How to banish austerity

 

             We saw yesterday that the OBR forecasts a gently rising recovery from here. People’s real incomes will go up modestly, share and property prices will rise  a little, more people will get jobs.  The trouble is the OBR have been too optimstic before about this economy.  It would be wise for the government to take more action to try and ensure a faster recovery, and head off more bad news and downgrades like the ones we have experienced for the last two years.

              I want people to be better off. I extend that wish to people at all income levels.  Lower tax rates could help. So too could a faster rate of economic gr0wth, generating better returns for savers and higher incomes for those in work. Breaking up the state banks, writing off bad debts to speed the day when the banks have good enough balance sheets to lend more against decent projects, is central to making progress. A new generation of would be home buyers and entrepreneurs are being denied access to proper credit facilities thanks to past errors, weak bank balance sheets and now super prudent regulators who cannot resist getting the cycle wrong both ways.

             I do not wish to hit people on low incomes by being mean on benefits for those who need them. The government is right not to hit the pensioners and the disabled with increases in pensions and benefits below the level of price rises. I have no wish to cut important public services. I do, however, think the government is correct in saying it must get the deficit down, and make progress in limiting the build up of debt. The Opposition too agrees with this, though there are still rows over timing and extent.

            So how can you square the circle? The answer surely is to be generous to those in need, but to be firmer over eligibility for state help. Many of us wish to be generous to pensioners, so maybe as longevity rises so we have to make further increases in the age of retirement to help balance the books. A 60 or 65 year old today is on average fitter and likely to live considerably longer than the equivalent twenty years ago.

             We should speed the moves to control our borders better. We should not extend out of work benefits to people who recently arrived in the UK and are not UK citizens. If they come here under the free movement of workers they should not be entitled to out of work benefits for doing so. The availability  to  work test should be applied to ensure that those who can work do work when work is available.

               The introduction of a high cap for housing benefit in understandable, as the government does not wish to destabilise families living in dear to rent homes . There could be a much tighter cap for new claimants.

                The UK could have a couple of years off from meeting the 0.7% target for Overseas Aid whilst we are sorting out our large budget imbalance. There are still items in the Overseas Aid budget that do not represent value for money, or further the noble aims of relieving poverty and disease in the poorest countries. Mr Cameron could dig deeper over the excessive contributions  we currently make to the EU budgets. Why not tell them we do not wish to contribute to the EU regional aid and agricultural programmes? it would be cheaper to do our own.

              There is universal acclaim for more public capital spending. We need to remember that these are often growth projects, which then need revenue finance to keep them running once built. When trying to reduce public spending, you do need to limit new capital works. If we gain better control over our borders then we will cut the need for extra schools, hospitals and social housing, which will represent a substantial saving to the taxpayer.

              Let’s have lower more competitive tax rates, better working banks, and more realistic public spending. Then we could match or probably exceed the OBR’s forecasts for rising incomes and a more successful economy.  Some seasonal cheer is better than more gloom about austerity.

93 Comments

  1. Mick Anderson
    December 6, 2012

    The simplistic answer is to reduce indirect taxes – the obvious big ones being road fuel duty and the surcharges being applied to domestic fuel. Both of these are felt disproportionately hard by those on low incomes.

    Leave more money in peoples pockets and they won’t need handouts. The only “losers” would be the SW1 bureaucrats running the money-go-round, and I don’t see that as any sort of loss.

    1. David John Wilson
      December 8, 2012

      A better solution would be to get rid of vehicle excise duty even if it is matched by a rise in fuel duty. This would mean that the poor are only taxed on vehicle usage rather than just for having a car. However very few people who are really poor actually have a car.

      There are small numbers who live in remote locations who can only survive by having a car. These would benefit most by the removal of VAT on fuel. VAT magnifies the disadvantage of living in a remote location as it magnifies the increased costs of delivery etc. Replacing the VAT by fuel duty creates a more level playing field across the country.

      1. Mick Anderson
        December 8, 2012

        DJW – If you assume that an average car does 12000 miles a year at about 35mpg, I calculate that road tax is the equivalent of less than £0.04 per litre. Mr Osborne added this to the cost of fuel after his first budget (£0.01 was later recinded due to public complaints), so if we take Mr Cameron at his word about ending the war on the motorist (*cough*) he should already have abolished it.

        There are many more taxes that could be abolished which would help those on low incomes more than the better off, but this myopic Government is purely focused on wringing as much cash out of us as possible. VAT is one of many. It was explained as a tax on luxury consumption, but has now been added to many of lifes necessities such as domestic and road fuel. I understand that once it has been applied, EU rules mean that it can’t be removed. Charging VAT on road fuel duty is one of the more dishonest applications of the tax, especially if you take the words “Value Added” literally!

        Of course, the best approach is to start by removing waste and inefficiency from the system thus requiring lower tax take, but the public sector empire builders are never going to allow that….

        Many of us suspect that the real economy would be given a real boost if the Mr Osborne was brave enough to lop £0.50 off the price of a litre of road fuel, but he is neither sufficiently bold or visionary to test the theory.

        1. APL
          December 9, 2012

          Mick Anderson: “Many of us suspect that the real economy would be given a real boost if the Mr Osborne was brave enough to lop £0.50 off the price of a litre of road fuel,”

          Can you imagine the squeals of anguish from the Green lobby, it’d be worth it just for that alone. But yes, that would be a real economic stimulus.

          Unlike QE which is nothing but a clandestine tax on anyone who is productive in the economy.

      2. wab
        December 8, 2012

        “There are small numbers who live in remote locations who can only survive by having a car.”

        That is their lifestyle choice. Why should urban / suburban people continually subsidise people who choose to live in the middle of nowhere?

        Nobody likes taxes. But both VED and fuel duty make some sense. VED makes some sense because roads have to be maintained even if hardly anyone uses them. Fuel duty makes sense because the more you drive the more pollution there is and also the more the roads that you use need maintenance. Of course fuel duty in particular is way, way, way above any justifiable level, but that is because most of the ruling elite are sanctimonious control freak who hate that anybody is allowed to drive other than they themselves.

        1. Mark
          December 8, 2012

          Why should rural people pay the inflated salaries and housing benefits that city dwellers require to live in their expensive properties and commute from suburbia?

        2. David John Wilson
          December 9, 2012

          Why do we have the red tape overheads of both VED and fuel tax? Getting rid of VED would simply remove an un-necessary level of bureaucracy. It would also get rid of the problem of people avoiding paying it and the court and police time that involves. Insurance companies can simply register with Swansea that a car is insured and if necessary provide an insurance disc to replace the current tax disc. In practice I believe this already happens.

        3. Stuart
          December 9, 2012

          continually subsidise people who choose to live in the middle of nowhere?
          Some of us have no choice where we live, but live in a remote place because it is the only job we can get.
          A vehicle is a tool for the job and a necessity, not complaining just pointing out.

        4. Mick Anderson
          December 9, 2012

          Sorry, wab, I don’t agree that VED is still justifiable. The excuse was that it was proof that you had a valid MOT and insurance for the vehicle at the time of VED renewal, but that is no longer relevant. The Police have lots of ANPR cameras linked to the DOT databases with all the records, and they can identify a moving vehicle rather than only one parked at the kerb.

          You only only actively wear out roads when you drive on them, although if a road has no use at all you will find that standing water, weeds and grass start damaging it in fairly short order. Having VED in this modern world is a little like making it compulsory to hold a railcard before you are allowed to consider buying a train ticket.

          Also, if you put all the road taxes onto fuel and limit the amount of fuel carried into the country by the foreign hauliers (so they have to buy fuel in Britain to work) you are making the system more fair. It is also completely “green” without the usual harm that environmental taxes bring – by all means pay through the nose to burn fuel at 20mpg in a Chelsea Tractor, because the classic V12 E-type Jaguar I (would) only bring out on high days and holidays (and is far less efficient) does virtually no damage to the environment.

          Having said that, I still believe that the quickest stimulus the Chancellor could make to kick start the economy is to radically reduce all fuel prices and abolish VED. I might even splash out on that Jag….

    2. David John Wilson
      December 8, 2012

      Similar action is required on domestic fuel prices. Companies should be stopped from using standing charges or higher prices for the first few units used. They should recover their costs in these areas by using a sightly higher single price. This has two advantages. Firstly those people who have to retrict their usage becasue they can’t afford high levels of usage will pay a lower average price. Secondly those people who reduce their usage by improving insulation and other recommended methods will benefit even more leaving the proflicate to pay for their excessive use.

  2. lifelogic
    December 8, 2012

    Indeed – more competitive tax rates, better working banks, cheap non religious energy and more realistic public spending (say half). Then the UK would certainly exceed the OBR’s forecasts for rising incomes and a more successful economy. Optimism not austerity is clearly needed. Just cut the state and thus lift the real economy by far more.

    Technology will make people better off than ever before in the history of mankind. Healthier, safer, richer and more comfortable. We just have to stop the Coalition and the EU pinching it all and wasting it on nonsense. Say wind turbines, countless over paid parasites, pointless regulations and paying healthy people to do nothing. It is not rocket science.

    1. Bazman
      December 9, 2012

      Technology is not going to provide clean drinking water and other basic requirements, The hundreds of millions of polluting and unhealthy cooking fires lit every day in the world using wood could be replaced by kerosene and that would not take any technology. Paying healthy people to do nothing is a good point, but not solved by making them more desperate.

  3. Mike Stallard
    December 8, 2012

    You assume that this is the problem. It is not.
    The problem is twofold.
    First both leaderships are now completely sundered from their local Parties. The Quad has absolutely no idea what people out here really think. Nor does it seem to care. Gay marriage indeed!
    Second, we all know that they are no longer in charge anyway. Stop kidding around.
    Oh – and a Happy Christmas from a frail OAP who is reading Douglas Carswell’s new book!

  4. Rebecca Hanson
    December 8, 2012

    I had a rare treat of a pub lunch yesterday.

    The man on the next table was whinging loudly about how pensioners like him shouldn’t have to pay higher rate tax – it wasn’t fair…….

    He sounded off loudly about all the benefits people who sit in the pub every day and never do any work.

    I was trying to picture these people…….

    I do know some benefits claimants who don’t work and have a decent standard of life. But they’re in that position because they’ve severe special needs and they have a decent standard of life because they’re never in the pub, they live cautiously.

    If you spend £10 a day in the pub that’s £70 a week. Who has that kind of slack on benefits? I haven’t met anyone. Maybe someone who’s signed off sick and had some savings? Clearly people this many who has a pension of over £34/year (so well over £500/week after tax) needs to be deeply jealous of. Life is so harsh to him, poor bunny. I did make a comment.

    1. zorro
      December 8, 2012

      I know of many examples of pubs in different parts of the country where there are people who are claiming sickness benefit which seems to allow them to drink most days. Perhaps they have an additional source of income. There are many self employed people who apparently earn very little but seem to have a lot of cash to spend ……

      zorro

      1. Mike Stallard
        December 8, 2012

        Allow me to advise a regular diet of Jeremy Kyle……
        Lots of the bunnies on there are on drugs, or “it’s all right because I was drunk”.

      2. Bazman
        December 9, 2012

        Yeah..and they all seem to so fat too. How is that possible when calories cost money?

        1. Edward
          December 10, 2012

          Lard and sugar is cheap.

          1. Bazman
            December 10, 2012

            Do they eat it mixed together in a lard sugar mix?

    2. Christopher Ekstrom
      December 8, 2012

      Poor Miss Hansen. This sincere missive really deserves a gentle Christmas time reply. Your pensioner recalls better days: Cops were male, murders hung, people worked.

      Those in pubs receiving benefits DO work. Occasionally & off the books. Perhaps as active criminals. A bit like handguns: hysteria took guns away from the plebs. But, gosh, criminals have guns. But that’s illegale!

      1. Keith
        December 9, 2012

        Man could have been a teacher who was simply enjoying one of their many long holiday breaks

      2. Rebecca Hanson
        December 9, 2012

        It’s Mrs Hanson Christopher,

        Judging by the quality of your post it seems…

        … you would know.

  5. alan jutson
    December 8, 2012

    John, your post todayis full of some simple commonsense ideas that I am sure many of us would agree with for starters.

    Can I suggest another.
    Given people are now going to retire later in life, why not increase the number of years of contributions they have to make to get the full State pension.

    Why indeed did we ever reduce it to the present 30 years.

    Fully aware Mums at home bringing up a family and not working need to be protected, but surely that is not beyond solving easily.

    Why in these times of financial difficulty for the Country, do you now have to have less payments to qualify for a full state pension than we did 20 years ago.?

    The stupid thing is if you pay more than 30 years contributions, you get no extra benefit for those contributions.

    So either increase the number of years to qualify, or increase the payout for those who go above the maximum years of contributions required by that percentage amount.

    1. Disaffected
      December 8, 2012

      I agree with JR and you Alan. These views do not represent Tory party leadership values.

      However, loony tune Cameron is on another planet. He is using the Lib Dems as an excuse to modernise the Tory party and in doing so is alienating Tory voters and some of his MPs- he knows this, it is not an accident. This week £2 billion given away to Africa for wind farms, money that the UK will borrow with interest to give away. No one sacked for the expensive west coast railway fiasco announced this week. Judge only given a reprimand for praising a burglar’s courage!! All issues indicating financial and social incompetence. A price we will all pay tomorrow in the way we live and are taxed.

      Today’s fiasco is that he has done another, one of many, U turns on gay marriage. Why did he not announce his view on this before the party leader contest or general election? He is a no hoper at the next election the pendulum has swung too far.

  6. Eric W Smith
    December 8, 2012

    How can a government of any persuasion achieve a fair balanced system whilst continuing to uphold the dictates of the European commission? The EU. is sucking the very life out the Uk. The simple answer to our problems is to break the link.

  7. Denis Cooper
    December 8, 2012

    “more people will get jobs”

    But which people?

    Britons who are currently unemployed, who are not contributing to the economy and therefore tax revenues but are adding to the government’s welfare bill?

    Or people from abroad, not least in the expected influx from Romania and Bulgaria?

    1. forthurst
      December 8, 2012

      “the expected influx from Romania and Bulgaria”

      Is a further chapter to be written in the history of the dalits of NW India whose migrations began 1400 years ago? Will those Roma decide that muli-cultural Britain is an infinitely more congenial place than SE Europe? etc etc

    2. alan jutson
      December 8, 2012

      Sadly your comment is all too true Dennis.

      Prepare for the next influx when the agreed controls end.

      Really does make you wonder if any in charge have any commonsense at all.

  8. Brian Tomkinson
    December 8, 2012

    JR: “Let’s have lower more competitive tax rates, better working banks, and more realistic public spending.”
    That’s what we thought we were voting for in 2010. As it hasn’t happened in the first half of this government I don’t hold out much hope for the second half. Cameron is more exercised about same sex marriage than the economy and oh, how dare you think that we shouldn’t keep on borrowing more to give it away in overseas aid. Sorry John your party is finished under this (lack of )leadership.

  9. Iain Moore
    December 8, 2012

    “So too could a faster rate of economic gr0wth, generating better returns for savers and higher incomes for those in work. ”

    Not when you have an open door immigration policy.

    As we saw in the last decade when we had some growth, but also mass immigration, the result was falling wage rates, while the proceeds of the growth went to a very small section of the population.

    We have got to the ridiculous situation of the state having to subsidise median and lower wage earners because their salaries just don’t cover the basics. When will the penny drop with our political classes that an over supply of labour is/has become a very expensive thing for the Tax payer as the in work welfare bill balloons?

    In a normal market, as there is growth, there is also, as you say, rising labour costs, which in turn forces companies to drive out costs, become more efficient, and increase productivity. By opening out borders to mass immigration we have allowed employers to rig the labour market, transferring costs onto the state, take the pressure off them to be more productive, and more perniciously have the state rob the productive industries to subsidise low wage paying employers, who rely on Tax credits to subsidise the payroll.

    Low wage mass immigration is beggaring pour future.

    1. Bazman
      December 9, 2012

      Many companies make money from the poor. The British citizen is to compete with East Europeans on who can work for the least? There would be even less British working if there was no minimum wage. Growth of the economy does not help poverty wages as seen in the last ten years.

  10. Martyn
    December 8, 2012

    John, you say “We should speed the moves to control our borders better. We should not extend out of work benefits to people who recently arrived in the UK and are not UK citizens. If they come here under the free movement of workers they should not be entitled to out of work benefits for doing so”.

    Few would argue with that but the EU dictates to us that any EU citizen visiting or settling in another EU country shall be fully entitled to all benefits offered by the host nation. We are no longer sovereign in this and so many other areas of national importance and must provide housing, social benefits, medical and educational services to any EU citizen arriving here, effectively on demand. As other nations join the EU it is soon going to get very much worse with tens or possibly hundreds of thousands of immigrants from the poorer new EU nations seeking work or housing and social benefits and I would not be surprised to see that cause civil unrest in some already greatly overcrowded parts of the UK and in England (the country which shall not be named by government) perhaps in particular.

    Reply: But I want a new relationship with the EU where we do not have to obey all their rules and laws and have common borders.

    1. Brian Tomkinson
      December 8, 2012

      Reply to reply,
      Just how and when are we going to achieve this new relationship? Talk is meaningless without action and I don’t see any in that direction.

  11. Acorn
    December 8, 2012

    “No Country for Old (White) Men”. That is the Post-It note currently being stuck on Republican Party doors in the US. Similar could be stuck on Tory doors next election. The UK is mirroring the US in so many ways; except in prosecuting the guilty members of the elite class.

    Take a chance JR and allow this link from Bill Gross. http://www.pimco.com/EN/Insights/Pages/Strawberry-Fields-Forever.aspx .
    The 90% Dept / GDP thing from Reinhart and Rogoff, has been debunked, they basically got it a*se backward.

    Nice try at cheering us up JR but with 70% of our last two decades economy, having been based on debt finance; what can you say? Debt finance has left the building, Elvis style. It has left the old, sclerotic, western world and moved to more productive eastern climes.

  12. English Pensioner
    December 8, 2012

    We can’t reduce taxes because we still have a tax and spend government. Last week someone waved their magic wand and produced money for windmills in Africa and help for Columbian Cattle farmers; more money was produced to refurbish some schools (which were only in that state because they had been neglected by the local councils). Nothing has happened about the “bonfire of quangos” whilst at the same time new ones have been or will be introduced. Most government departments have increased in size, consultants are still being employed by the thousands, the list is endless.
    There is absolutely no sign that the government is getting things under control, so presumably to distract attention, Cameron is proposing to introduce gay marriage.
    Meanwhile at the UN climate change conference it seems that UK will sign up to even tougher limits regardless of the fact that neither China or the US are going to do so.
    I simply can’t see any difference between the Tories and Labour.

    1. Christopher Ekstrom
      December 8, 2012

      Lords reform. Right: time to vote UKIP!

    2. APL
      December 8, 2012

      English Pensioner: “(which were only in that state because they had been neglected by the local councils)”.

      Exactly, now how to sanction the local authority that neglects simple tasks like maintanence of known building inventory?

      Localism anyone? Tory party remember localism?

  13. Paul Rivers
    December 8, 2012

    I guess a basic point is that the government spends too much of our money and is not very good at it , indeed the civil service machine is an obstacle to growth and has been deeply embarrassed by the virgin rail affair. Its incompetence has been exposed . I just wonder if the government has at long last realised the full extent of the problem and the solution. Gove’s cuts at Education ( 1/3 staff reduction), the reducing of dept budgets to force change elsewhere, more action to force property disposals by government and finally Cameron blocking the DECC permanent secretary appointment. The latter perhaps because Shale gas exploitation does not fit in with the departments agenda and he wants an appointment outside the green consensus.

  14. Jose
    December 8, 2012

    How about living up to the promise of the ‘fire of the quangos’? Just think how much wasted money would be available to be put to proper use.
    When you have ‘no money’ you cut out the ‘nice to have’ items and go for the essentials, the coalition has got nowhere near real cutting of government direct or indirect.

  15. me
    December 8, 2012

    Here’s another one.

    Stop pi$%ing money away on eco-nutter boondoggles like wind farms.

  16. Steve Cox
    December 8, 2012

    I suspect that most followers of this blog would like lower taxes, both direct and indirect. But with such a huge budget deficit still in place, every tax cut will mean a spending cut as well, and where are the suggestions for those, at least on the scale that is needed? Don’t tinker with the overseas development budget, suspend it for 3 years. Of course, our left-of-centre, liberal, beloved leader (and I’m not referring to Clegg here) would lose a lot of face with his mates in the metropolitan elite, but would the man on the Clapham omnibus care? I doubt it, he would applaud. (Except that nowadays he’d probably be from Somalia or Afghanistan or Bangladesh, so maybe not…, ha ha) We are still living in a fairytale fantasy land where we can borrow whatever we want to pay for all those things we feel we are entitled to, but it cannot and will not last forever. One day the British government will have to wake up and grow up, and believe me when it happens it will be the more painful the longer that it is put off. Look at what Ireland has achieved in public spending cuts since the crisis began, 33% according to the Independent. So why is spending still rising in the UK when we are supposedly committed to cutting the deficit? It’s a complete joke, along with the official inflation numbers which may as well have been produced by the Argentinean statistics department for all that they are worth.

  17. zorro
    December 8, 2012

    John, you mention ideas which we have heard previously but you seem to be giving more emphasis to the control of immigration which is sorely needed for a variety of social and economic reasons. This is sensible, as the recent ‘investment’ of 5 billion pounds seems to be on housing and schools, and we know that nearly half of this requirement is linked to immigration. The country cannot afford this any longer and we must invest in border control so that we can ensure the the UK resident population is give proper access to employment and not undercut on an uneven playing field. This makes economic sense as it will lead to more people working and less paid out in benefits. It is criminal that we have allowed the situation to develop where we have created jobs whilst still not lowering the number claiming benefits.

    zorro

    1. Bazman
      December 9, 2012

      So who benefits from all this cheap labour then? Certainly not the majority of the population. Funny how all the high paid managers have not be replaced by cheap labour from the EU. Is it down to their unique skills and talents? Have a think.

      1. Edward
        December 10, 2012

        You have a different experience to me Bazman, most of the redundancies I hear about are managers.
        One friend of mine was one of 60 or so middle managers recently “let go” from a local company.
        Banks, building societies and insurance companies and many other PLC’s have been stripping out layers of mangement and saving loads of money.

        You ask who benefits from all this cheap labour…well the consumer mainly with cheaper goods, followed by the shareholders, followed by the Directors.

        1. Bazman
          December 10, 2012

          As most goods are not made in this country I doubt it. Do tell us what in the supermarkets other than electrical goods are getting cheaper? Shares are not really doing anything. Wages are rock bottom for most. So that just leaves the directors, who are really just managers with executive powers, doing well from the government in one form of direct or indirect subsidy. Who as you say making a lot of lower managers redundant and getting the lower workers to do the work for the same money.

          1. Edward
            December 11, 2012

            Bazman, what you say is partly true.
            The driver of this trend is a desire to survive in the UK, in business, against increasingly strong world competition.
            Although I would agree with you that most goods are made abroad, the logistics, retail and service industries for example, still need to be competitive.
            Like you I’m unsure where this trend is all heading, as this continued reduction in staffing levels and pressure to lower salaries could rebound onto companies when they find demand for their goods and services reducing.

  18. Matthew
    December 8, 2012

    Highlights again the gap between Mr Cameron’s rhetoric, that we’re in “The economic equivalent of war” and his actions that fall well short of putting us on a “war footing”

    The state banks are moribund, yet we’re fiddling around with Green Investment Banks – what do we need another bank for? Let’s sort out and rid ourselves of the one’s that we’ve got.

    Mr Cameron isn’t giving a clear direction of travel, why doesn’t he name just a few key priorities that form the centre of his push for economic growth?

    Like, banks, energy, EU savings, border policy ….for a start. People would get behind that.

    1. Brian Tomkinson
      December 8, 2012

      Matthew,
      “Mr Cameron isn’t giving a clear direction of travel, why doesn’t he name just a few key priorities that form the centre of his push for economic growth?”
      He’s too busy pushing same sex marriage and borrowing more for overseas aid.
      In short, he is not fit for purpose.

  19. Neil Craig
    December 8, 2012

    Growth is the real alternative to “austerity”. The most redistrubutive extreme leftism coyuld not seriously expect to make the poorest 1o0% of the populatuion more than 10% better off (even assuming thier programme would not destroy much of the real econ omy(. On the other hand 2 years of the average growth of planet excluding the EU) would make EVERYBODY an average of 12% better off.

    Fixing the deficit is valuable since that deficit is a great drag on growth, however fixing it by increasing taxes is an even greater drag. We need to cut the enormous amount of government parasitism.

    We need, even more, to cut the regulationms which increase the cost of doing thuings – H&S, building “planning”, those nuclear costs not justified on its safety record etc.

    Most of all we need a free market in energy, since growth in energy use correlates virtually 1:1 with GDP (or in our case the reduction in energy use).

    All of these are relatively easy since they only require government to stop getting in the way. Taken together they would guarantee us a growth rate exceeding the world average.

    1. uanime5
      December 8, 2012

      You do realise that a growth of 12% in GDP doesn’t make everyone 12% better off. A large proportion of the population won’t get any benefit from this as their salaries won’t increase by 12% over 2 years.

    2. APL
      December 8, 2012

      Neil Craig: “Most of all we need a free market in energy, since growth in energy use correlates virtually 1:1 with GDP”

      Yes, the Climate Change bill and all the other Green nonsense that this government signed up to when in opposition, and has not repealed since coming to power.

      Wiki: “On 16 October 2008 Ed Miliband, Secretary of State for Energy and Climate Change, announced that the Act would mandate an 80% cut overall in six greenhouse gases by 2050.”

      Does Ed Miliband realize what an 80% cut in CO2 emissions will mean for British industry? Does David Cameron?

  20. forthurst
    December 8, 2012

    “The introduction of a high cap for housing benefit in understandable, as the government does not wish to destabilise families living in dear to rent homes . There could be a much tighter cap for new claimants.”

    The last Labour government introduced an unsustainable system whereby people who do not work and are not English or even born here could select a property in a prime Central London location or anywhere they chose, rent it at more than the private rental market rate, and pass the bill to English working families who could not for many reasons afford to live in Central London. This was a typically nasty Labour initiative designed to damage us whilst helping their rentier chums.

    Private tenants frequently have to move on two months notice on the whim of a landlord. They then have to find themselves alternative accomodation. It is not clear why those whose rents are paid by the taxpayer should have greater security of tenure. As things stand, taxpayers are helping to prop up the rental market, costing them more in tax and more when they themselves rent. There is also being created a special class of tenant who rented properties before the new regime was introduced just like in the bad old days.

    1. Christopher Ekstrom
      December 9, 2012

      Rather Soviet, eh?

  21. deddy
    December 8, 2012

    Of course the “temporary” ban on immigration from Bulgaria and Romania stops on 31st December. Welcome to the next (arrival) of Eastern Europeans!!!!! Politicians – a complete waste of space

    1. APL
      December 8, 2012

      Deddy: “Of course the “temporary” ban on immigration from Bulgaria and Romania stops on 31st December. ”

      I think we should phase out the ban, Bulgarian and Romanian women should be permitted entry 31st December, the men can come later.

  22. Manof Kent
    December 8, 2012

    ‘You do need to limit new capital works’

    Yes ,those that have a short pay back period which show an immediate benefit eg sorting out the A21 ,need to be undertaken first .

    Clearly HS2 will produce no benefit for 15 years or so ,therefore strike a red pencil through that vanity project.

    We have to borrow money to do all this capital work so make sure we are getting a quick return or we might as well pay people to dig up the roads or break windows.

  23. BARMOUTH FAN
    December 8, 2012

    I have picked up from realclearpolitics.com that JFK pointed out that LOWER rates mean MORE revenue 20 years before Mr Laffer came up with his curve.
    I have advocated being in ETFA. If WIKI is right we would pay the MUCH lower ‘single market contribution’ but have SAME trading relationship. Boris is advocating EFTA PLUS i.e we continue to have a seat on the Single Market Council and thus have input into RULES. I thought that Bill Cash was exaggerating when he said that we have a 50 BILLION trade deficit with EU but this is NOW the case. SERIOUS LEVERAGE!

    1. uanime5
      December 8, 2012

      Given that the UK’s trade deficit with non-EU countries don’t give us any leverage there’s no reason why the UK’s trade deficit with the EU will give the UK any leverage.

      Boris’ plan is nothing more than a fantasy with no prospect of working. The EU will not allow the UK to make EU law, while ignoring these laws and not paying for membership of the EU.

      1. Edward
        December 10, 2012

        unamime5,
        Deficit and leverage is not the key thing.
        If we offer good quality products at attractive prices into the worlds markets then people will buy them.
        We offer in turn a fair and open market at home, there is an enticing market to have available and co-operation and accommodations will be created between us and the world’s trading nations.
        It is in no nations interests to be awkward and difficult to the point of protectionism and loss of markets.
        We are the worlds 6th or 7th biggest trading nation with a large number of top brand companies.
        We will make our way and survive as a trading nation OK, in or outside the EU.
        Dont be so worried and pessimistic.

  24. Muddyman
    December 8, 2012

    Get fracking on with it!. We need to invest in reality, not the Green Dreams of the ‘windies’.

    1. Bazman
      December 9, 2012

      Another ‘fracking’ fantasist. The site is riddled with them!

      1. APL
        December 9, 2012

        Bazman: “Another ‘fracking’ fantasist.”

        There is nothing fantastic about ‘fracking’ for gas. It appears there are very significant reserves of gas in the strata under our feet, it’s there for the taking, let’s take it.

        I suppose you would oppose the extraction of Coal from underground, the process caused much more disruption to the strata than fracking is likely to.

        There you go, Bazman forbids the extraction of coal. Industrial revolution canceled!

        1. Bazman
          December 10, 2012

          Its dubious whether fracking can be profitably extracted in Europe. Some 50experimental well have so far not produced one cubic meter of gas according to Colin Smith head of energy research at VTB capital. British shales are among the thinnest and not suitable for fracking. Another point is that even if this is not true the large number of well heads are going to make all these windmill that are such a ‘monstrosity’ on the landscape as so many say they are look pretty and what of the 1000/s of lorries required to build the well heads typically in America a 1000 lorry loads per well. The pollution caused is also another problem even in a large country like the USA.
          You had better have a further look into your fantasies like the rest of the right wing dreamers on this site. As usual

          1. Edward
            December 10, 2012

            Last report I read said the shale gas could be 17 times more valuable than North Sea Oil ever was.
            But its probably just another right wing fantasy, like the huge reductions in gas prices in the USA in the 4 years they have been extracting shale gas in large volumes, without any problems.

        2. Bazman
          December 10, 2012

          Could be. You intend to gamble everything on this putting other energy sources back years?

  25. waramess
    December 8, 2012

    Since the government are not productive and hence are unable to create growth it is quaint that they spend so much time worrying over it. Only the private sector creates growth and government actions prevent it.

    Smaller government, no deficit, cheap energy no windmills.

    No more minimum wage no more redundancy payments, forget redistributing incomes and allow the private sector to create jobs and allow only those certifiably unable to work to claim benefits.

    Without the barriers to employment there is no reason why full employment should not exist and that is the most important thing to most people. not whether they get the minimum wage. That comes after.

    Forget overseas Aid but remove all barriers to trade even though lobby groups might seek to protect national industries.

    Just a rant of course for there are far too many vested interests for such a programme to exist so, we will just have to sit back and listen to the whimpers of politicians who are unable to understand why there is no growth, why unemployment keeps rising and why the deficit keeps growing.

    The only “salvation” for the UK will be gas through fracking and there we have a recipe for lazy politicians to do nothing very much about anything other than allow the public sector to keep growing

    1. uanime5
      December 8, 2012

      Typical right wing fantasy devoid of reality.

      If you remove minimum wage then this will result in a race to the bottom with immigrants working in all the low paid jobs because wages will be too low for British workers to live on.

      If you remove benefits expect an increase in homelessness, poverty, crime, and the prison population. Making people more desperate for low paid jobs doesn’t result in full employment only more misery among the most vulnerable.

      If you remove all barriers to trade then British shops to be swamped with cheap products from abroad and British manufacturing to collapse because they can’t compete with the low price of foreign goods.

      In conclusion the UK’s salvation will not come from people who believe that the free market will magically fix all the problems.

      1. waramess
        December 9, 2012

        uanime5 ubfortunately yours is a typically left wing rant. The minimum wage is a law against the right of the worker to freely trade his labour. no longer do we have a feudal system where the employer calls the tune; this is a question of supply and demand for labour which is itself no more than a cost of production.

        Mess with this and you end up with mass unemployment because in a recession where people are spending less the cost of production needs to come down.

        Full employment would mean that you would not need to have benefits at current level so comprehensively widespread. Just look after the truly disadvantaged and hopefully everybody else would be so busy in employment that your scenario of crime and high prison populations.

        Homelessness and poverty are the result of unemployment and tariffs are just a way of protecting the very people you seem to think would millitate against the working classes.

        Nothing wrong with cheap goods and if your sort stopped mucking around with economic realities then a reduced wage would result in cheaper goods which would enable us to compete robustly in a high tech market.

        The corrolory would be that Africa would be able to start manufacturing and exporting finished goods into Europe without the stupidly high tariffs which protect European corporates.

        In conclusion UK salvation can only come from the free market. Supply and demand are a function of physics; whatever you try to do you cannot change them and your best efforts will do no more than distort the end ressult

    2. Bazman
      December 9, 2012

      How is anyone supposed to support themselves without a minimum wage? You propose to have peole working and in competition as to who can work for the least as there is not enough jobs. The ones without any work should presumably starve as there is to be no benefits. As for redundant payments you are just wrong and I assume it would not apply to anyone above manual anyway. Basically another rat for a race to the bottom a race that you will of course for whatever reason and circumstances will not be taking part in. Ram it. Your lack of reply is as ever telling.

      1. waramess
        December 9, 2012

        Bazman you will drown in your socialist dogma. Try thinking of an economy of full employment where socialists have not been allowed to meddle and where wages are no more and no less than a cost of production.

        If workers are offered a rate that is less than is necessary then the cost of production goes down and the price of goods declines. Competition will see to that.

        Until recently this system prevailed in the USA and the unemployed levels were the lowest in the western world. Now, the socialists have introduced a minimum wage and you can see the result

        1. Bazman
          December 10, 2012

          You seem to think that the market sets the wages in many cases such as the supermarkets they set the wages. Companies pay the minimum they can get away with to boost profits, they are not going to share, and use the states benefit system to boost profits. You are a free market dreamer where there is no free market. The idea that if benefits were cut would lead to more jobs and higher wages is a fantasy.
          There is minimum living standards in this country and we should be wary of forgetting this.

          1. Edward
            December 10, 2012

            Bazman, Its being diluted by 500,000 new keen arrivals most of whom are looking for unskilled or semi skilled lower paid jobs.
            Supply and demand as usual.
            Good old Labour party looking after the workers during their 13 years of misrule..

  26. Alan Wheatley
    December 8, 2012

    My suggestion to help banish austerity is to spend more money on rolling out high-speed broadband to every dwelling and business that currently has a telephone. I have banged this drum several times before, and make no apologies for doing so again.

    This is a capital project that will not need revenue spend to keep it running. Indeed, it will generate revenue.

    By committing to provide the facility to everyone it will bring some cheer to the significant minority who see no prospect of every getting the benefits while the rest of the population moves forward.

    But the Government needs to dramatically change the way the programme is currently being run and replace it with something far faster, effective and efficient. It is not difficult.

    1. Bazman
      December 9, 2012

      Interesting map on just this subject. Finishes on 31st December so take a look now.

      http://www.idoxgroup.com/mapforengland/index.cfm

      1. Mark
        December 9, 2012

        Very good maps on broadband speeds and availability also available here:

        http://maps.thinkbroadband.com/?utm_source=mainsite&utm_medium=navigation&utm_campaign=maps&utm_content=sidebar

  27. pete
    December 8, 2012

    “We should not extend out of work benefits to people who recently arrived in the UK and are not UK citizens” – correct, I cant imagine moving to Germany or France or anywhere else and asking where the dole office is, where can I get a free house etc.

    Little wonder migrants cross Europe until they stop at Calais

    Your mention of border control, same thing – yet another EU chip away that needs sorting out.

  28. Jon
    December 8, 2012

    Lots of good sense in the blog. By not cutting government spending austerity is permanent feature for the rest of us.

    I would add tackling the massive union subsidy of the taxpayer. Thousands are on permanent secondment to work for the political unions at our cost paying for their salaries, pensions and office space. Yet again this Christmas RMT will be on strike costing the economy 100s of millions each time they do this.

  29. wab
    December 8, 2012

    “Many of us wish to be generous to pensioners, so maybe as longevity rises so we have to make further increases in the age of retirement to help balance the books.”

    Of course this makes some sense, and is already happening, although unfortunately the current generation that is just retiring or has just retired is exempt from the increase that should have happened long ago.

    The one niggle, and I’ve never seen a proper analysis of this in the UK context, is that poorer people do not live nearly as long as richer people (and “richer” includes the entire middle class). So the latter are the ones who should theoretically work longer, not the former, but in practise it’s hard to see how to do anything about that in any sensible way.

  30. Christopher Ekstrom
    December 8, 2012

    “Austerity” means not significantly cutting public spending. Wasteful & otherwise. “Skeptic” means endless hand-wringing & tolerance for cast-iron lies. That’s why I am UKIP: keen to slash public spending & ANTI-euro.

  31. Lindsay McDougall
    December 8, 2012

    This post contains some good suggestions but I feel that a few specifics are needed.

    There is no reason for the existence of social (subsidised) housing. Any handouts should follow the family and not be tied to particular properties. So sell off all social housing, either to the tenant or, where this impractical, to a private landlord. The level of the benefit cap should be set regionally to reflect property prices and rentals. I’m not sure about giving preferential treatment to existing benefit recipients, which is a bit like squatters’ rights.

    Invite offers for RBS and Lloyds, in whole or in part, right now. Look at the values of the offers and the ‘strings attached’ and pick the best of them from the point of view of taxpayers. What I find worrying are these little stories that are leaked to the press now and then about how it is impossible to sell RBS shares ‘for at least 10 years’. Stephen Hester only asked for 5 years to return RBS to profitability and 4 of these years have passed. So who is responsible for the leaks – worth a question at PMQ?

    During the last period of the Labour government and the initial period of this government, public capital expenditure was halved, so there is some way to go before it becomes excessive. On the other hand, the monster of public current expenditure has not been much affected; indeed it is only now that the Chancellor is imposing a 1% pa cap on benefit increases. And the huge expenditure on the retired elderly has hardly been touched.

    Much as I love tax cuts, in current circumstances we have to confine ourselves to cutting tax rates that will lead to increased revenue; there aren’t many.

    There I go again, ignoring the sprit of Christmas. Bah, humbug!!

    1. uanime5
      December 8, 2012

      The advantage of subsidised housing is that the Government can set the cost. Using rental property means the Government is at the mercy of landlords.

      A 1% rise in benefits is a 2% cut in real terms due to inflation being above 1%.

      1. Mark
        December 9, 2012

        You do not understand how markets work. If the government is a monopsony buyer of housing for the less well off, and there are many landlords, it is the government that has the negotiating power.

        1. uanime5
          December 9, 2012

          You don’t understand how the markets work. The Government has to house those who can’t afford their rent and there is a housing shortage, so landlords can charge what they want knowing that the Government can’t go elsewhere.

          The Government only has negotiating power when there is a surplus of housing available in the area.

          1. Lindsay McDougall
            December 10, 2012

            There isn’t just one landlord, there are lots of them to choose from. It’s just that government and recipients of benefits are extremely lazy when negotiating on behalf of taxpayers. The amount of housing that family ‘needs’ is to some extent elastic. There are many families living in Tower Hamlets who sleep seven to a room and send lots of money ‘back home’ to relatives in poor countries. Have you never heard of the saying ‘beggars can’t be choosers’?

  32. Mark
    December 8, 2012

    We don’t need more “affordable housing”, we need housing that is more affordable. That includes bringing down high rents that are supported by generous benefits that line the pockets of landlords, not tenants. It requires tough negotiating, by telling landlords en masse that their contracts will not be renewed unless the rent is reduced say 5% where the rent is supported by housing benefit. Tenants who negotiate even lower rents should be rewarded with a share of the benefit of their negotiations, as should those who agree to move to cheaper properties. Since in most instances tenants will be paying some rent, the potential to reduce the housing benefits bill is rather greater than 5%. Lower rents for those supported by housing benefit open the way to lower rents for those renting privately. Rinse and repeat next year. It really doesn’t help to marginalise a small sector of the market by disadvantaging them.

    A further benefit of capping rents properly is that it would stop landlords from outbidding other buyers on the assumption that the state would support their purchases with high housing benefit subsidies. That would allow house prices to drop and make them more affordable. In turn that would reduce the sums the banks have tied up in mortgage lending, freeing funds for more productive use in the real economy.

    As to capital spending, not all of it is welcome. Government seems to have an unerring habit of making extremely unproductive investments. Projects such as HS2 and windfarms should not see the light of day, as they destroy value. Instead, we need to repair and improve the motorway network; establish high speed broadband (the B4RN project in Lancashire shows how gigabit fibre broadband to the home can be brought to the countryside for a tenth of the cost suggested by BT); and invest in sensible forms of energy.

    It is extremely good news that the British Geological Survey has endorsed an estimate of 300Tcf as the reserves in the Bowland basin. That is over 100years’ gas consumption at last year’s rate of consumption in the UK. At a price of 60 p/therm it would be worth some £1,800bn – enough to pay off all outstanding gilts, plus the additional borrowing planned by the government. Mr. Salmond may not be so pleased that England has its own energy supply, and won’t need to depend on Scottish wind.

    Development of shale gas would be of great benefit to our security of energy supply, rather than relying on supplies of LNG from inside the Straits of Hormuz as we do at present. It would also at the same time lead to a sharp improvement in our balance of payments.

    That is, provided Mr Davey and Mr Barker don’t sign away the benefits in donations in Doha. What mandate do they have to do this anyway?

    1. sm
      December 9, 2012

      If we funded developments via debt free money maybe with a share based on risk/reward we could fund a sovereign wealth fund investing in longterm infrastructure to pay all the future pensions.

      Q. How would we keep greedy sticky fingers out of the jar?

    2. uanime5
      December 9, 2012

      The Government could easily reduce the cost of housing benefit by limiting the rent that can be charges on property based on the property’s council tax band.

      Telling landlord that contract’s won’t be renewed won’t work if they can get new tenants who will pay the same rent or tenant that will pay at least 4% less than the current rent.

      Regarding shale gas it’s estimated that only 10% of the shale gas in the UK is extractable so the Bowland basin is worth much less than your estimates.

      1. Edward
        December 10, 2012

        uanmime5,
        In a previous post to the one above you were arguing the Government has no power to affect rents as landlords have all the epower…now in this post you state “Goverenments can easily reduce the cost of housing benefit by limiting the rebts that can be charged….”
        Do you just take a contrary view to every post for the fun of it or are you a bit confused?

        Also, a recent survey reported in the press, indicated that shale gas reserves, so far found, repeat so far found, exceed North Sea oil by a magnitude of 17 times.

      2. Mark
        December 10, 2012

        Once again you are talking out of your hat. The previously recognised situation by BGS was their estimate that the total shale gas reserves in the UK on a possible basis (50% probability of being higher or lower) was just 5.3Tcf. Those low numbers have been used by DECC ever since they were produced in 2008, in support of the idea that shale would be “insignificant”. They, and the useless ECC Select Committee persisted with this estimate despite the announcements of various finds, the smalled of which is the 4.4Tcf field that straddles the Fermanagh/Leitrim border, and the largest was at least 200Tcf in Lancashire.

        Companies that announce discoveries have to adhere to very strict reporting rules. The DECC and the BBC seem to have been immune from those rules, feeling free to ignore those announcements in preference for their propaganda.

        BGS have now admitted that just in Lancashire, reserves are 60 times bigger than they thought for the whole UK. Supposedly they are producing a revised whole UK figure soon, but once again the DECC seem to be trying to prevent larger numbers from being publicised.

  33. uanime5
    December 8, 2012

    An easy way to help people earn more money is to raise the minimum wage. This would have the added benefit of reducing the welfare bill as well.

    If raising the minimum wage will cause too many problems for small businesses then the higher minimum wage could only apply to non-SMEs (over 250 employees).

    1. Edward
      December 10, 2012

      It seems such a tempting idea unanime5.
      Put up the minimum wage until we are all richer and fully employed.
      What about differentials?
      If the lowest grade in an organisation suddenly had a 10% or 20% wage rise do you really not think all the others on higher grades would not ask for a similar increase?
      What about the effect on prices?
      Employers would have to find those extra costs from somewhere, and the main way would be increased prices charged for their goods and services.
      You could end up with bigger wages but an unchanged standard of living as everything you have to buy costs more.
      Its the economic equivolent of someone shipwrecked drinking sea water to survive.

  34. David Langley
    December 9, 2012

    I cannot believe that the PM,s myopia regarding money thrown away only extends to the narrow range of topics you mention. It extends everywhere it is just his total lack of getting it. EU aid plus our own direct contribution, the billions thrown away on the EU subscription must be the tip of the iceberg.
    Money spent in this country usually will be taxed at source if its in wages and salaries, when spent it attracts VAT, Corporation tax and a plethora of government cash grabs. It therefore goes around as Keynes said on the “Propensity of public spending and saving” This circle increases the trading and wealth of us all here in this country. You know this John so it is vital that we start getting all cash sent abroad repatriated back here at home we do have the power to do this. You say we should, I say we must, and if it it is in our own hands to do this what is preventing Cameron from doing it? Who is he trying to impress with his extravagance? I am not impressed.

  35. Cary
    December 9, 2012

    One can only cut taxes if one is prepared to run up a deficit or cut government spending. No one thinks the former course is sensible but no one is prepared to say what government expenditure they will cut. It also puts too much faith in fiscal policy to stimulate growth. The biggest obstaces to growth at the moment seem to be lack of finance and regulation. The first cannot be resolved until the financial markets rediscover confidence and that will not happen until the Euro crisis and the US ‘financial cliff’ are sorted out; some measures, such as postponed Basel 3 capital controls for 5 years will help. As to regulation and its costs to business, some of that is domestics policy decisions and some is EU imposed, which leads us back to the EU debate.

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