How can the UK economy grow?

   I have been asked to post the lecture I gave at Oxford. I spoke without a text, but will post bullet points on Monday.

The main points I made were:


1. There is no positive correlation  between fast growth and large amounts of state debt. China has fast growth and low debt. Japan has high debt and low growth. Greece has high debt and recession, the US and UK have quite high debts and slowish growth.

2. In past UK crises – 1974-5, 1981-2, 1992-4 the formula of cutting the deficit and easing money policy  produced growth and recovery. Indeed, as the cuts came into effect, so the economy grew faster, reinforcing the drop in the deficit through the cyclical effect.

3. After the 2007-8 crisis, the Coalition government proposed the same forumula as in the previous three crises. However, they did not succeed in cutting the deficit as quickly or as far as  in the three previous crises, because they decided to keep on increasing current public spending. They did raise taxes.

4. Whilst they tried to expand money, and printed far more than in responsse to previous crises, the broken state of parts of the banking system and the tough regulatory framework introduced at the wrong stage of the cycle prevented credit growth in the private sector to fuel the recovery

5. So the main difference between previous recoveries and this is the government has neither delivered as low a deficit as before, nor as  much money and credit expansion as before. As  a result growth has been very disappointing.

6. Overseas evidence reinforces the message that tighter fiscal policy and easier money policy produces expansions This has been shown in countries like Canada and Sweden which went through substantial programmes of spending reduciton and deficit cutting which  produced growth from the better balance of the public finances.

It has been a traditional feature of IMF recovery plans that the deficit has to be cut as part of the package to generate private sector led growth and further cyclical falls in the deficit.


  1. lifelogic
    November 25, 2012

    Indeed no real cuts in the deficit, just an attempt to grab yet more in taxes from the private sectors with higher rates and back door taxes and charges – and all at at time when the banks are pulling cash back from businesses too. Is it any surprise there is little growth or confidence?

    The total lack of small state low tax vision from Cameron, the green religion, the payments to the EU, the BBC big state agenda and the almost certain prospect of Labour in 2015 hardly help confidence either.

    1. Timaction
      November 25, 2012

      Mr Redwood an excellent article that demonstrates your knowledge and logic to National problem. Why can’t your leadership see and implement this?
      Of course if public spending was cut and taxes reduced, people would have more money to pay for goods and services. In a nutshell the state needs to get out of the way including all the green nonsense driving businesses away.
      We have discussed this before.
      1. What must the state provide and to what standard?
      2. What should the state provide?
      3. What could the state provide if we could afford it.
      Get the Government to get rid of all 3’s. Consider at length 2’s with substantial removal of services and provide 1’s with the proviso that we can no longer afford “platinum plated” services e.g. No 5.2% rise in benefit payments.
      Finally, who should these public services be provided for? Foreign people having contributed either nothing or very little should NOT receive state services of health, education, unemployment benefits, housing as a matter of course. This includes EU citizens if there was a political will. We can no longer afford it under the Treaties which include austerity as demonstrated in Spain with the removal of health services for ex pats. The lefties won’t like it as it is this that provides the pull for mass migration at huge expense to the English taxpayer as above.

      1. Disaffected
        November 25, 2012

        JR, sound logic that will be ignored by Cameron. You are marginalised and your talents wasted in the liberal conservatives- as Cameron describes himself. In direct answer to your question- the UK economy will not grow as long as Cameron and Osborn are in power. Could you point us to the basket of policies that has changed the country’s fortunes in the last two and half years? You have given them a lot of clues and paths of direction they could take, did they listen?

        They had an ideal opportunity to change the fortunes of the UK and lost it. They prefer to go on a jolly in the president’s plane than deal with the UK budget, no wonder the outcome was a mess. Has Mr Cable equally helped the country in the last two and half years? Dumbing down university is not a good long term economic plan.

        How about Mr Huhne or Mr Davey, how has their energy plan helped the uK? Better still what is likely to happen in the next 5-10 years? Mr Osborne has capitulated on wind farm subsidies, not only is it economic madness it will mean industry will leave the UK and people will not be able to light or heat their homes (except posh boys churning it in from rent of their land).

        Taxes are rapidly increasing to get rid of strivers and anyone who wants to build a business. There is nothing at all “fair” about taxation that the current shower in cabinet talk about. Lib Dems have drawn millions of people into the 40% income tax bracket that should not be there. It was meant to be a 80/20 split.

        Spending is still vastly increasing, as you point out, not through tax rises, but wasteful spending. EU and overseas waste spending does not help. 1 in every 3 pounds get to the poor the rest goes to rich consultants from Oxbridge, despots, fraud and corruption- and Cameron’s plan is to fix a higher amount into law?

        It is reported Tata is going to shed 900 jobs because of the green energy agenda- well done Lib Dems and Cameron. Osborn capitulated- hardly a surprise, Cameron and Osborn cannot stand up to Lib Dems, who would have thought it…..

        1. Disaffected
          November 26, 2012

          I suggest everyone read Peter Mullen’s article in the DT about state spending and the committed coalition to continue on the same trajectory as Labour- soul-enterprise of public sector jobs, the need to destroy the culture of welfarism, more tax and spend.

          JR, why is the Tory led government not changing course from Labour?

        2. uanime5
          November 26, 2012

          Lib Dems have drawn millions of people into the 40% income tax bracket that should not be there. It was meant to be a 80/20 split.

          That was the Conservatives because they didn’t want too many people to benefit from the increased personal allowances the Lib Dems negotiated.

      2. Bazman
        November 26, 2012

        For a start attacking the poor is not going to work and make no mistake this is exactly what you are proposing. This country has entitlements whether you agree with them or not. This is one of the richest countries in the world. How would you realistically decide who is going to get these services and what will happen to them if they do not get them. Dragging the country down in order to help the rich. Don’t start telling us the country is already going down as it is not going down in the way you want.
        Million s in this country are working and not able to make ends meet you propose to punish them even more and give tax cuts to the rich? Another idiot protected by middle class welfare. Ram it.

    2. mike
      November 25, 2012

      “and the almost certain prospect of Labour in 2015 hardly help confidence either.”

      Let us hope that Mr Hitchens is correct….

      Amazing to think he wrote that in 2007, and parts in 2003. His article from 2010 is, if anything, even more damning…

      Sorry John but it does put your economic witterings in context….

  2. Single Acts
    November 25, 2012

    This seems self-evident to anyone who is paying attention and much as we may dislike the various front benches, we must therefore ask:

    (a) Do they honestly not believe this is the case, are they pseudo-keynesians?
    (b) Do they know it is true but lack the willingness or the ability to make cuts?
    (c) Do they know it is true but are pursuing another undeclared agenda?

    1. alan jutson
      November 25, 2012

      Single Acts

      Agree with you, but there is another possible alternative reason.

      The present people perhaps think they are more clever than they really are, because they have an over inflated opinion of their abilities.

      History will prove the case one way or another.

    2. Dr Dan H.
      November 26, 2012

      Actually Keynes seems usually to be mis-quoted and maligned to a fair degree. If you look at what he actually suggests and what his underlying assumptions are, then you get a much milder picture.

      Keynes seems to assume that economic cycles are inherent in the world economy (rather than forced by economic mis-management by politicians) and that to operate in such conditions, you need to do two things. Firstly, when economic times are good, a government absolutely must be reducing the country’s deficit and paying off debt.

      Secondly, when a country hits a recession, then government spending is there as a strictly temporary measure to prevent skilled workers from losing their skills, so that when the expected recovery starts kicking in, said skilled workers can find new jobs in private industry and pick up where they left off.

      Keynsianism therefore only sees government intervention as a temporary quick-fix or tiding over measure, nothing more. Keynes wasn’t stupid; he knew perfectly well that no country can borrow and spend indefinitely, unlike certain UK politicians seem to think.

  3. Mike Stallard
    November 25, 2012

    Thank you – sheer common sense.
    Governments last for only five years. This one has agreed to do just that.

    Recovery can take more than that. So what a temptation to just borrow and spend without rocking the boat! That way there is at least a chance of getting re elected – unless, as with Mr Brown, the whole thing explodes in your face.
    Meanwhile “investment” and “growth” seem to be going on as public works are paid for out of borrowed, or freshly printed, money.

  4. Ian Hills
    November 25, 2012

    Better to shrink the money supply through increasing the reserve requirement. Safer banks, less inflation. Then just make more money available to borrowers by easing the current restrictions on starting up small private banks. As for debt the BoE should just retire the Treasuries it bought through QE. Less tax needed then. So more spending money. End of problem..

    1. lifelogic
      November 25, 2012

      Certainly more competition in banking and fewer barriers to entry are needed. The banks are getting away with ripping off customers all over the place and rationing finance due to a lack of real competition in banking. Not silly government schemes just more competition.

  5. Acorn
    November 25, 2012

    In the interest of transparent debate, before you comment on the bullet points above, have a look at Stephanie Kelton’s presentation on the US Fiscal Cliff.
    Unfortunately, in the UK, we don’t have the level of debate that is available to US citizens via the likes of C-SPAN. Coalition / Republican economic thinking, is yet to understand how modern floating fiat currency economics actually works. They still think we are on the gold standard, with crates of the stuff being shipped at regular intervals, to pay for the “imbalance” of trade. (When you run out of gold you have to balance your trade with all other countries). A fiat currency issuing government does not have a budget like a household. It does not have to use someone else’s currency, which it can’t control; like a Euro-zone state. Historic data tells us that countries that used austerity to recover from recession, eventually, would have done it quicker and with less pain for the 99% had they used fiscal stimulus, not monetary stimulus. And, no, thinking this way does not automatically make you a Keynesian Marxist. Think of it like the way modern technology and science won us a lot of gold, on Olympic bicycles.

    Don’t forget, just like the DWP hands out welfare benefits (US: entitlements) to individuals; the Treasury and the BoE, hand out corporate welfare benefits in the form of interest on government bonds.

  6. Nick
    November 25, 2012

    4.7 trillion for the state pension
    1.6 trillion for the civil service pension
    0.4 trillion short fall for the public sector workers (shows the extent of civil service pension generosity)
    0.1 trillion for nuclear decommissioning
    0.4 trillion for PFI

    all hidden off the books

    1.1 trillion for the borrowing – on the books.

    Taxation 0.55 trillion.

    You’re over 14 times geared.

    If we take out core services such as the NHS, roads, schools, defense, its even worse.

    Just like the worst fraudsters such as Madoff, Ponzi, its the accounting fraud that has lead to policitians spending like mad.

    Now with so many spending dependents and addicts, you can’t cut.

    So what does that mean?

    It means the cuts will happen by force. Just like Greece the cuts will be imposed, and it will happen in a chaotic way. Those that deserve help won’t get it. Those that caused it, the public sector will hold out for their perks at the expense of others.

    In the UK, in France it will become violent.

    However, by sticking your head in the sands, denying that these debts exist, saying nah nah nah, or its not the way it works, you’re a major part of the problem John.

    1. waramess
      November 25, 2012

      Very well said. Too much faith in monetary magic and far too little in common sense.

    2. Richard Hobbs
      November 25, 2012

      All that money and there are still many ex-pats suffering from frozen UK State pensions. I note that UK has recently decided to stop giving aid to India (a nuclear state) to the tune of £500 Million a year, more than the amount needed to uprate the pensions of our deprived older pensioners in places like Canada, Australia New Zealand and South Africa. In the meantime how much more are we sending to other foreign nations that either do not need the money or use it to offset the amount they spend on armed forces. Are we still sending aid to China?

      Reply: No,we got that stopped.

      1. Richard Hobbs
        November 26, 2012

        Well, I am so glad to hear that.

    3. A Different Simon
      November 25, 2012

      Nick ,

      8 out of 10 private sector workers retire on a pension pot of less than £30,000 . This is the elephant in the room that nobody ever seems to mention .

      This 8 out of 10 will require support well beyond the state pension . For arguments sake lets say that with housing benefit etc they require double the state pension :-

      0.8 * £4.7trillion = £3.76trillion

      Takes the liabilities to £11.96 trillion doesn’t it ?

      I believe the closing of private sector vocational pensions was less to do with costs and more to do with CBI members wanting to get their hands on peoples lifetime earnings before they retire . As usual the costs of this foolishness end up being socialised .

    4. Single Acts
      November 26, 2012

      I fear your logic is relentless and all too true. The only disagreement I have is that I suspect the current disorder in Southern Europe is simply the warm up act.

      Given that the Spanish and Greek economies are dying, I reckon the lawlessness could be more prolonged, wide-ranging and sustained. I don’t see why it won’t happen here either.

  7. oldtimer
    November 25, 2012

    While awaiting your bullet points, a couple of observations.

    Are you sure that China has achieved fast growth with low debt? I was under the impression that many Chinese state organisations have massively over borrowed. Or were you were speaking of debt levels relative to the Western economies?

    Apart from the actions of governments, the actions of businesses also matter. If businesses believe the outlook is bleak they will slow down investment. If they perceive that better tax deals, lower energy prices and more reliable energy provision is available elsewhere then they will look and invest elsewhere. In this respect the programme of continued subsidy for inefficient energy resources is a clear negative signal.

    The UK must compete for investment with other countries just as much as businesses must compete for customers with other firms. In all these respects the government has much work to do. The anti-business signals that constantly flash in government and in Parliament are anti-growth.

    Reply: Chinese state debt is 28% of GDP

    1. forthurst
      November 25, 2012

      “Reply: Chinese state debt is 28% of GDP”

      What about Local Government debts, specifically those through LGFVs (Local Government Financial Vehicles)?

      “Thus, if one would like to be optimistic, the LGFVs debts along with other local government debts would amount to RMB12-13 trillion range. If one would like to be more conservative (i.e. more pessimistic), the higher end would be closer to RMB20 trillion. At the higher end, the local government debt-to-total-GDP ratio would be about 50% of 2010′s GDP.”

      According to this article, local authorities have large land banks which they can sell to house Chinese people. [The situation in this coutry is that local authorities do not have large land banks and do not wish to house English people but do wish to take large swathes of our ancestral land for housing people of foreign extraction. Why not explain the benefits of mass immigration to the Chinese, instead?].

      Reply: Even with figures for local government debt China’s level is low cpmpared to much of the west.

  8. Manof Kent
    November 25, 2012

    Put simply ,under Brown there was a massive shift of resources from the private sector to the public
    This must be reversed now.
    So stop borrowing to support current expenditure and cut ,cut ,cut to get a surplus.
    Once we have done this then reduce taxes and repay some debt.

    Sadly we started off far too slowly making a balanced budget more and more difficult to
    I was personally reconciled to a public pension freeze [yes me] and benefits freeze too – instead we all got a 5% rise.
    Meanwhile my civil servant daughter ,who helps pay for all this ,got the pay freeze.


    1. waramess
      November 25, 2012

      Given that your daughter as a Civil Servant is presumably a part of the non-productive sector of society she pays for nothing; on the contrary she is herself paid for by the productive sector.

      1. Brian Tomkinson
        November 25, 2012


      2. Bazman
        November 25, 2012

        Simplistic nonsense. The country would stop if you were to sack all the civil servants. They would then have to be rehired at great cost like last time. How are they unproductive?

        1. Mike Stallard
          November 25, 2012

          They are not in any way unproductive. They are careful, determined to keep their jobs like everyone else, determined not to do anything silly, resolved to make sure that nothing goes wrong on their watch that can be blamed on them. And there are a lot of them all earning various salaries, some very expensive indeed and some not so much.

          What the problem is that they are not actually adding to the GDP, but they are being paid out of it nevertheless. And, of course, by constantly playing safe, they do stunt initiatives.

          Mr Redwood set out some ways to reduce this vast army at the beginning of the government. Nobody was listening and, although the very worst of the “Guardian Jobs” seem to have been abandoned, there are still an awful lot of people determined to control the country in their unimaginative, often very inefficient and expensive way.

          1. Bazman
            November 25, 2012

            Jobs for the chaps needs to be cut back for sure Mike. The middle class social security system need a major overhaul.

        2. lifelogic
          November 25, 2012

          How are they unproductive? Well some do useful things, collect rubbish, deter criminals uphold property rights but many do nothing (that anyone sensible wanted doing), the fight counter productive wars, think up daft schemes like Carbon taxes and wind subsidies, HS2 and the carbon capture nonsense. Many merely inconvenience the productive or fine them or make them fill in yet more forms or design new absurdly complex tax systems and word silly new laws.

          Inconveniencing and taxing the private sector is the core business of so much of the state sector as is the PR indoctrination of the public.

        3. waramess
          November 26, 2012

          Think about a system where we were all employed as Civil Servants in order to establish how sinplistic it is Bazman

      3. Nicol Sinclair
        November 25, 2012

        Waramess: But, in return, she assuredly pays her taxes (PAYE).

        1. Epimenides
          November 25, 2012

          Nicol, she pays her taxes on money provided by the private sector that pay her wage.

          1. lifelogic
            November 25, 2012

            Indeed and on average they are remunerated, with pensions included, at about 150% of the private sector average.

    2. waramess
      November 26, 2012

      Remember also that your pension is not a government handout; it is something you contributed to all your working life and any increase in pension should be viewed in the same way

  9. Edward
    November 25, 2012

    One point to add is the regulations on pension funds which are forcing companies to put huge sums of extra cash into funds regarded as being in deficit (as defined by these regs).
    It is currently taking hundreds of millions away from investment in R and D, new plant and equipment and the creation of new jobs at a time when expansion funds are already scarce.
    I read that BT had to put in a billion extra recently.

    1. Jon
      November 25, 2012

      Edward, I think you are confusing IAS 19 with Auto Enrolement. Without going into detail of that basically debt was favoured over investment. Today the large companies, BT you quoted, have access to bank funding and shareholders. SME’s may not have funding from either, John’s point 4 above. One through a lack of savings which contracted the shareholder potential and second, the banks are lending to the large companies rather than SME’s as a result of lowering risk.

  10. Lindsay McDougall
    November 25, 2012

    Why do you ignore the fact that in this recession the ratio of average household debt to average household has been very high, and is still well above normal? Should private households be borrowing and spending more in these circumstances? And if household expenditure doesn’t increase in real terms, the incentive for businesses to borrow in order to invest in additional capacity isn’t there.

    One thing that is undeniable is that loose money produces inflation if there is low growth. We have had above target inflation for years on end; 2% pa inflation is meant to be an average, not a base. In summary, the low growth and inflation that we have experienced in recent years is what we should have expected, and loose money has not been beneficial.

    I put it to you that if we went for zero inflation and positive returns on investment, things would slowly return to normal. Aged 66, I am semi-retired. I refuse to stop looking for work, I refuse to buy an annuity and I refuse to spend more than necessary because HM government is deliberately eroding the value of my savings. Putting savings in a SIPP is some protection against this, but it is not total. You can take away concession fares, free prescriptions, winter fuel allowance and the winter bonus (£10, cor!!!), not just from me but from all pensioners. Just deliver zero inflation; that’s ALL.

    Looking at past recessions, you ought in fairness to point out that the root cause of the mid-seventies crises was the Heath/Barber budget of 1972, with its massive deficit. That deficit was ‘only’ £4 billion but I think that the inflation factor since 1972 to 2012 has been round about 30, making the modern equivalent £120 billion, roughly what it is at the moment. The reason that inflation hit 25% was that Wilson/Healey poured fuel on the inflationary fire. Incidently, my memory of that time is that one year of 5% real GDP growth was followed by 3 years of stagflation.

  11. j goodchild
    November 25, 2012

    Agree with all the above. I wish the PM would make you chancellor!

  12. Rebecca Hanson
    November 25, 2012

    We need to massively upskill our workforce. This can be achieved using the new types of qualifications which can be accredited online.

    We also need a benefits system which responds to the way in which individuals are applying themselves to constructively upskilling. For example those who are developing their skills actively and effectively may only be forces to do two job applications per week rather than seven and so on.

    1. Rebecca Hanson
      November 25, 2012

      Looking at this I think the word ‘upskill’ is misleading. I think we actually need to cross skill/multiskill people.

      Your discussion of the economic policies which were used during the recessions of the early 80s and 90s serves to conceal rather than reveal the reality that fundamental structural changes to the workforce and the nature of our approach to business took place at the same time and were also instrumental in generating recovery.

  13. Bernard Juby
    November 25, 2012

    How can the UK economy grow?
    Simple, Wake up ‘The sleeping giant” (Britain’s wealth of micro and small businesses which make up over 95% of the total of all businesses), initiate a Small Firms Administration (c.f. the USA) amend all laws currently holding them back and let them generate the jobs and wealth that this country needs!
    Why don’t you politicians ever listen???

    1. Bazman
      November 25, 2012

      Which laws exactly are stopping the population from earning further pin money Bernard? Money could be a major problem. Maybe we could stop that as they would only use the profits for luxuries like food and accommodation instead of funding their business.

      1. Bernard Juby
        November 25, 2012

        You don’t just earn “pin money” if you work in a small business but it would help some to get a start on the botton rung of the ladder. Minimum wages raise the barrier for a start. Then you could lower taxes rates and cut NIC. You could chuck the money-go-round that is VAT (foisted on us by the EC, mainly because Germany had a cascade tax and preferred this) – and that’s just for starters. If you want more then go to the Policy Office of the FSB in Westminster.

        1. Bazman
          November 25, 2012

          If your business cannot afford minimum wage then it is not viable. Anyone can make money with poverty wages. Could you live on two hundred quid a week in your owns circumstances? If you could not then ram it Bernard. Your car probably costs more per week. No excuses please.

          1. Bernard Juby
            November 26, 2012

            You make the same mistake as many. Do not confuse an income with a “living wage” which is what Lib-Dems and Socialists tend to do. Of couse a business is viable – what a daft comment. It’s all the red tape involved with employing some-one that puts potential employers off. It’s a Quantum leap going from a one-two person business up to an employer.
            Incidentally my car does not cost me anywhere near £200 a week and with miserable returns on my invested hard-earned (tqaxed) savings plus devaluation via Quantitive Easing we are getting pretty close to your figure and still keeping our heads above water thank you.

        2. Bazman
          November 26, 2012

          Any business would be viable if you could find employees to work for next to nothing and your fantasy of red tape putting off employers is just that. Agencies, self employment short term contracts. Red tape like the minimum wage and health & safety is what you mean. Allowing for depreciation your car costs a lot more than you think to run.

          1. Bernard Juby
            November 28, 2012

            You obviously have never run a business, not even a whelk stall if you think like that AND it is not a fantasy – survey after survey shows that red-tape and Employment Law is what puts off small businesses from taking on extra staff.
            Sorry but you should get your facts right before you sound off. You should also not make assumptions about other people. I know exactly how much my car costs me p.a. and that allows for depreciation. There you go, making assumptions again – you don’t even know what car I run or my annual mileage.
            ‘Nuff said. We obviously differ, me from experience and you from supposition!

        3. Bazman
          November 28, 2012

          Specifically Which employment law Bernard? I said name specific ones.

          1. Bernard Juby
            November 30, 2012

            Haven’t been back to this string lately so a bit late with a reply. Look at what is on the Statute Book as far as businesses are concerned. There is a huge amount so try the Sex Discrimination Act and Employment Tribunals for starters – there a huge amount. Not for a micro business the “luxury” of an in-house lawyer, book-keeper, accountant, etc. In 1) you can’t advertise for a muscular male when the job required heavy, repetitive lifting for example and 2) it’s a lawyers paradise when, if you cannot dismiss some-one caught with their hand in the till without going through lengthy processes. Many small firms just pay up rather than fight it because they cannot afford the time or the money involved.
            If you need more specifics then please check out the National Federation of Self-Employed & Small Businesses’ site or ask their Policy Office in Westminster.

        4. Bazman
          December 1, 2012

          I said specific laws Bernard not some wishy washy reply about not being allowed to fire at will and advertise for specific individuals. Is there no muscular woman in your sex discriminating world?

          1. Bernard Juby
            December 3, 2012

            Hardly “wishy-washy”‘ – I’ve shown you where to look. Why don’t you do it?
            As far as I’m concerned this thread is over.

        5. Bazman
          December 3, 2012

          As i said wishy washy propaganda site for small businesses. Example being: Nationally, Government should exempt micro businesses from specific pieces of employment regulation. Like what for example? No further information is given. Presumably health and safety and employment laws. You need to come out with some of your own facts Bernard. Eroding the working and pay conditions of the average person is not the way to do it. Ignoring me like we are in the pub does not work on the internet. The thread is over as you cannot defend your right wing retired position of a big pension. Ram it.

    2. Muddyman
      November 25, 2012

      They don’t listen because they don’t understand SME’s .
      Having moved into the Politic charade from self serving political apprenticeships, Profit and Loss mean nothing, employment law is a sheet of paper, an end of year statement merely an opportunity for a farrago of political B/S.

    3. lifelogic
      November 25, 2012

      Indeed leave them alone, let them hire and fire, tax them less and get the banks to lend to them.

    4. Bazman
      November 29, 2012

      We are waiting Bernard.. If you cannot come up with any then stop your fantasies and blind beliefs.

  14. JimF
    November 25, 2012

    You’re addressing purely the financial as side here and in a macro as sense.
    As we’ve said on here endlessly you also need loose regulation and a change in the micro financial outlook e.g. not to expect SME s to pay business rates on space used solely to employ people.

    1. David John Wilson
      November 25, 2012

      It is quite reasonable to expect SMEs to pay business rates on space used purely to employ people. Where they should not be paying business rates is on space used to manufacture things (in the broadest sense).

      The main improvements in the economy will only come from reducing imports and increasing exports. Taxes should whereever possible be used to improve this balance.

      The strength of SMEs depends on their having a positive cash flow. This can again be improved by ensuring that taxes are levied as late as possible in the life cycle of their output. This means whereever possible reducing taxes that have to be paid before any output is sold. In this context business rates and employers NI contributions are obvious areas for action. Unfortunately there is a problem that the tax regime that benefits SMEs the most tends to be based ontaxes that are “avoidable” by larger companies.

      Solving the tax avoidance problem thus becomes a major requirement for the economy.

      1. JimF
        November 25, 2012

        If I want to expand my Company I need space before people before output.
        Business rates increases hit this at the first hurdle, employers NI at the second and corporation tax at the third.

  15. Nicol Sinclair
    November 25, 2012

    Mr Redwood: “I spoke without a text…”

    Without wishing (or meaning) to sound like a sycophant, that is the mark of someone who really knows his stuff…

    All points are fairly obvious to some men in the street but not, apparently, to the Treasury Mandarins and their Boss.

  16. Neil Craig
    November 25, 2012

    Obviously I regret that you did not mention energy prices and availability as something consistently showin a 1:1 correlation with growth in economically free economies and a still very close relation in those where government artificially restricts supply and increases prices, such as ours.

    John even if you don’t believe this correlation to be important I think you should at least have explained why not.

    Reply: Yes, I regularly explain why more cheaper energy would help.

    1. Neil Craig
      November 26, 2012

      John I happily acknowledge you have done so. Nonetheless if the correlation is as close as I suggest (or even if it were quite a bit less) it must be the single most important factor in getting out of, or falling deeper into, recession. It should thus always be listed among the 6 main ways of achieving growth. I would argue, at #1.

      This is a matter that is going to be increasingly raised because, although the leaders of the LabConDems remain committed to reducing power and making it more expensive UKIP’ (energy spokesman Roger Helmer former Tory MEP) is fully committed to allowing the free market to produce the power that will get us out of recession.

  17. Bazman
    November 25, 2012

    The economy would grow if the banks and the city were stopped being pandered to in the form of communism for the rich. The tax evading companies could be told to pay up or shut up. Your company and yourself can find another fool. Guess what they are going to do? Really? We don’t respond the threats so at this point you are finished. The money produced and saved could then be used to lend to business and improve infrastructure. This idea that if we do not fill the boots of top executives and erode the wealth of the rest of the population is discredited. They can either play by our rules or we will call their bluffs and they can go and take their unique talents and wealth creating skills elsewhere as we cannot afford them. Sink without trace guaranteed and most of the population frankly do not care if a top executive only gets remunerated and compensated for ten million instead of fifty million. Why should they get any public money when they pay themselves hundreds of times more than their average worker. Jealousy? You are reading the writings of an adult man. If a company does not exist to benefit Britain and its population then why should it exist? Politicians of all sides living in a Britain that they cannot even imagine allowing the population to be exploited at every turn. You are not exploited if this year you could only afford a new Ford instead of a BMW and only had two holidays instead of three. Ram it.

    1. Lindsay McDougall
      November 26, 2012

      A lot of the tax avoiding (not evading) companies are multi-nationals. They use internal pricing to (influence) where profits are declared.

      (Deleted two examples where multinationals were alleged to have used false transfer rpices to direct profits from high tax to low tax countries – both cases were I think accepted as fair pricing by the authorities)

      The UK government could in theory bring prosecutions against the multinationals for fraudulent specification of internal pricing. But then it would have to take on the might of the American legal profession, with backing from their politicians. Who’s feeling brave?

      Reply: Yes, false transfer prices are against tax laws in many countries, and Tax Authorities regularly check and inspect this. If you have proof of such actions you should send it to the authorities.

      1. Lindsay McDougall
        November 27, 2012

        This is incredible. Are we not allowed to disagree with the judgement of the tax authorities regarding the fairness and accuracy of the inter-country internal pricing of multi-national companies? Is it a case of ‘Jesus loves this I know, for the tax authorities tell me so.’?

  18. Pete
    November 25, 2012

    We seem to have entered a twilight zone in the world of politics. Nobody even discusses the damage constant deficit spending does to the real economy. Even alleged right wing Conservatives seem afraid to think through the effects and implications of incessant devaluation and completely unproductive public sector spending. It’s like none of them have ever had to keep to any sort of budget. One can only assume that they earn so much money that restraint is not something that exists in their world. A real person cannot continue to run up bills and hand out IOUs forever. Sooner or later the creditors will come and take all your possessions (or break your legs). Despite politicians delusions of grandeur the same applies to governments. The money markets are waiting to break bones and when they do we’ll find out that the alleged experts are wrong on every single platitude and promise. The socialists (and I include modern Tories) will ruin us all.

  19. Trevor Butler
    November 25, 2012

    Any free thinker can see that an economic revolution could take place in this country in a matter of months if taxes (both direct and indirect) were slashed rather than tinkered with and regulation on SME’s drastically reduced – SME’s are the key not huge government works programmes – The more the government gets out of the way the more the country will prosper – If we could get rid of the collective mill stones hanging round our necks (the EU, green policies etc) this country could be a power house but I’m not holding my breath as there seems to be very few people in power (unlike yourself, Mr Redwood) who can think beyond their own comfort, re-election and towing the party line.
    This is all a bit personal for me as I have helped my eldest daughter set up a successful small enterprise IN SPITE of the local council who made her jump through many inappropriate hoops, HMRC who made life difficult and the HSE who see it as there objective to kill entrepreneurship.
    Government, both national and local seems to be dedicated to sinking this country by regulation.
    My pennyworth

  20. Barbara Stevens
    November 25, 2012

    This debt problem was never heard of when I was in school, we were never told how or what the government spent. Its arosen because of bad management and political parties competing to catch voters by promises we could not affford. I now don’t trust any man or woman who says they are in politics. Even the Whitehall mandrins do as they please and the state credit card is overly used, who cares?
    My concern is the stability of this country, its defence systems, and the ability to defend ourselves. I sincerely believe the world is so unstable we should rethink what we spend on defence with some urgency. For most we should pull out of Afgansistan and Iraq, if we are still there, pull back and rebuild our defences. We have weakened ourselves, again, by politicans dreams and pontificating on the world stage, at our expense. Blair, did this blatently to our costs, which we are still paying.
    As for the debt, politicians have a responsiblity to protect all citizens of this country that is what they are elected for. How is it we are told of this ‘debt’ and the dire circumstances we may or are facing, yet, they continue to spend or borrow our money for foreign aid? We owe these countries nothing, in my book they are NOT our responsiblity they have their own governments to do that. Is it about time elected politicians from all sides started to look after its own citizens? Until they do that, and they stop spending our money, we’ll never repay the debts, while our own citizens suffer. I’ve no faith in any of them to do the decent thing anymore.

  21. Jon
    November 25, 2012

    John, being a person who has embraced the internet to get the message across would you consider recording some of your lectures for Utube?

    I don’t think there is any chance of them becoming viral like the gangnam style clip. They might though augment the message to the people who frequent your blogs and get a wider audience.

    BBC Parliament shows “lectures” of ex ministers on their past times in those posts, basically anecdotes. A lecture that is relevant to today and the future would be far better.

    This government called for a deficit program, a star council. What happened to that? Where are those people who could guide that through in the executive?

    Reply: I do post video lectures when someone records them – as with the CPS one and the Parly speeches.

    1. Jon
      November 26, 2012

      Good, I’ll be more observant then.

  22. Martin
    November 25, 2012

    The government has to stop blocking business and for example let the airports expand. The airports fund themselves.

  23. Simon
    November 25, 2012

    I can’t help feeling that point 1 is somewhat disingenuous. Nobody expects there to be a correlation between increasing government debt and growth in normal circumstances.

    And as this (generally economically innumerate) coalition government has shown us, debt will tend to increase during economic downturns simply because more people will require social payments, even if the state attempts to reduce spending.

    What you might expect to correlate with growth during periods of poor economic performance is government expenditure on investment. Which of course has been dramatically reduced since 2010.

  24. Conrad Jones (Cheam)
    November 25, 2012

    Aren’t Chinese Banks ALL state owned and controlled?

    Doesn’t China have a Low Debt because the entire Banking System is owned by the people? The Interest Payments go to the people.

    You are not comparing like-with-like Mr Redwood. Most of our Banking System is made up of Private Banks – when they create Loans they create money and the interest payments on those loans go into Private Profits. When we bail them out, we end up with all the Toxic assets that they don’t want and people like Richard Branson doesn’t Want (like with the case of Northern Rock). Chinese Banks often don’t call in their bad loans, they keep them on their Books and just issue new ones, as this is how they are able to keep the Economy Growing so well. Our Banks only care about themselves – calling in a loan is good for Business, even if it wrecks a local Business. The only Businesses our Government cares about are Banking Businesses – the Chineses Banking System is the Servant of the people.

    I don’t agree with the Chinese System only because it puts far to much power at the Centre of the Government, far better to have lots of Private Banks competing for depositors money, with a Government (Public) created Money System.

    When Chinese Banks create Money through Debt, the Interest Payments go to the PBoC, where the Government can then spend or reuse it to create more loans by forsing the Publicly Owned Banks to make more Loans directly into the Economy.

    This goes beyond Full Reserve Banking, as it means that no International Banking cartel can screw up the Chinese Economy.

    Are you suggesting we adopt the Chinese Model and go for 100% State Owned Banks ?

    Another feature of the Chinese Economy is Birthrate Controls and very poor worker conditions – i.e. Factory Workers being paid $1.75 per hour and also being charged for their sleeping accomodation – in very cramped and overcrowded dormatory buildings. In fact, the Conditions in one Factory were so bad, that they had to fit Suicide Nets around the Building to catch people as they throw themselves to their deaths from the top of one of these buildings as they cannot live in those conditions any longer. The Factories are usually owned and controlled by Western Companies who would rather pay slave wages to Foreign Workers in the East than provide Jobs with fair wages to their fellow countrymen.

    Something else about China is that they have their own Gold Mining Operations. That tends to inspire Confidence in the Economy. Increasing Gold Reserves inspires Confidence that the Chinese Government know the basics of Economics – unlike Globalist Gordon Brown.

    Instead of just importing Chinese Toys, Clothes, Electronic Goods and Electrical Goods – perhaps we should just import Chinese Economists and Treasurers as the ones we have working for the UK Government don’t seem to know what they are bloody doing.

    There is a correlation between debt and growth – but only when that debt is used for productive work and not speculative investment in Asset Bubbles. There’s also a correlation between Debt and Money. Government Debt makes up some of that Debt, reduce Government Debt and you will reduce the Money Supply. That equals Depression in our current system.

  25. Kenneth R Moore
    November 26, 2012

    Why do we need perpetual economic growth….that’s falling for the lazy assumption that resources are not without limits… Would it be so bad if we had to cut back a bit and stopped the obsession with money and buying things we don’t really need…

    Maybe we just don’t deserve our current’ high’ standard of living. Does anyone really need a new car every 2 years, lashings of pre-packaged convenience food, foreign holidays, plasma tv’s, all the latest gadgets etc.
    Maybe if we toughened up a bit and worked a little harder we could turn down the central heating a bit and save some north sea gas. ?

    I see a nation of spoilt rather snobbish people that have theyre energy gobbling waching machines and central heating systems on constantly thinking they would die if they didn’t have a hot bath every day. Would it be so bad if motoring was a bit more of a luxury activity like it used to be.. then maybe the roads wouldn’t be so cluttered up with people making unneccessary journeys. ?

    Wake up Britain the ‘good days’ are over.

  26. Derek Emery
    November 26, 2012

    The Bank for International Settlements produced a paper in 2010 “The Future of Public Debt: Prospects and Implications” at

    This states that since the financial crisis industrial country public debt levels have increased dramatically and are set to continue rising for the foreseeable future due to unfunded costs associate with ageing demographics. This path is unsustainable. See the graphs on p10 which indicate the UK has the second worse future rising debt trajectory in the world to Japan.
    There are large uncertainties but it is unlikely that the UK and several other countries will return to higher growth.
    The fiscal unbalance due to unfunded aging costs is huge. The UK and several others would require an improvement in the budget balance (excluding interest payments) of 4.5% of GDP.
    I doubt any UK politicians are taking this on board as it would require serious cutbacks to social spending. Indeed Labour are dreaming of ways to increase entitlements (increased minimum wage) even though all the cash box contains is a pile of IOUs.

    The OECD long term growth figures with the UK projected to have an average of 1.6% GDP growth up to 2060 see

    The OECD area growth is expected to average 1.7% growth whereas the non-OECD area growth will be about 3% with Chinese and Indian GDP per capita to rise seven times by 2060.

    I suspect that the markets will not allow debt trajectories to continue to rise substantially year in year out without large increases in interest rates limiting borrowing. In effect the rising ageing costs become unaffordable due to ever-rising interest charges so cuts in spending will have to be made no matter how unpopular with politicians and public.

  27. John Doran
    November 26, 2012

    John, have you considered the possibility that this present crisis is completely different to past crises?

    (puts out theory that Fed is not a public body trying to work in the public interest – we have had bloggers alleging this before – I do not see the evidence to support the argument-ed)
    The Fed created the Housing Bubble in the US by keeping interest rates low, by pushing mortgages at sub prime people, & packaging up these low quality mortgages in such a way that banks worldwide did not know what debts they had on their books.

    This has led to the crisis of confidence we see in banks now, & the whole edifice is built on confidence.

    Why should the Fed (behave like this)?

    Because they are financing UN Agenda 21, which is a UN blueprint for our 21st century. We are also financing UN Agenda 21 through ludicrous carbon taxes, sponsored by the Global Warming Scam, which originated with UN IPCC.

    1) What is Agenda 21?

    is instructive.

    We live in interesting times. 🙂


    1. John Doran
      November 26, 2012

      Good luck with getting our economy growing, John, while we are throttling our businesses & households with expensive & unreliable “Big Wind” power, & subsidised solar & tedious tidal.

      While China opens a coal fired power station almost every week, what we do with carbon limitation in this country is irrelevant re the alleged “Global Warming”

      Don’t take my word for it, get Mrs Thatcher’s science adviser Lord Christopher Monckton to explain the facts to you. He understands the science to the extent that Al Gore refuses to debate with him on global warming.

      The bedrock of any modern economy is cheap, plentiful & reliable power.
      We are going for expensive & unreliable “Green” power.

      We have hundreds of years of coal reserves in our ground, fracking is a 10 year proven industry in the US, & we build bird killers.

      Is our parliament full of traitors & troughers?

      We live in interesting times. 🙂


      1. uanime5
        November 26, 2012

        Lord Christopher Monckton doesn’t have any understanding of science and his claims were debunked by Professor John P Abraham. Ale Gore didn’t debate with him because Lord Monckton doesn’t have a clue what he’s talking about.

        Reply: I suggest you go and listen to Lord M who has studied this area extensively.

        1. John Doran
          December 3, 2012

          Talks about Lord Monckton’s attacks on Al Gore and recommends his site for details.

  28. Lindsay McDougall
    November 26, 2012

    Easy money causes inflation, not GDP growth except in the very short term. It’s a quack remedy.

    The great inflation of the mid-seventies was triggered by the Heath/Barber budget of 1972, with its deficit of £4 billion (worth £120 billion in today’s money). In those days there wasn’t sophisticated separation of fiscal and monetary policy; if the government ran a deficit, the BoE ensured that extra money was printed to pay for it, so that inflation was a hidden tax. Things were made worse by Wilson/Healey who, after being elected in 1974, poured fuel on the inflationary flames.

    Following that 1972 budget (I forget the exact time lag) there was one year of 5% real GDP growth, followed by three years of stagflation.

  29. UK Inheritance
    March 9, 2013

    Do you mind if I quote a couple of your articles as long as I provide credit and sources back to your website: http://johnredwoodsdiary.
    com/2012/11/25/how-can-the-uk-economy-grow/. Please let me know if this is okay
    with you. Thanks alot 🙂

    Reply: I do not mind people quoting these pieces as long as credits are given and they are not quoted out of context.

  30. 詳細
    May 13, 2014

    How can the UK economy grow?

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