by spending as above.
Most people probably dont realize the assets they have have been bid up in price by our debt booms. Pity most people dont have net assets, except for the 21 trillion offshore.
September 2, 2012
[…] Mr Osborne is right to resist some of the pressures on him to “do something” There is understandable frustration that the Uk economy is not growing. It gives everyone interested in economics and government policy the opportunity to fly their favourite kite, offering it as a solution to the big question of how do we achieve a decent rate of growth. […]
September 2, 2012
So the poor simple Coalition Leadership’s response to the crisis is predictably useless ..more legislation in the form of a new Bill to promote economic growth. Who knew it could be that easy!. Less not more of the big government nanny state is needed.
By the time Osborne and Cameron realise they made the wrong call on the big issues the history books will be written. Now is the time for a more robust response from the more savvy back bench Conservative Mp’s.
As usual with the Coalition leadership , the policy implemented is the reverse of the course of action that is needed. Mr Redwood must feel more than a tinge of shame that the ‘Conservative party’ reputation is being dragged through the mud.
September 2, 2012
Yes, just stick to Plan A or rather look to implement it. It just seems we are moving away from cutting spending on the State as being a priority.
A select committee thinks £800m pa could be saved by privatising the property management.
A few years ago on the communye into london were two civil servant peoperty surveyors for government properties. They were boasting about how they were getting back something. This was done by always parking in the short stay car parks at Heathrow or Luton when they went to see properties in Edinburgh. One of the bills they boasted about was £1500, every trip though came with atleast a several hundred pound parking bill.
We can cut, the above that I heard on the train suggests its endemic as it would no doubt be authorised by their managers and audit/expenses dept.
Mr Osborne just needs to cut public spending which most of us voted for. That will make them look more closely where they are wasting money.
I don’t dissagree with what the Chancellor says I just want him to implement what he says.
September 2, 2012
A new runway for Heathrow is a stopgap for a new airport built to the south. Compulsory purchase and quick legislation will get things rolling. Thank god there isnt a war on! We would lose by the time MPs came back off their holidays.
September 2, 2012
Buisness as usual on the SS Titantic.
September 2, 2012
A new bill in the Autum to promote growth – wow. QE was supposed to promote growth. Low interest rates were supposed to promote growth. The front bench have not just lost thei way they have run out of ideas. 2015 cant come quickly enough
September 2, 2012
I mostly disagree with your “Diary” today.
A Wealth Tax, despite what you say, seems to me to have little to do with Prosperity. I am not exactly Left Wing but I am ready to face up to the idea of wealthy people paying, perhaps one-off, to reduce Government Debt– but this is solely because high Debt is dangerous and so to be avoided or, as now, curtailed.
Debit Government Debt
Credit Government Cash (from Wealth Tax)
………. has no effect – no direct effect anyway – on Government Equity. It is simply the patriotic thing to do and to my mind has nothing to do with the jealous gibberings of the Liberals.
(BTW Any reason why the Community Charge should not be regarded as a Wealth Tax albeit one within limits?)
In the case of Heathrow you again set up an irrelevant sort of straw man only to knock him down. A Third Runway is not a quick fix – who is saying it is? – but if it needs to be built as I believe it does it would be better to have such a long term fix in process than no fix at all. Better late than never. The Manifesto commitment was plain daft and it should be made clear that the next Conservative (and UKIP) Manifestos will say that a Third Runway will be built.
So I am not with you and think we should indeed be doing something – in fact a lot – and if there are lots of ideas so much the better. Blasting ahead with Shale Gas, Tidal Power of some kind (programme the other night said there were 1000 tidal mills in Domesday Book) and repudiating Climate Change laws and to Hell with the EU of course would do for starters.
September 2, 2012
Whilst I disagree with Heathrow-centricity (being pro-BHX and possibly pro-Stansted), I do agree with the sentiment that the treatment of infrastructral investment (such as, though in my view not, Heathrow) is not really complete within this ‘Diary’. Some Govt investment can crowd out private investment, some Govt planning can prevent private investment, however some efficiently completed planning and, appropriate, clear and delivered Govt investment can crowd in private investment.
I suspect that there is transport infrastructural investment that can begin to crowd in private sector investment, particularly if aligned with the right relaxations (e.g. green corridors not green belt), and the right enterprise zones/LEPs. It may take some time to buid new infrrastructure, but once the work actually starts (rather than the talk, review and court cases) it can give a context for private investment.
September 2, 2012
Mr O might like to look at what Greece is proposing in the way of economies. €11.7bn of spending cuts targeted in their latest round, €4.6bn from reduced pensions, €1.39bn from health, €1.32bn from state salaries and €1.27bn from administrative costs.
Public-sector wage expenditure will be cut by €3.3bn by applying a 12 percent cut to the special salaries enjoyed by certain categories of civil servant, while another €339m will come from cutting what remains from 13th and 14th salaries (whatever they are?!).
The salaries of 68,000 employees in public utilities companies will be cut to give a €274m in savings over the next two years, with a reduction in state subsidies to these companies. Greece is also considering putting 30–35,000 public servants on labour reserve, where they would be paid 25 percent less to remain at home for a certain number of years before being made redundant, to save other €167m. I wonder if anyone other than those caught up in that will miss them at the work place?
€165m to be saved by freezing all promotions in the military and police further savings are also planned from cutting the monthly bonus benefits enjoyed by departmental heads in ministries . Now that is something Mr O should consider for the UK, because it simply cannot be right for so many huge bonuses to be paid to public servants for just doing the work for which they were employed.
Dream on, Martyn, you ain’t going to see anything like that happen here, where tax, spend and waste are the order of the day and will be for the foreseeable future…..
Reply: Will they? Greece has as big an armed service as the UK but is only one sixth the size in population.
September 2, 2012
“Greece has as big an armed service as the UK but is only one sixth the size in population.”
Surely the need for military capacity is determined more by the area to be defended and the extent to which it abutts potentially hostile neighbours such as Turkey? We shouldn’t need much military because we do not abutt an enemy (as yet). It is puzzling though that we appear to have been successfully invaded by millions of potentially hostile foreigners in recent years, despite that.
September 2, 2012
Why does Greece have a large standing army?
Look at where it is and its islands. Its risk is probably * 6. Besides which being in the army is probably mostly better than being unemployed.
I seem to remember Turkish paratroopers landing in Northern Cyprus uninvited by some? There seems to be no resolution to that yet and that is between relatively stable peaceable countries.
September 2, 2012
What Mr Osborne actually needs to do is to correct, with immediate effect, the huge imbalance in the way that the deficit-reduction programme is working and on whose shoulders the reduction programme it is actually falling.
At the outset of Plan A were assured that in the austerity years that lay ahead 75% of the deficit reduction programme would come from reductions in government spending and 25% would come from the extra taxes raised. Any reading of recently published government financial reports clearly sets out that what is actually happening is completely the reverse.
This is one of the the root cause of the total disenchantment of the public, long-standing Conservative party members and supporters, and many right of centre Tory MPs in the both the prime minister and the chancellor to exercise anything remotely resembling getting a grip and demonstrating that they are in control – which clearly they are not.
Cameron and Osborne are intellectually bereft of any form of understanding as to what makes the real world work and tick. Sadly they will go down in political history as worse head of government combination than Blair and Brown.
September 2, 2012
Mr Osbourne has fallen into the trap of leaving his cuts far too late in the parliament ,some of his cuts announced two years ago have still yet to take place and were never anything like enough anyway .Gordon Brown created almost a million public sector non jobs that should have been cut in the first weeks he was in power but still we see adverts for risk assesment managers ,outreach workers ansd street football coaches !
As long as this situation goes on no one can take him seriously .
September 2, 2012
Osborne has been the Chancellor for 2 years and has sent an economy that was growing into recession. He should accept that this is due to his mismanagement and resign.
Also higher taxes would reduce the amount the Government needs to borrow and you can’t cut your way to prosperity.
September 2, 2012
It was only growing because its annual deficit was still growing, which would have led to a catastrophic bankers’ ramp of debt. We would have been paying 7% interest on government bonds the way that the Spanish and Italians have been doing. And for us, there would not even have a German rescue.
So Labour’s way of governing wasn’t viable, was it.
September 3, 2012
The annual deficit is still growing, so why did the recovery stall after Osborne became chancellor?
September 3, 2012
Until this financial year, the annual deficit was declining. However, it takes a huge amount of political courage to cut total public expenditure in real terms. The coalition has recently gone all limp wristed and meekly accepted the increased spending on benefits. They will regret it unless public expenditure cuts start in earnest in 2013.
Deficit deniers of both left and right don’t seem capable of grasping one simple, central truth. ANY combination of public expenditure cuts and tax increases will reduce demand and will (temporaily) lead to zero or low growth. The Office of Budget Responsibility were supposed to point this out but they too indulged in assuming a bounce back in growth.
With the end of the Paralympics, the last of the New Labour / Tory Wet jamborees will be behind us and the country can get back to hard work and serious business. There might yet be some growth in 2013, perhaps enough to compensate for the 1% decline that has taken place.
September 3, 2012
I forgot to add that Osborne fired hundreds of thousands of public sector workers in order to create millions of private sector jobs. The result was a huge bill due to redundancy payments, barely enough jobs created in the private sector to match the jobs lost in the public sector, and many of these public sector employees were rehired because the departments they were fired from found they didn’t have enough staff (the border agency is a good example of this).
September 2, 2012
John – you draw our attention to three wealth taxes, although they are not called that. For most people they depend on the value of the real property that the tax payers own.
Can I get you to include, in your thinking about wealth taxes, that class of tax called Council Tax or Universal Business Rate ? The ones you list are only levied occasionally, but these taxes are levied annually and, for a person of modest wealth, in the course of very few years hurt him more that stamp duty and IHT combined.
The poorest householder effectively pays each year perhaps 1.0% of the value of his dwelling, while his neighbour occupying a million pound property might pay just 0.3% of its value – a most peculiar progression and presumably the very opposite of the Mansion Tax the LibDems are promoting at the moment.
UBR for the typical business impacts at roughly 3.0%. It is absolutely not obvious that the owner of the business property gets any more from his council than he would if the property was his private house – he is presumably taxed so heavily because he is not seen as a voter and is presumed to be making an unjustified profit. Actually, if he is struggling to make a profit, the obligation to pay UBR may be what breaks his business.
Like your other wealth taxes, UBR must have a distorting effect on the economy. I expect you have a charity shop (or three) in the centre of Wokingham, where the landlord is charging no rent just to get the occupier to pay his UBR. It is particularly discouraging for those SME start-ups that we need right now.
September 2, 2012
It’s not about Economic Growth, Mr Redwood, it’s about sustainability and sovereignty. It’s about Debt, it’s about Control – it’s not about Growth. It’s about contracting money supplies.
“We have also been told that building a third runway at Heathrow would do the job.” – you are joking – aren’t you?
If the Government was serious about Economic Growth then it would adopt policies that would promote manufacturing in the UK instead of allowing offshore production.
It’s also about freedom of information and not manipulation of information so why is the Government threatening to enter the Ecuadorian Embassy? What is the Government so afraid of? You have accepted the positive side of the internet with your blog – why hasn’t the Government?
September 2, 2012
John
Thanks for permitting my contributions, I think they were a little OTT, apologies. But you should enable regular contributors the opportunity to self regulate their ideas. I’ve been thrown to the lions a few times. Keep up the fight against the EUSSR John!
Reply: I will ask the service provider if he can add that facility.
September 3, 2012
Maybe you should just stand by your comments and stop flim flaming? Are you going to change your position every ten minutes?
September 2, 2012
@uanime5
You are making the false assumption that somehow governments can make any economy grow, this is completely wrong. It shows clearly that you are some sort of left winger because you think erroneously that governments can grow economies which they cannot. Nation State ( which you hate ) economies grow because in general businesses are successful that is small, medium and large. Governments can help by making it easier for companies to do business and that means less regulation and lower taxes which you as a left winger disagree with. People like you ultimately want control economies which have proven to disintegrate and fail, you should consider accepting capatalism, its the most successful system and it works
September 3, 2012
Capitalism is a good system in theory but it never works in practice.
September 3, 2012
On the contrary, capitalism is a good system in practice if only our governments would invest time in properly understanding the theory. They would have known that bailing out RBS and HBOS with taxpayers’ money was a very, very bad idea. They would have known that failed businesses should be allowed to fail. They would have learnt of Professor C Northcote Parkinson’s law of civil service employment: “Work expands to fill the time available.”
September 3, 2012
The government can put in place policies that help increase demand making the economy grow.
September 3, 2012
While a Government can’t make an economy grow it can hinder it through mismanagement and poor policies. Something the current coalition seems to be doing.
Since Germany is growing does this make it a nation state? It also has higher taxes and more regulation so it’s clear that neither are a barrier for growth.
September 3, 2012
It has higher taxes but LOWER public expenditure because it knows how to run a sensible fiscal policy. Where is your evidence that Germany is more regulated? The EU is controlled by the Franco-German axis in order to impose greater regulation (and dead wood) on OTHER Member States.
September 3, 2012
I am pleased to see broadband links highlighted as something we need to get on with.
However, it is not something that can be left entirely to the private sector because of the way the infrastructure works and the legacy of the plain old telephone system and who owns it.
The fundamental mistake being made by this government, and its predecessor, is to believe the way forward is for the there to be competition for the physical infrastructure. This is daft and unnecessary. It is as misunderstood and misguided as to expect coach operators to build their own roads.
Far, far better to have a common ownership of the physical infrastructure and for there to be competition between companies buying to use it to provide communications services for their customers. This approach is only possible if government enables it.
Incidentally, we are about to see a similar mistake with the up-comming G4 auction, repeating the mistake of the G3 auction. That led to lots of unnecessary masts and higher infrastructure cost than there need to have been. And also less flexibility in the use of bandwidth resources.
September 3, 2012
Every average worker is dealing with cuts to their pay and price rises every day. Who can have failed to have seen the price rises in the last ten years in the supermarkets? You could say as a rule of thumb 30-40% on most products. Utilities three times the cost. Fuel double.
No rises in wages anywhere near this in the private or state sector. The additional costs are just passed onto the consumer and employee including the interest rate by banks. What has this got to do with taxation? Labour government? Yeah! Right!
The only way to increase or maintain your living standards is to give yourself a pay rise by paying off all your debts and owning your property outright. Not possible for many of the population. You could also change your buying habits, but even the basics like bread, rice and pasta have risen. Heinz beans where about 40p but are now about 70p so even beans on toast is a lot more expensive. It’s not as if anyone can even boycott that. Maybe someone could tell me how we should turn to the land as English peasants.
September 3, 2012
DEFICIT REDUCTION WITH ZERO GDP GROWTH
Here are the figures, all in £ bn in 2012 prices except for the first column, as promised. The second column converts the actual 2001/02 figures to 2012 prices. The 2013/14 projected expenditure is 5% less than that in 2011/12 and there is a 2% per annum decline after that. I have accepted the Chancellor’s figures for Net Debt and for the later years I have set debt Interest at 5% of the Net Debt at the end of the previous year.
This plan is fairly modest, only reducing public expenditure to 43.2% of GDP by 2015/16. Note (1) Zero GDP growth is assumed. (2) In 2015/16, public expenditure would still be higher in 2012 prices than for 2001/02 – in every single Ministry. It is quite clearly do-able. So why all the howls of protest? Yes, the Net Debt / GDP projection is high and we will need to carry on working to reduce that.
FYR 2001/02 2001/02 2011/12 2012/13 2013/14 2014/15 2015/16
GDP defl 78.445 100.000 100.000 100.000 100.000 100.000 100.000
Pensions 73.4 93.6 119.4 119.4 113.4 111.2 108.9
Health 54.3 69.2 121.3 121.3 115.2 112.9 110.7
Education 46.4 59.1 91.9 91.9 87.3 85.6 83.8
Defence 29.9 38.1 45.7 45.7 43.4 42.5 41.7
Welfare 57.7 73.6 113.5 113.5 107.8 105.7 103.6
Protection 20.2 25.8 33.0 33.0 31.4 30.7 30.1
Transport 9.2 11.7 21.5 21.5 20.4 20.0 19.6
Gen Gov 8.7 11.1 17.8 17.8 16.9 16.6 16.2
Other 39.2 50.0 80.6 80.6 76.6 75.0 73.5
Interest 26.4 33.7 44.6 45.3 52.0 58.0 63.6
Balance 0.7 0.9 0.0 0.0 0.0 0.0 0.0
Total 366.1 466.7 689.3 690.0 664.4 658.2 651.8
Net Debt 312.4 398.2 905.3 1039.0 1159.0 1271.0 1365.0
GDP 1021.6 1302.3 1509.6 1509.6 1509.6 1509.6 1509.6
Sp / GDP 35.8% 35.8% 45.7% 45.7% 44.0% 43.6% 43.2%
ND / GDP 30.6% 30.6% 60.0% 68.8% 76.8% 84.2% 90.4%
September 3, 2012
Sorry, people. Once again the blog programmer has wrecked tabular presentation by stripping out all the extra blanks. Obviously, tables are either too boring or too complicated.
September 4, 2012
Can one use html?
1,11,2
2,12,2
September 4, 2012
It would appear not.
September 4, 2012
What happened was that I used Excel for the calculations and copied the results into a Word table. I then copied the Word table into blog text and did a little editing to tidy it up, making sure that columns aligned. It all looked fine until I hit the ‘submit’ button. Then the extra blanks were stripped out.
There is a way round it but it’s a bit laborious. Before submission, replace all blanks by dots.
September 4, 2012
I’ll remember it in the supermarket either way. Or at the Job centre… You know it makes sense.