Living standards need to rise – inflation is their enemy

 

         One of the reasons I stand for Parliament is I want to help create the conditions in which living standards can rise. I want everyone to have the chance to be better off through their own efforts, or to be able to participate in the nation’s economic success if disability or old age means they have difficulty in providing for themselves.

        The recent prognosis by the Governor of the Bank of England that inflation could well stay above target for longer came as no surprise. It may be one of his more accurate forecasts, after years of understating the rate of price rises and overstating the rate of economic growth. The bad news  is higher inflation  could well prolong the period of falling living standards, which started with the collapse during the deep recession of 2008-9.

          You would have thought the main objective of the government’s economic policy would be to create the background where living standards can start rising again. You would expect the Opposition, seeking to rebuild their reputation for economic competence after the disaster of the Big recession, to be equally keen to set out views that could help bring about some restoration of living standards.

              There are two ways of doing this. The first is to get on top of inflation, so people’s wages buy more. The second is to grow the size of the economy, making sure the extra income generated goes to people who already live here.  The first aim does not seem to figure prominently in current political debate. Let me make the case as to  how it could be done.The second is proving difficult, with much of the extra effort being made by recent arrivals so it does not add to per capita output and income.

                  Getting inflation down is not as difficult as it might at first seem for government, because government itself is one of the main causes of it. There are three immediate areas where better public sector management and different policy could make a big difference.

                The first is energy. Go for cheap energy, so people on low incomes can afford to keep warm, and businesses can afford to make things here. The government has imposed large extra costs whcih the US, China, India and others do not incur.

                  The second is transport. Fares are far too high, especially on the railways. The government now accepts that the railway is massively inefficient, but there are few signs of a culture change that might make an impact with lower fares and less subsidy. The poor management of the road network also adds greatly to business costs. The public sector sees private road travel as an easy source of large amounts of revenue which makes us all poorer.

                 The third is the stifling cost of tax and regulaiton on a wide range of activities. Just consider the very large costs now on buying, improving and selling property. CGT at 28%, high fees for planning permissions and building regulations, high stamp duties. These all stand in the way of more jobs in construction and home improvement. They block off one of the main ways people in previous generations have made some capital.

 

 

 

 

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133 Comments

  1. livelogic
    Posted February 15, 2013 at 6:27 am | Permalink

    Nothing to disagree with here. All obvious and virtually indisputable, but Cameron and Osborne just take the opposite route – expensive religious energy, uncontrolled & non selective immigration (no projected figures are available but Pickles has seen them it seems), over regulation of everything (even insurance premiums), huge over taxation, mugging of car drivers at every turn, silly expenditure on HS2, the pigis, the EU, wind, pv, the green deal, the dis-functional NHS, the counter productive wars, the propaganda BBC organisation, absurd employment laws and over paid, pointless, bureaucrats everywhere and at all level of government.

    As you say – Get on top of inflation, so people’s wages buy more and grow the size of the economy, making sure the extra income generated goes to people who already live here rather than undercutting them with labour who then send much of the money abroad. Just get out of the way and fire the half of the state sector that is pointless or worse.

    On my last planning application for a new house I was required to place two adds in a specific local paper at a cost of about £300 each and then do a pointless bat survey at another cost of £600. Then there is the excessive costs of new utility connections (virtual monopolies), the planning and building regulation fees and over the top energy nonsense, high interest and fees on development finance too at the moment. The house costs thousands and is delayed for years, before you can even lay a single brick.

    • Timaction
      Posted February 15, 2013 at 10:37 am | Permalink

      Sound advice Mr redwood. It’s a shame your leaders aren’t listening. They are just going for the daily soundbite and not addressing the strategic issues!
      Of course it doesn’t make sense to add to our population to do the low wage jobs leaving native Britains on benefits.

    • Jerry
      Posted February 15, 2013 at 11:32 am | Permalink

      @LL: “Just get out of the way and fire the half of the state sector that is pointless or worse.”

      Thus spend any savings on redundancy and unemployment payments – Duh…

      • lifelogic
        Posted February 15, 2013 at 5:04 pm | Permalink

        Well as so many are doing nothing useful (or worse inconveniencing the productive) it is far cheaper to have them on the dole and looking for a real job than being paid far more than dole on the state pay role.

        As for redundancy they should pay a law saying 2 months pay is the maximum due.

        • Jerry
          Posted February 16, 2013 at 9:47 am | Permalink

          @Lifelogic: Well yes they (the Tories) could, but I guess you are far to young to remember the last time a government attempted to change employment laws in such a way and what happened, and no it wasn’t Thatcher’s government, try ten years earlier…

          Yes the resulting (general) strikes might be illegal but what would the government or courts do, build more prison -assuming that they could get any prison officers to work in them?!

        • uanime5
          Posted February 16, 2013 at 12:31 pm | Permalink

          So no rewards for long service then. If your redundancy limits were introduced companies wouldn’t be able to retain staff for more than 2 years because the staff would be better off constantly changing jobs.

      • RB
        Posted February 15, 2013 at 8:44 pm | Permalink

        Yeah because dole money and housing benefit/mortgage support is far more expensive than a £45k per year street football coordinator and pension. Duh.

        • Jerry
          Posted February 16, 2013 at 9:49 am | Permalink

          @RB: Err you forgot to include redundancy payments as part of your equation. Duh…

      • Max Dunbar
        Posted February 15, 2013 at 10:31 pm | Permalink

        No pain no gain. In bee-conomics the drones are turfed out at the end of summer – for good reason. The same logic applies to humans in the non-creative sector. It cannot be avoided. The productive workers must prevail and the useless mouths cast out.Only a question of when not if.

        • Jerry
          Posted February 16, 2013 at 9:55 am | Permalink

          @Max Dunbar: Indeed but there is a time and place for everything, many would suggest that in the midst of the worst peace time deficit (which is still increasing, not reducing) might not the time to borrow even more money to simply to comply with the rules on redundancy.

        • uanime5
          Posted February 16, 2013 at 12:32 pm | Permalink

          In bee-conomics the drones are the ones who do all the work and provide honey for the queen. Don’t expect the Government to function at all if they fire their drones.

          • lifelogic
            Posted February 17, 2013 at 8:59 pm | Permalink

            The drones are clearly the private sector workers in the bee analogy.

          • Max Dunbar
            Posted February 17, 2013 at 11:17 pm | Permalink

            The drones’ only function is to mate the queen and only one drone is required for this. The only product of the drones is sperm which is stored within the queen’s body for a considerable time and remains viable, not honey.

    • lifelogic
      Posted February 15, 2013 at 12:47 pm | Permalink

      You say:-
      “One of the reasons I stand for Parliament is I want to help create the conditions in which living standards can rise.”

      Well you have indeed made valiant and sensible attempts. Alas it looks as though Cameron will surely go into the next election having made everyone poorer after a full five years. He could not even beat Gordon Brown. How can he possibly ever win at the next election? His record is appalling. His clear dishonesty to the electorate over Lisbon the EU and Inheritance tax and his quack renewable & expensive energy agenda now totally discredited.

      Perhaps the IHT promise was, being very generous, not a direct lie. But it was surely even worse. It was a very clear & deliberate deception of the electorate. Obtaining political power on a very clear deception. Promising a popular policy for votes and then making no real attempt to deliver it whatsoever.

      Then further, not even promising it after the next election. Not that any Cameron Osborne promises are now worth anything at all.

    • lifelogic
      Posted February 15, 2013 at 12:54 pm | Permalink

      Now the Waltham Forest has the £80 spitting tax. All those gold pensions to pay I suppose not to mention the pay and pensions for all these new civil enforcement – spit watching officers.

      What an odd sense of council priorities.

      • Mark
        Posted February 15, 2013 at 7:58 pm | Permalink

        Will they add taxes on shoe-throwing and mooning à la Maori as well? Or are those culturally acceptable?

    • livelogic
      Posted February 15, 2013 at 1:43 pm | Permalink

      Given that “A meteor streaks across the sky in central Russia causing loud explosions and injuring nearly a thousand people” and a large Asteroid is passing rather close this evening can we assume the Global Warming soothsayers have taken all the similar incidents for the next 100 year projections into account and if so how. Also any solar impacts they will need to know too. Not the mention the suns activity, and technical innovations, developments in agriculture, population growth or declines and endless other things.

      Or are they just talking BBC/Libdem/Huhne/Cameron drivel and speculative guesses as usual?

      • uanime5
        Posted February 15, 2013 at 4:05 pm | Permalink

        What effect do you believe the meteorite had on global warming? Unless it contained some carbon dioxide it won’t have any effect.

        The sun’s activity follows a repeatable pattern so it’s possible to know what effect it will have on global warming over 100 year (none).

        • Jerry
          Posted February 16, 2013 at 6:44 pm | Permalink

          @uanime5: Trouble is, it is becoming clear (to anyone still with an open enough mind) that climate change is also predictable, it also has a tendency to gain speed as the climate moved out of the abnormal mini ice-age phases that it goes through every so often, oh and that is every few years in terms of how long the earth has existed.

          At worst, all man is doing by releasing a little bit more CO2 (from both man made and natural sources) than would occur from natural sources is speeding up the inevitable natural process very slightly, so rather than spend money trying to turn back nature we would do better to use technology and money adapting and preparing for it, that is not to say the whole industrialised world should not be tackling other pollutants -which most western countries have been doing since the mid 1950s.

          Oh and by the way, when talking about climate change and trends, you need to multiply your 100 years by at least 100,000, if not by 1m to get any meaningful data! Even then it tells us very little about what caused the increase or reduction in ‘green house’ gasses.

        • lifelogic
          Posted February 17, 2013 at 9:02 pm | Permalink

          Well an asteroid is believed to have wiped out the dinosaurs. So rather a lot for a big one – get real.

      • wab
        Posted February 15, 2013 at 10:42 pm | Permalink

        “Can we assume the Global Warming soothsayers have taken all the similar incidents for the next 100 year projections into account and if so how.”

        Umm, if the odd small meteor streaking across the sky had anything to do with the climate then you can guarantee the scientists would be modelling it. (It’s not difficult to model, unless you happen to believe that you need to know the exact time and location of every meteor, which would be a bizarre idea.)

        The sun’s activity is a red herring.

        Technical innovations, etc., could help (or make things worse if it allows more people to emit more). This is why a range of possible scenarios is given, from “business as usual” (nothing much changes) to increases and decreases relative to that.

        If you think all this is “drivel” then I’m sure we all await your brilliant Nature paper explaining what is really happening.

        • lifelogic
          Posted February 17, 2013 at 9:06 pm | Permalink

          What about a big asteroid like like the one believed to have wiped out the dinosaurs? – get real. Not to mention volcanic activity.

          Still I am sure they have it all in their computer modelling! They must be very clever people -real expert clairvoyants.

    • livelogic
      Posted February 15, 2013 at 1:49 pm | Permalink

      The new Walthamstow £80 spitting tax should do well at football and rugby games but with the crowds put up with all those stoppages? Is there no end to job creation schemes for the parasitic sector – all those index linked pension to cover I suppose.

      • John Maynard
        Posted February 15, 2013 at 3:52 pm | Permalink

        Ha-ha, you sound like someone who has never been physically exerted (usually, it’s ladies who say such things).
        Hard physical exercise produces lactic acid, which needs to be discarded.
        Some bright spark on the Waltham Forest council, actually suggested that joggers should carry a sort of ‘mouth potty’ to spit into !

        • Jerry
          Posted February 16, 2013 at 7:17 pm | Permalink

          @John Maynard: If you are exerting yourself in normal life that hard you should not be! Anyway no one is talking about stopping spitting on the sports field (event), but there really is no excuse to spit in the street for 99% of people and time. Also with the unwelcome upturn in (drug resistant) TB of late there really does need to be a renewed effort to stop such anti-social behaviour. Indeed, if you must spit why can’t one do it into a handkerchief, would you also blow your nose without using something to catch the discharge?

      • Bazman
        Posted February 15, 2013 at 4:25 pm | Permalink

        If it is anything like the dog fouling laws do not expect one prosecution. Police state laws and undercover surveillance is all fine by me on this. The Daily Mail and their readers can ram their freedoms.

      • Jerry
        Posted February 15, 2013 at 6:49 pm | Permalink

        Sorry but is LiVelogic the same person as LiFelogic or are they two different people, John, anyone?

        • zorro
          Posted February 16, 2013 at 11:35 am | Permalink

          There can be only one…….

          zorro

          • lifelogic
            Posted February 17, 2013 at 9:09 pm | Permalink

            Just one with erratic spelling. Having one “right” spelling system is clearly a socialist imposition – up with which I will not put..

  2. Leslie Singleton
    Posted February 15, 2013 at 6:33 am | Permalink

    Instead of charging them, via the iniquitous and impossible to understand Employers’ NI, the Government should pay employers for every person they employ and for the enormous amount of work they are forced to do that has absolutely nothing to do with them–pensions, maternity leave, tax collection etc. The present situation is or should be against employers’ human rights. Apart from being fair, this simple step would be the sort of thing that might actually make a dent in the unemployed with the multitude of very positive knock-on effects that would immediately ensue which would make a change from the useless measures being taken at present. Penalising employers is a very silly thing to do.

    • lifelogic
      Posted February 15, 2013 at 9:04 am | Permalink

      Indeed hence the large increase in relative self employment. The disincentives to employing people (especially when you cannot ever retire them thanks again to Cameron and the EU) are huge.

      • Jerry
        Posted February 15, 2013 at 11:37 am | Permalink

        @LL: “especially when you cannot ever retire them

        What difference does that make, it would be very unlikely that any old (aged 65 plus) person will want to stay in a physically demanding job, whilst the young can just as easily bring their own problems (especially if female) for the employer, unless that is you actually meant retire in the sense of making the position redundant?

        • lifelogic
          Posted February 15, 2013 at 5:17 pm | Permalink

          It the elderly are doing the job well employers would not want to retire them anyway the problem is when they are no longer doing the job efficiently. Easy hire and fire for young and old is needed.

    • behindthefrogs
      Posted February 15, 2013 at 1:45 pm | Permalink

      I totally support the view that employers’ NI contributions should be reduced as much as possible if not got rid of completely. Even if this has to be financed by an increase in corporation tax for small companies the potential is immense. With the banks reluctant to lend a move like this that improves cash flow will have huge dividends.

  3. Nina Andreeva
    Posted February 15, 2013 at 6:44 am | Permalink

    Fourth stop engaging in a “currency war” to deliberately debauch the value of sterling. John why are you not stating that all this “money printing” is not, like in the 1930′s, to make Britain’s exports relatively cheaper i.e. Britain is now exporting things that are not so price sensitive like coal and steel were in the past. The real intention is to deliberately import inflation so as to reduce the value of all the accumulated debt.

    • Denis Cooper
      Posted February 15, 2013 at 3:52 pm | Permalink
      • zorro
        Posted February 16, 2013 at 11:37 am | Permalink

        This is because of the wider money printing type policy solutions being considered/implemented in Japan/Eurozone/USA, and the general world inflationary trend.

        zorro

        • Denis Cooper
          Posted February 16, 2013 at 5:13 pm | Permalink

          Maybe.

          But the fact remains that if the Treasury and the Bank have been trying to devalue sterling they haven’t succeeded over the past four years or so, including the periods when QE was running.

          The big drop before that, during 2007 and 2008, was clearly the work of the markets and not something that either the Treasury or Bank sought to happen or could in any way control.

          • zorro
            Posted February 16, 2013 at 6:55 pm | Permalink

            To be honest Denis, I don’t attribute it to any skill on the government’s part – they were lucky – as you know, the main aim of QE has been to cover existing government spending, and maintain the ‘slow inflationary default on the debt’ line. They have been lucky that the Eurocrisis has been better food for the markets over the last few years otherwise we would have been hit sooner. We still might be tested this year now that there is some long term stability (of sorts) in the Eurozone area…..The question is who would blink first the government or the market (remember 1992)…..?

            zorro

          • Jerry
            Posted February 18, 2013 at 10:41 am | Permalink

            @Zorro: The Euro crisis is far from over, the test if one comes will be the Markets vs. the Euro (and EU/ECB’s “We will do what ever it takes” statement from last year), still no excuse for complacency on the UK’s part though.

  4. Mike Stallard
    Posted February 15, 2013 at 6:59 am | Permalink

    Your last three points are simply commonsense and totally on the ball.
    But you know and I know that they are all down to the EU.
    Energy is tied in with the Climate Change scare and windmills. The pace on fracking is glacial.
    The railways are dominated by DG MOVE.
    The many, many Civil Servants both in Brussels and UK exist to pour out regulations which, we both know, are never discussed in parliament because they are statutory instruments.

    If it was just us, then, of course, you would be bang on. But the fact that even Germany is now beginning to suffer suggests that it could be the EU that is to blame.

    • lifelogic
      Posted February 15, 2013 at 9:06 am | Permalink

      Well the EU and people like Cameron who connive with it, while pretending not to!

    • John Maynard
      Posted February 15, 2013 at 3:58 pm | Permalink

      After getting itself into a complete pickle, by going for the “green energy” scam, I see that Germany is now urgently reconsidering allowing ‘fracking’.
      What’s the betting that they have production before we do, despite our (present) three year lead ?

    • uanime5
      Posted February 15, 2013 at 4:10 pm | Permalink

      Statutory instruments are laws made by ministers so they can be discussed in Parliament. Parliament can also repeal the acts that give ministers the power to create statutory instruments.

  5. Nothing Better To Do
    Posted February 15, 2013 at 7:37 am | Permalink

    Unfortunately, Mr Redwood, if improving living standards for a majority of people is your intention you are in the wrong business. Government exists by removing wealth from it’s owners, taking a large cut for itself and then giving some back in the form of bailouts, subsidies, benefits or fake tax breaks in a manner calculated to bribe people just enough to get itself re elected. That allows inefficient industries to remain in business, the idle to remain jobless and distorts free markets so that they do not build real wealth to the extent they could do. Even if various sections of society become richer most do not. We are collectively poorer because of government. Wealth is never created by the state despite all the claims, it can only be stolen and spent by it.

    • lifelogic
      Posted February 15, 2013 at 9:08 am | Permalink

      Indeed just defence, property rights, law and order and perhaps a few roads and other basic services are all that is needed. 20% of GDP is plenty to provide for these.

      • Bazman
        Posted February 15, 2013 at 4:31 pm | Permalink

        You have been shredded a number of times on this fantasy. Why do you keep repeating it? Is it like a religious chant. Right wing think put forward by right wing daydreamers living in tax havens?

        • lifelogic
          Posted February 17, 2013 at 9:12 pm | Permalink

          I have yet to hear any sensible arguments put against it.

          • Bazman
            Posted February 18, 2013 at 12:09 pm | Permalink

            You have yet ‘hear’ is right. It has been pointed out to you a number of times that in a modern advanced economy like Britains a return to nineteenth century economics and a rolling back of the state to the same levels is not real who would accept this regression? The private sector would not just fill the gap and how would anyone live to British income levels? Can you hear that or do you think they would? Is it possible to live like a peasant in modern Britain? When you answer some basic question to yourself you will not be as foolish in your ideas.

    • uanime5
      Posted February 15, 2013 at 4:17 pm | Permalink

      That allows inefficient industries to remain in business

      Won’t inefficient industries have more trouble paying their taxes than efficient ones? If so then it doesn’t benefits inefficient companies.

      the idle to remain jobless

      That’s more to do with the lack of jobs.

      distorts free markets so that they do not build real wealth to the extent they could do.

      In order words taxes prevent the wealthy from giving themselves even higher salaries.

      Wealth is never created by the state

      The infrastructure provided by the state (roads, schools, hospitals, police, courts) allows companies to make money. Funny how the anti-state brigade keep forgetting this.

  6. oldtimer
    Posted February 15, 2013 at 7:55 am | Permalink

    The policies you propose make sense. The question in my mind is why those in charge do not follow them. Either they are obtuse or they are pursuing a different agenda. I think it is the latter.

    • lifelogic
      Posted February 15, 2013 at 3:18 pm | Permalink

      “a different agenda” perhaps the “children let loose in a sweet shop (of other people’s money) agenda”

      • Bazman
        Posted February 15, 2013 at 4:33 pm | Permalink

        The children let loose to cut the economy and save themselves money, but everyone else paying for it is what you mean?

  7. Ben Kelly
    Posted February 15, 2013 at 8:03 am | Permalink

    The inflation monster is continually fed by government through its handouts and poor procurement policies.

    Government inflates prices for all: childcare demand is driven by government payments, consultancy charges remain high for all due to demand created by government, healthcare and medicines show huge profits as government forms much of the marketplace, Access to work resources are higher for private buyers as government does not use market mechanisms. Old age care for those who have to pay are higher because government raises price in the public sector.

    Wages are high in public sector so putting pressure on the private sector thus raising consumer prices for all.

    Benefits were insured against inflation, the largest portion of the benefits bill, pensions, still are. This itself is a driver for demand led inflation while the working populace see their standard of living eroded. Private landlords accepting housing benefit tenants must take a discount from their receipts as the payments are guaranteed, that must have a value but has government negotiated it?

    Benefits paid to new arrivals encourage higher population which in turn drives demand led inflation, do not pay tax credits, child benefit, JSA or housing benefit to incomers.

    If government truly wishes to tackle inflation it has the tools without resorting to monetarism

    • stred
      Posted February 15, 2013 at 9:50 am | Permalink

      Ben Kelly. You are correct in saying that EU migrants often claim HB when they arrive. However, landlords are not guaranteed to be paid. Since Labour stopped the system of direct payment by LAs to landlords, some tenants spend the money on other things and fail to pay the rent, knowing that it will take about 6 months and an expensive court order to remove them, and that if they move or have no savings, the court order on arrears is unenforceble.

      • Ben Kelly
        Posted February 15, 2013 at 1:19 pm | Permalink

        So to remove the inflationary pressure pay the landlords directly.

        As per my main point government procurement practices (not getting better prices for swift payment for instance) drives inflation.

      • Bob
        Posted February 15, 2013 at 1:48 pm | Permalink

        @stred
        and they call landlords unscrupulous!

      • lifelogic
        Posted February 15, 2013 at 5:21 pm | Permalink

        Indeed it is the Landlord that needs protection the court system is slow weak and on the side of tenants even if they are not paying.

        “Unscrupulous landlords” is just the Labour/Libdem BBC word used for Landlords.

    • uanime5
      Posted February 15, 2013 at 4:22 pm | Permalink

      Wages are high in public sector so putting pressure on the private sector thus raising consumer prices for all.

      Wages are higher on average in the public sector because the public sector has more educated employees, but when you compare wages per education level those in the private sector make more.

      In any case cutting wages in the public sector (a race to the bottom) won’t reduce prices. It will just reduce the number of people who can afford to buy things (something that will reduce demand and make the economy worse).

      • lifelogic
        Posted February 17, 2013 at 9:16 pm | Permalink

        “more educated employees” well perhaps but very ineffective.

        50% more pay and virtually no net output.

    • Bazman
      Posted February 15, 2013 at 4:43 pm | Permalink

      Benefits and child care costs are more often than not paid to working people often due to low wages. A fact that eludes you it seems? Stopping payments to newcomers is going to be difficult as it is unjust. Should any British doing the same job without making any contributions be subject to the same?
      How are the benefit claimants supposed to work given the price of childcare in this country? The cost of childcare is one of the reasons why there is so many claimants and why after one child woman do not work. It’s just not worth doing work to give the money to childminders. So what do you want more claimants and less woman working or less children? Got to be one of them. You seem to be under the impression that incomes can be cut and their will be no knock on effects or costs. Why is this?

      • Bazman
        Posted February 18, 2013 at 12:12 pm | Permalink

        Any answers to this one lifelogic? Oh! Less tax and less regulation will solve it? No it would not. At least not for the population in general. Have a think why.

  8. Posted February 15, 2013 at 8:24 am | Permalink

    I completely agree! If inflation is 3% and earnings growth is 1% then that’s a 2% drain on the economy. And it’s cumulative, next year it will be a 4% drain, the year after that a 6% drain. Earnings MUST rise faster than inflation for the economy to grow.

    As as you say, the way to make that happen is to put a lid on inflation. I consider it criminal the way inflation is above target every month and yet the Bank of England does nothing about it.

    • Mark
      Posted February 15, 2013 at 8:04 pm | Permalink

      On the contrary: they condone and fuel it via QE and ZIRP.

  9. David Price
    Posted February 15, 2013 at 8:25 am | Permalink

    “You would have thought the main objective of the government’s economic policy would be to create the background where living standards can start rising again. You would expect the Opposition, seeking to rebuild their reputation for economic competence after the disaster of the Big recession, to be equally keen to set out views that could help bring about some restoration of living standards.”

    It seems to me that as a group MPs, government ministers and the public sector are largely isolated from the ravages of inflation. While in the job you get pay increases independent of the actual state of the economy, for example a few years ago Wokingham increased it’s council tax by several percent despite a near zero rate of inflation. When you retire your pension is index linked and rises comfortably independent of the circumstances of the people who fund it. This is in stark contrast to the vast majority of people in the private sector who are exposed to the full effects of inflation and bad decisions by those in positions of authority yet do not enjoy the same levels of protection.

    If you want a systemic change to encourage control of inflation then the public and political sectors, especially the government enforced monopolies, need to be fully and directly coupled to the effects of inflation and their policies – no index linking, no automatic increments and promotions, no defined benefit pensions.

    • lifelogic
      Posted February 15, 2013 at 9:10 am | Permalink

      Indeed and the state sector, including pensions, are already 50% over paid relative to the private sector – whose taxes and pensions they are stealing and wasting.

      • Bazman
        Posted February 15, 2013 at 4:54 pm | Permalink

        There are consequences to your cost cutting fantasies and here’s a couple.
        Massive pensions at the top maybe. Here in Cambridgeshire the golden pension with the council is worth on average £2800 a year, so income support for them on retirement. For 2013-14, Cambridgeshire will receive £3,949.94 per pupil, putting it 151st out of 151 local education authorities for school funding The county’s low education budget is a historic budget dating back to political decisions made by the council in 1980s, when it wanted a low council tax.

    • A different Simon
      Posted February 15, 2013 at 11:52 am | Permalink

      Couldn’t agree more .

      There should be a component in the inflation basket for the RATE OF SAVING which a private person is estimated as needing to put aside to make provision for their old age .

      As index linked annuity rates are so low , a bigger pot is required which requires more saving and given that growth rates are non existent even more saving .

      All difficult when wages are dropping in real terms and often cash terms for many in the private sector , especially the self employed who never had access to SERPS .

      Whereas saving 10% of wages over a lifetime for old age might have been sufficient to supplement the state pension 8 years ago and provide a dignified standard of living in the absence of growth the figure now will be closer to 30% of takehome pay than 20% .

  10. Gary
    Posted February 15, 2013 at 8:37 am | Permalink

    So, either they are completely stupid, which isn’t impossible, or they know exactly what they are doing. Bailing out bankers.

  11. David Price
    Posted February 15, 2013 at 8:40 am | Permalink

    Ed Milliband does a set piece apology for dropping the 10% band and claims they will restore it as this action damaged the situation for the working man and their grass roots. He and Ed Balls blame Mr Brown for all the problems despite them being active participants in the disasterous Labour handling of the country’s energy and finances.

    Milliband has apologiesed for allowing unbridled immigration and overtaxing the low paid but he carefully avoids mentioning that he also imposed the increases in energy costs euphamistically called “government obligations”. These impact those on lower income just as much if not more considering the harmful effect on industry and commerce.

    Both Balls and Milliband claim dropping the 10% tax band wasn’t the right thing to do so why did they do it? The situation hasn’t changed materially and increased taxes always harm the taxpayer. Why didn’t they refuse to do these things?

    Was it because they were incompetent or ineffectual or they put their careers ahead of the needs of the taxpayer? How can anyone believe it would be any different next time?

    • behindthefrogs
      Posted February 15, 2013 at 1:53 pm | Permalink

      This 10% tax band is a stupid proposal. If the same money is invested in raising the starting point for tax this benefits the lower paid who are taken out of tax completely to a larger extent while those who benefited from the whole 10% tax band would lose out a little.

      However rather than playing with tax bands this is another case where the money would be better invested in raising the lower limit employees

      • behindthefrogs
        Posted February 15, 2013 at 2:02 pm | Permalink

        Sorry my computer twitched midsentence. I was trying to say:

        However rather than playing with tax bands this is another case where the money would be better invested in raising the lower limit employees’ NI contributions. This would help people with lower earnings than raising the tax band and also concentrate the help on the employed rather than those with unearned income.
        There should be an aim of removing NI from the list of taxes that small companies have to administer.

  12. Brian Tomkinson
    Posted February 15, 2013 at 9:06 am | Permalink

    Good luck with trying to persuade Cameron and Osborne whose strategy was to reduce the deficit by higher taxation and inflate away the debt. Even the Governor of the BoE is now pointing the finger at them for higher inflation. Their problem has been that they just wouldn’t stop spending more money and so they will end up leaving office having most of us poorer but with a debt level double the one they inherited from Labour.

  13. David Hope
    Posted February 15, 2013 at 10:08 am | Permalink

    I totally agree with your 3 suggestions. That said, surely the big issue is interest rates and QE.

    Cheap money and new money have contributed to massively inflated asset prices. A large part of the pain for younger people is high rents and mortgages. It’s absurd when a one bedroom flat in an average area is £1400 a month in london. Average wages can’t match that.

    Non more QE is a necessity. Interest rates are trickier. The BoE has checkmated itself as inflation has meant people have no room to cope with a rise.

    A bit of deflation following 2008 might have been welcome. We’ve tried to keep money supply up and zombie businesses continuing and ended up in expensive stagnation

  14. Acorn
    Posted February 15, 2013 at 10:22 am | Permalink

    I trust you have all read Martin Wolf at the FT.com (Feb 7 and 12). MMT (Modern Monetary Theory) is starting to creep into the UK via the few financial journalists that got above NVQ1 in economics. There are even signs that Whitehall and its regulators are starting to understand, the difference between Monetary operations by the BoE and Fiscal (taxing; spending; budget deficits) operations by the government Treasury. Dropping money out of Helicopters is back on the agenda at the FSA, (a fiscal operation not a monetary one). Mr Carney doesn’t sound to keen on Helicopters, or monetising government spending straight out of the DMO.

    There is much talk of flexible inflation targetting which will be great for the Banksters, but not for the 99% whose living standards will continue to drop. As Neil Wilson posted, [I paraphrase], “there is no demand pull inflation in the system it’s all cost push – caused by terms of trade and lack of competition. It’s not really inflation in the classic sense; it’s a deliberate reduction in the standard of living for wage earners, while protecting creditors. If the independent central bank hypothesis had any credibility they would jump on this price change and cause the necessary level of bankruptcy and capital destruction to eliminate it. But that would involve some of their banker mates taking a cold bath. So it doesn’t happen”.

    So is the coalition in an ideological trap? Osbo’ and Cam are running a post war economic theory that has passed its sell-by date. It will take a hell of a lot of spin to back out of it, without the Opposition smacking them to the boundary six times an over.

    • Gary
      Posted February 15, 2013 at 11:46 am | Permalink

      MMT wants the money counterfeiting by printing press to be done by govt instead of the banks. Their concession is that it would be debt free. Patently, MMT don’t have a clue about inflation and the supply of money, and they never heard of the problem of economic calculation.

      I don’t trust the bankers with a money printing press , and I certainly would not trust the govt.

      Let the market determine the type and amount of money, and let’s get vested monopolies out of that business.

      • Acorn
        Posted February 15, 2013 at 5:59 pm | Permalink

        Gary, with respect, you have got it a bit twisted. Can I suggest you have a read of (Mosler’s paper-ed I have not myself had time to study this ) Particularly the bit starting “How the Federal Government Spends”. Specifically, the passage “The story begins with parents creating coupons they then use to pay their children for doing various household chores. Additionally, to “drive the model,” the parents require the children to pay them a tax of 10 coupons a week to avoid punishment. This closely replicates taxation in the real economy, where we have to pay our taxes or face penalties”.

    • Acorn
      Posted February 15, 2013 at 12:40 pm | Permalink

      BTW. I noticed this while I was in the database.

      I don’t know, you have 5,171 pieces of primary legislation operating in the UK somewhere. You have 69,088 pieces of secondary legislation likewise but its never enough. Did someone mention a bonfire of rules and regulations; my arse. I wonder if there is a prise for the parliamentary draftsman, who can write an SI and knee-jerk it before parliament in the quickest time?

      Anyway there is never an SI around when the horse has bolted and jumped into a la-sag-nee.

      “In so far as these Regulations cannot be made under powers contained in the 1990 [Food Safety] Act, the Secretary of State makes the following Regulations in exercise of the powers conferred on him by section 2(2) of the European Communities Act 1972(c).

      Its a good job we are in the EU, er … isn’t it? http://www.legislation.gov.uk/uksi/2013/264/pdfs/uksi_20130264_en.pdf

      • Denis Cooper
        Posted February 15, 2013 at 4:04 pm | Permalink

        I take it that this is “negative resolution procedure”, so the SI will come into force on April 6th unless either MPs or peers pass a resolution against it.

  15. John B
    Posted February 15, 2013 at 11:00 am | Permalink

    Mr Redwood: you mention two areas, energy and transport.

    For each we need and want the most efficient, that means the most effective to meet our individual needs at least cost.

    But there is no longer a free market here, that is we as individuals working together do not decide how best to achieve these aims, as the Government has a monopoly in both areas forced by taxation and regulation.

    So what are the Government’s aims in both these areas? On a grand scale the aim is ‘to save the Planet’ and more modestly, ‘to protect the (local) Environment’.

    The interests of the People are trumped by the interests of the political class.

    In fact Mr Redwood, the entire economic policy of the Government revolves around saving the Planet or protecting the Environment in the which quest the People and their interests are expendable, trumped by the interests of a preening political class.

    It is pointless talking about transport and energy unless the policy is how best to ensure prosperity, not meet a vain Green objective.

    One might think we do not already had cheap ways of making electricity: we do gas and coal. Nuclear has perhaps missed its time thanks to ‘Green’ worship, unless thorium technology will allow cheap power plants, low running costs and minimal waste disposal.

    We do have the means of a low cost transport system, called roads. But by taxation and regulation this mode of transportation is made difficult by regulation and taxation to force people onto the railways, also a Government monopoly, which is 200 year old technology and cannot cope. We might as well be driven back onto horses.

    The solution is to make prosperity the objective, not idiotic Green nonsense.

    Britain’s entire infrastructure: waterways, roads, rail, utilities, energy sources was constructed by the free market funded by private capital to give the Industrial Revolution, a time of such great advance in prosperity and wealth for all, unmatched in history and made possible precisely because the dead hand of Government was not present (see France in the same period).

    Why is it now imagined Government can do better, particularly since unlike our ancestors whose aim was prosperity, the aim is now to sacrifice prosperity in the worship of a god?

  16. Jerry
    Posted February 15, 2013 at 11:17 am | Permalink

    I want to help create the conditions in which living standards can rise. I want everyone to have the chance to be better off through their own efforts [..//..] The first is to get on top of inflation, so people’s wages buy more. The second is to grow the size of the economy, making sure the extra income generated goes to people who already live here.

    But not at the expense of a debt fuelled bubble! I’m also a little confused by the second part that I quoted above John, you seem to have needlessly inserted the word “already” into an otherwise very powerful observation for a Tory MP to make (I assume you are profit and free-market orientated), indeed if the UK was to make more of what it currently imports from Asia and the far east (be that cheap kettles from China or cheap-call centres and staff from India etc.) then more of the wealth would be going to more people who live in the UK because they would be employed (and in the case of some companies financed with off-shore investment, anyone in the UK, even shareholders…).

    As for that ‘stray’ word “already”, the Tories and UKIP pandering to ‘certain types’, in doing so they will likely loose votes from elsewhere -meaning a net loss, not gain. Let’s be honest, (im)migration is not the cause of our ills, although it might be a symptom, we need to look a lot closer to home and stop keep blaming jolly-foreigner. For example, why was it only 30 odd years ago that for the youth of Britain a career in Farming was still path to follow, now much of British youth won’t get out of bed for such jobs, meaning that farm managers now need to look elsewhere, and the same is true across whole swaths of UK industry, especially in the traditionally lower paid sectors. Did not the 1950s, although a genuine labour shortage then, cause by the war and rapid post war expansion, not teach us anything about why migrant labour comes in from abroad?

    Perhaps we need to stop the nonsense of 50% of school leavers going to Uni, the brightest kids go to Uni (after proper, exacting, exams), far to many kids are been feed daydreams by politicains and teachers, the vast majority of school leavers will be lucky if they attended a College of Further Education or enter an apprenticeship. I’m using that word in the traditional sense, not the modern sense that seems to mean little training and rock bottom wages – I mean, an ‘apprentice domestic cleaner’ for Gods sake!

    Go for cheap energy, so people on low incomes can afford to keep warm, and businesses can afford to make things here.

    Indeed but all the time this government is trying to be “the greenest ever” this will always be the straw that is going to break many a camels back, not only would I like to see this government get rid of these ‘green taxes’ and regulations but for Tories to actually start debunking the so called “AGW” science, it can’t be difficult to do, if a few ‘rag-bag’ non scientists [1] in UKIP can do so, if the BBC in a single programme can go 9.99/10th of the way to doing so with pure scientific facts [2] laid before the average listener then just think what Tory MP’s sitting on the government benches with all the resources and opportunities they have available could do both on the floor of the house and away from it – even more so if in a safe seat.

    As for public transport, indeed if the cost of private motoring was to be lowed and kept lower then public transport would have to also follow, and as the Laffer curve also applied to VED and fuel taxes etc. the increase in private motoring would almost certainly generate extra tax income that could then be used to subsidise public transport routes that would otherwise close due to running at a loss, be that country or urban routes.

    As for wanting yet another property bubble (and inevitable bust) do we never learn, unless you really were only addressing the building trade or keen DIYer – the latter which buys a larger -but dilapidated- house than would otherwise be affordable and then spends the next 20, 30, 40 years improving it so that when the time comes to cash-in (either as a result of career move, retirement down-sizing or death) the benefit is gained. Who was it in the Tory party who coined the phrase “back to basics”, or was it “traditional values”?…

    Sorry for the length of comment.

    [1] I say that as a compliment, a term of endearment, not abuse

    [2] BBC R4 “In Your Time” 09:00 – 09:45 2013.02.14. (if using iPlayer make sure that you access that version of the programme, the latter repeat is a shorter, edited, version), only the last 30 seconds or so was the more usual BBC AGW religion allowed to utter its hell-fire and brimstone ‘warnings’, other than that nature and natural events ruled supreme

    • Jerry
      Posted February 16, 2013 at 9:19 am | Permalink

      Have I’ve been blacklisted or something, comments above, comments below, comments older, comments younger…

      • Mark
        Posted February 16, 2013 at 11:45 am | Permalink

        I guess you’re someone else affected by the quirks in the site software since it changed servers.

  17. Neil Craig
    Posted February 15, 2013 at 12:01 pm | Permalink

    Technically inflation doesn’t impoverish people if it happens to everybody. However what you mean by cutting inflation appears to be cutting the size of government and thus the money they need to print/borrow and in this you are absolutely right.

    I agree 100% about the value of cutting energy prices, transport costs and regulation – in all cases what is needed is a free market economy. There is nio question that we could match the world average of 6% growth and little that we could seriously exceed it if the politicians were not actively preventing it.

    Unfortunately you are in a party which is almost as committed to big state control and Luddism as the “opposition”. Only UKIP supports the sort of policies you want

    • uanime5
      Posted February 15, 2013 at 4:35 pm | Permalink

      Inflation does impoverish people as price rises have a greater effect on the poor than the wealthy.

      • Neil Craig
        Posted February 16, 2013 at 10:33 am | Permalink

        As normal with the “left” we get assertion without even a pro forma attempt at evidence.

        Un’s atatement is, as normal with him, not only untrue but obviously so.

      • David Price
        Posted February 17, 2013 at 6:02 pm | Permalink

        Would that be the poor who received an above inflation (5%) increase in benefits last year?

    • HJBbradders
      Posted February 15, 2013 at 5:40 pm | Permalink

      Why not? I would have thought that it made everyone poorer.

  18. Peter Davies
    Posted February 15, 2013 at 12:02 pm | Permalink

    Agreed – its got to be accepted that adding premiums to bills in order to pay for more windmills is going to do nothing for climate change. Politicians need to accept that even if the science was true then Co2 does not recognize borders and the likes of China are increasing emissions more than we could ever hope to reduce.

    If they want cheap energy apart from the obvious shale etc above then lets clear the way to build more nuclear power stations. This will help local economies by way of employing the whole logistic chain to build the things and will lead to being self sufficient in energy for years to come.

    • lifelogic
      Posted February 16, 2013 at 5:59 am | Permalink

      Exactly but they have all been infected with the “renewable religion” clap trap.

  19. A different Simon
    Posted February 15, 2013 at 12:40 pm | Permalink

    Also , why are we still “Rip off Britain” ?

    Laptop computers , cameras , fishing reels , cars are typically 50% more expensive than they are in for instance the United States .

    I’ve got a feeling that the majority of the difference is going to global manufacturers rather than in tax and duty .

    • Bazman
      Posted February 15, 2013 at 5:10 pm | Permalink

      America is in effect one market say the manufactures so they only need one headquarters and so. A more real reason is that Americans will just not pay the prices asked and demand more competition. We like our price differences too. How would Audi drivers feel about paying similar prices to Ford? They want them to be expensive so Ford drivers cannot afford them. Many years ago before the internet I would buy American motorbike magazines such as Cycle World and noticed that some motorbike companies flagship models are different prices from their rivals. Here that are often the same price to the pound, so don’t just shout “tax” and defend them, though some British made products cheaper than here. When I pointed this out to my associates at the time the opinion was that I should be happy and just pay! I was a tightwad no less! No doubt it is the same now only more hidden.

      • uanime5
        Posted February 16, 2013 at 12:46 pm | Permalink

        Interestingly people consider high priced good to be better quality than low price goods and often want them simply because few people can afford them. So if the prices dropped this would reduce the number of sales.

        http://en.wikipedia.org/wiki/Veblen_good

        • Edward
          Posted February 17, 2013 at 11:47 am | Permalink

          Uni and Baz,
          Whilst there are goods that are purchased because they are expensive, this ultimate brand effect has to be built up very carefully and needs to be backed by excellent quality and customer service.
          Your example of Ford and Audi is a poor one because the Audi has superior driving characteristics and better overall quality (this is an opinion, likely to be contested by Ford and its fans-ed), which consumers are prepared to pay extra for.
          If Audis were the same price as Fords I would exepct Audi’s sales to rise and Fords to fall.

          Cars are too expensive in the UK and the reasons are historical.
          After WW2 the UK was exporting most of its car production and there were waiting lists for home orders. Prices were high and remained so.
          A State owned and subsidised car industry which was heavily unionised and generous tax breaks for company car ownership did not encourage lower prices either.
          Even when Japan came into the market in the seventies they were careful to only undercut a little on price but to give reliability and high specification and long warranties as their main selling points a to gain market share and make big profits.
          These things did not happen in the USA who have always been used to paying almost half what we in the UK pay for a car.

          • Bazman
            Posted February 18, 2013 at 12:38 pm | Permalink

            Ford and Audi is a poor analogy, but Audi and BMW deliberately keep up their prices as the sort of people who buy them demand exclusivity. The Japanese car industry and in particular motorbikes were of very poor quality in the early 70′s. A joke for many, and but they were cheap and more reliable than the British ones and had extras like cheap toolkit, despite their pressed steel frames, poor finish and quirks such as electric shocks through the handle bars. They were in some cases experimental at best. The unreliability of British motorcycles was seen by some companies as feature with one director even claiming that motorcyclists like grinding in the valves at the weekend!
            A lack of investment in new designs is what really finished the industry. 1974 Honda 740 4. The mark one mass produced superbike. The end for them. The only British firm to survive by 1978 was Triumph and less than 2000 were sold. ‘They were mens machines’ should be the epitaph of the British motorcycle industry. Todays bikes are more closer to cameras than cars. Advanced and cheap.

  20. Posted February 15, 2013 at 1:20 pm | Permalink

    The problem as I see it is that we have a Chancellor with no understanding of his job. All our top politicians may have PPE degrees from a good universities, but the amount of economics in such a course hardly gives them the knowledge or the skills required to run a country. As a result, I believe they lean too much upon the advice of their Civil Servants, particularly those in the Treasury, who are the very same ones who advised Gordon Brown and helped to get us into the present financial mess. There will be no change until we have either a Chancellor who has the necessary economic background in business, or a wholesale replacement of the top Civil Servants at the Treasury.
    So we continue to borrow more and more with the deficit showing no signs of decreasing and with the government proposing to spend even more on vanity projects like HS2 (surely it should be H2S as it stinks!). Add the Romanians & Bulgarians, who will be flooding here to get benefits and use the NHS, and the situation becomes so depressing that it’s not worth thinking about. No wonder both my daughters and their husbands talk of emigration and have feelers out for suitable jobs.
    But then seemingly, our PM is happy for our graduates to leave as he welcomes those from India.

    • lifelogic
      Posted February 15, 2013 at 5:30 pm | Permalink

      Not only that but they seem to specifically learn dodgy economics, dodgy global warming science, dodgy electricity production, dodgy transport policies and dodgy social policies.

      It is more what can we get the public to fall for, rather than what will actually work in science, engineering and economic terms.

  21. forthurst
    Posted February 15, 2013 at 2:25 pm | Permalink

    John Rishton Rools-Royce CEO, “. “Our margins are not as good as some of our competitors’, our costs are higher than the likes of General Electric and Pratt & Whitney, that enables our competitors to offer lower prices, it allows them to invest more in infrastructure and better training.” [The Times]

    The government would be very concerned that they have imposed unnecessary costs on business by their big state, multiculturalisation and high energy price agenda unless of course they see the consequences of their actions entirely in furtherance of their objectives which is in effect to destroy England as a first world country primarily occupied by its rightful inhabitants, the English.

    • John Maynard
      Posted February 15, 2013 at 4:08 pm | Permalink

      Rolls-Royce is a focussed business, Both GE and Pratt and Whitney are part of huge conglomerates where indirect costs can be much better spread.

    • lifelogic
      Posted February 15, 2013 at 5:41 pm | Permalink

      John Rishton Rools-Royce CEO is quite right. Rolls-Royce aerospace are one of the few good engineering companies we have left. But he should do his job, look after his shareholders and slowly move production somewhere cheaper and more efficient.

      Given Cameron’s policies (of over tax, over borrow, over regulate, expensive energy and large government waste) gives him rather a wide choice of other countries to look at.

      • David Price
        Posted February 18, 2013 at 7:04 pm | Permalink

        Move it somewhere cheaper, like China? Do that and their IPR will vanish along with their business, I am sure their shareholders would want to thank you personally.

        And cheaper doesn’t mean more efficient, when my company outsourced to China we had to pay for all sorts of supernumaries that didn’t actually do anything, along with their cheauffeurs. After that and reviewing the actual effectiveness of the outsource group their LLR looked nothing like what we were sold

        One of the reasons I left the high technology sector is because it is full of young and old business graduates with freshly printed MBA’s who thought the same as you do but never stuck around to enjoy the true benefits of their changes, including job reductions, even though we were effectively cheaper. Usually it was an American exec outsouring British jobs and that tradition just keeps rolling on – eg Cadburies.

        Please stick to your line about unnecessary regulations, government interference and overly high taxes as it is far, far closer to the reality.

  22. Bert Young
    Posted February 15, 2013 at 2:44 pm | Permalink

    I agree that the Government cannot create wealth , but , it can create the fiscal conditions to stimulate those who can create the wealth . As things presently are and are muted to be , there is not a lot of incentive for the entrepreneurs and business leaders to operate in the UK ( Dyson in Singapore , the threat of the ” mansion tax” , the level of taxation on individuals and businesses , the unbelievable level of “red tape” and the punitive employment conditions ) . Prioritising a low energy fuel cost would be a good beginning followed by a reduction in taxation .

  23. Antisthenes
    Posted February 15, 2013 at 3:00 pm | Permalink

    Once again you have highlighted ways of improving the economy but once again it is wishful thinking. Whilst there are so many people dependent on the largess of the state that will coalesce around the like’s of Lierbour, Lib-dims and Greens and so ensure that largess continues. Until state services and benefits are cut down to manageable and affordable sizes then taxes and regulations have to remain high and draconian. Therefore sapping wealth and undermining wealth creation. Self-defeating of course as the whole thing must eventually collapse but only those who do not rely on the state care and they are too few to do anything about it.

    • uanime5
      Posted February 15, 2013 at 4:41 pm | Permalink

      Well if the people who don’t rely on the state paid their employees more money then these employees wouldn’t have to rely on the state either. The price of paying your employees a pittance is high taxation so these employees can afford to work.

      • Edward
        Posted February 16, 2013 at 12:10 pm | Permalink

        Uni.
        I think we might agree that employers will pay the market rate to attract the employees they need into their business and keep them.
        If you ran an SME you would be looking to see if your job advert attracted any replies.
        If you got thousands of relpies you could deduct that your current wage rate was perhaps too high but if you got no replies you would quickly increase your rates.
        Employers do this all the time just as they have to carefully watch how their selling prices compare to their competitors.
        Businesses are not charities and they are mostly operating in a very competitive environment.
        It would be nice if all employers were to increase their wages to a level you feel is not a pittance, but without national legislation on a more complex minimum wage structure this will not happen until there is a shortage of labour or a hugely increased demand for goods and services.
        At the moment we have a large number unemployed and an extra few hundred thousand keen new arrivals coming here each year increasing competition for jobs.
        We also have a free and open market so other nations with much lower costs can import into the UK and undercut us on price very easily.
        Its tough out here in SME land.
        And before you talk about bosses paying themselves millions let me tell you after decades working in small companies, the bosses and managers wages are nowhere near the fantasy levels you often claim, sadly neither are the profits.
        And note that over 80% of people work in businesses with less than 30 people in them.
        I hear you complain a lot about poor wages, but I rarely hear you tell us of a practical solution.

      • lifelogic
        Posted February 17, 2013 at 9:20 pm | Permalink

        If you pay more than the market rate you just go out of business or get bought out – dummy.

  24. Winston Smith
    Posted February 15, 2013 at 3:33 pm | Permalink

    I am still amazed at how pathetic the Conservative Party has become? It is now firmly entrenched in socialism.

    http://blogs.spectator.co.uk/douglas-murray/2013/02/national-socialism-the-clues-in-the-name/

    The Party is being destroyed from within. History will not treat well those that sat by and watched it crumble.

    • lifelogic
      Posted February 15, 2013 at 5:51 pm | Permalink

      Indeed but I suppose Career politicians just join the party that offers them the best Career path.

      My personal belief is you can spot socialist “thinking” quite early in people it usually goes with a preference for appeals to irrational emotion over and above logic, a love of trains over cars, the “arts” over the sciences, religion over reason, forced “equality” over what actually works and a complete lack of understanding of human nature.

      • Bazman
        Posted February 16, 2013 at 3:17 pm | Permalink

        Where does your right wing fantasy think come from? It has no defendable basis and relies on everyone to just lie down and take it. Having nothing and being happy with it basically. Enlarging the economy with no benefit to the ones doing the work. The complete lack of understanding of human nature is very much your problem. Have you noticed that most of your arguments are easy the squash? Anti Democratic ranting and chanting socialism for the rich no less.

        • Edward
          Posted February 16, 2013 at 9:14 pm | Permalink

          Baz,
          Do you really want a population dependent on the State for their handouts for evermore, either as employees or as unemployed beneficiaries of the State because that is where we are heading.
          We have a State which is over 50% and growing, of all the national income we develop.
          This is not susstainable long term.

          You assume human nature is unable to manage without Stae welfare whereas I am full of depair that the full potential of our wonderful people in this nation, is being ruined by the lack of incentive to get up, get on and get going.
          Its all abput creating incentives to do things and at the moment we keep creating disincentives.

          • Bazman
            Posted February 18, 2013 at 7:03 am | Permalink

            What disincentive are you talking about? The disincentive of few jobs and many low paid ones which would somehow be improved by cutting welfare and tax credits ‘incentivising’ by making the poor more desperate? How does this create jobs and especially, how will this increase pay? When you and others come out on this you are squashed, so tend to hide your views in weasel words like lack of ‘incentives’. I’m onto it.

          • Edward
            Posted February 18, 2013 at 10:00 pm | Permalink

            Baz Im not asking for enforced poverty with swingeng benefit cuts or tax credit cuts this your fantasy of what I’m saying.
            What I’m after is some tax cuts especially at the bottom end, to encourage consumer demand and some incentives for small businesses to expand and employ one or two extra people.

    • zorro
      Posted February 15, 2013 at 10:26 pm | Permalink

      John, any views on this deselection (for someone who retweeted a quote-ed)

      Reply No. I do not have time to study this and comment on it.

      • lifelogic
        Posted February 17, 2013 at 9:23 pm | Permalink

        It stinks to high heaven as does plebgate and some other Cameron actions against individuals.

  25. John Maynard
    Posted February 15, 2013 at 4:15 pm | Permalink

    John -
    I would love to hear your thoughts on the French economy, always described as “in crisis”.
    Yet the stock market is quite buoyant, and each new statistical bulletin apparently shows France doing comparatively well.
    Huge state sector distortion, or statistical manipulation ?

  26. Gary
    Posted February 15, 2013 at 4:31 pm | Permalink

    Inflation always impoverishes everyone, because of the factor that hardly anyone accounts for : malinvestment or misdirected investment. Due to the supply and demand price being masked by prices rising non-uniformly due to currency debasement. That destroys an economy, eventually.

  27. Denis Cooper
    Posted February 15, 2013 at 4:38 pm | Permalink

    I grow weary of saying the same thing over and over again, but I will.

    If we have a law it should be obeyed.

    If a law has unjust or absurd or otherwise damaging consequences, and assuming that its wording does not allow the courts sufficient discretion to rectify the position, then that bad law should be changed not ignored.

    The Labour government which took power in 1997 had Parliament pass a law giving the Bank of England independence over monetary policy, but explicitly stating that the top priority of its policy must always be price stability, meeting an inflation target set by the Chancellor, and only subject to that it should support whatever economic policies the government defined.

    Yet again and again the Governor writes an Open Letter to the Chancellor saying that inflation is above the target he has set, and again and again in his reply the Chancellor does not reproach the Governor and nor does he insist that the Bank must do whatever is necessary to perform its statutory duty.

    In other words, the Chancellor is colluding in breaches of the law.

    He could adjust his inflation target upwards; or he could invoke a section of the law on “reserve powers”, which would enable him to ask Parliament to suspend the normal system and allow him to run monetary policy as he saw fit, perhaps temporarily reversing the normal order of priority and putting economic growth above price stability; but instead he prefers to hide behind the Bank and collude in its breaches of the law.

  28. John Maynard
    Posted February 15, 2013 at 4:38 pm | Permalink

    I see from the Spectator (where there remain problems with the site-ed), that a cove by the name of Dan Byles MP, is making a big noise about the formation of “an all party group”, to discuss the future of shale gas (just a few months after the conclusion of the government’s lengthy “consultation period”).

    According to Byles, we need “a public debate”. Naturally, led by a bunch of know-nothing MPs, with an exaggerated sense of their own importance and time on their hands.

    NO !! what we need now Mr Byles, is ACTION, Please just get out of the way and let the industry get to work !!

    It is a convenient myth that the EU stymies every effort to move the country forward, with red tape. Our MPs are every bit as guilty.

    • Mark
      Posted February 16, 2013 at 11:42 am | Permalink

      It’s a small step up: previously, the Energy and Climate Change Select Committee – of which Mr. Byles is a member – denied any possibility that shale gas could be of significance. As recently December they were relying on a hopelessly outdated assessment from the British Geological Survey that claimed the UK had no more than 5.3 Tcf, whereas the talk now is of 1,300-1,700 Tcf. For comparison, UK annual consumption of gas is about 3.3Tcf.

      http://www.telegraph.co.uk/earth/earthnews/9735848/Shale-gas-is-not-a-game-changer.html

      The DECC and the Select Committee could justifiably be described as shale gas deniers, intent on protecting the vested interest investment in windmills and LNG while crippling the economy. Let Qatar sell elsewhere. As the song has it,

      God bless the child that’s got his own.

  29. uanime5
    Posted February 15, 2013 at 4:46 pm | Permalink

    Fares are high for transportation because the Government decided to privatise rail and buses, then ignored all the harm caused by the annual fare increase and the fact that the difference in price between a single and return is almost non-existent. Until the Government sets the maximum fare per mile these prices will remain sky high.

    • Lindsay McDougall
      Posted February 16, 2013 at 2:15 pm | Permalink

      High rail fares are needed to finance a lot of nearly empty trains run for social reasons and to build up an investment fund for HS2.

      If you want cheaper fares, cancel a lot of off peak trains, cancel HS2 and introduce light weight trains so that the live load to dead load ratio improves.

  30. Derek Emery
    Posted February 15, 2013 at 5:05 pm | Permalink

    As regards energy there are known to be future capacity problems as aging plant has to be closed down and coal stations have to shut down to meet EU regulations. This could easily lead to power cuts on a regular basis in just a few years time. Even the quickest to build gas fired powered stations take over 2 year to build in the US. You can at least double that time here. Are there any serious plans to cope with this by having stations built to be ready in time? It would mean pretty much starting now and in the UK there would be a very longed winded process proceeding any build.

    Railways are Victorian technology designed when the market and costs bases were very different to today. You can’t make a silk purse out of a sow’s ear. In the EU costs are similarly just as high and railways there as here are reliant on subsidies to exist. Without subsidies there would be no railways as the charges to passengers would be far too high compared with other forms of transport. I suspect there is a lot of wishful thinking in the cases government makes for the extra growth railways create. See the government report on HS2 at http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtran/writev/rail/m85.htm

    If energy prices become high and/or there have to be regular cuts the downside to the UK economy will be far higher than any possible upside from HS2 and far quicker. However HS2 is of far greater interest to top politicians than energy will ever be.

    To raise living standards requires economic growth year in year out. In turn this requires reforms to strengthen the the flow of capital into long term investment by government and institutional and private investors. See “Long Term Finance and Economic Growth” at http://www.group30.org/

    Miliband’s proposed titivating of the 10% tax by adding mansion tax will have no more than the minutest effect on economic growth (far less than 0.1%). You will need a microscope to see any improvement.

    Its very unlikely that there will be any significant growth in the number of industrial jobs in the UK as technological change will replace such jobs by automation.

    The UK needs to make itself a part of the world that is very attractive new business on the scale of Google and the like. The EU will be no help here as it will insist on ever increasing rules and regulation to keep the bureaucrats busy and to scare private enterprise away.

    The UK cannot rely on London as a financial centre to generate the same money in future so will need something to replace that income loss. Hong Kong will become the world’s biggest financial centre by 2016 see http://www.scmp.com/business/banking-finance/article/1104322/hong-kong-track-become-top-financial-centre
    Hong Kong is already.
    Hong Kong has been rated as the world’s top financial centre for two years thanks to the strength of its business environment, infrastructure and a favorable tax regime. See http://www.reuters.com/article/2012/10/31/us-financialcentres-wef-report-idUSBRE89U0BD20121031
    The UK due to new rules and regulations can only become less competitive with Hong Kong.

  31. waramess
    Posted February 15, 2013 at 5:07 pm | Permalink

    Inflation, caused both by the government and by the Bank of England, and QE ,are both a form of the old art of money clipping and that is, and always hes been avoidable and a fraud on the people.

    Perhaps the government should stop the nonsense of referring to price rises as the cause of inflation and refer to the direct cause of inflation instead in order that it can be seen clearly who bears the blame.

    The government now consumes more than fifty percent of the National Product and rising .

    Through their policies of low interest rates and saving the banks we now have a private sector riddled with underperforming corporates and banks; banks who are now unable to lend because they are weighed down with underperforming loans.

    At the same time we have mortally damaged many good corporates who had the foresight to take out interest rate swaps but failed to see the folly of the government keeping interest rates a these low levels.

    So where will the growth come from and, where will the reduction in unemployment come from?

    We are well and truly stuffed by the arrogant and stupid actions of our government and their apparent desire to manage the decline of the British economy.

    There will be no growth so long as the government continues to grow, and there seems to be no end in sight to their desire to consume more and more market resources .

  32. Glenn Vaughan
    Posted February 15, 2013 at 6:12 pm | Permalink

    John – isn’t “quantitative easing” a significant factor contributing to higher inflation?

  33. Wilko
    Posted February 15, 2013 at 9:05 pm | Permalink

    People’s standards of living can be improved by their raising their standards. Many of those with low standards have worse enemies than inflation.

  34. Bryan
    Posted February 15, 2013 at 10:22 pm | Permalink

    Inflation plus low interest rates kill peoples saving. Ergo they have less cash to spend. Ergo growth potential is diminished.

    It is not rocket science.

    The sooner we get rid of this fascination with Keynes, the better.

  35. Max Dunbar
    Posted February 15, 2013 at 10:59 pm | Permalink

    Realistically, I think that most of us will be grateful to you if you manage to maintain our living standards never mind raise them.
    All that you say makes sense in an objective way and from a materialistic viewpoint. But can living standards be equated solely on this basis? Are there not other factors that contribute to living standards some of which may be considered intangible, emotional or even dismissed as irrelevant? To feel comfortable and at ease in one’s own country is valuable, and that is a living standard that no amount of cheap energy, good transport, lower taxes or manageable inflation can buy.

  36. Lindsay McDougall
    Posted February 16, 2013 at 1:12 am | Permalink

    Getting rid of inflation is a very good idea. Cheaper energy will help. Reducing regulation will help, especially if it leads to a reduction in public sector payroll costs.

    However, lower rail fares will undermine the finances of the railways and ultimately result in increasing the public sector deficit. Transport costs should mainly be paid for by the people using that form of transport. If you want cheaper rail fares, then first cut rail costs.

    Zero inflation will result in pensioners spending more, especially those living on an annuity that is not protected against inflation. This is one of the reasons why QE and cheap money are so counter-productive.

  37. David Langley
    Posted February 16, 2013 at 9:07 am | Permalink

    Pareto analysis told me that the 80/20 rule is generally true, so 80 percent of the countries personal wealth is in the hands and banks of 20 percent of the population. Re distribution is always going to be difficult.
    What a disgrace our generation is, having fought and won to achieve safety and comfort for our people trying to change these statistics we have let it all dribble away through apathy and fraud and neglect.
    That is why every announcement about cuts and austerity and belt tightening only serves to create hostility to the governing class. We do understand the reasons we do understand what to do and the only way out is through the ballot box and honest communication.

  38. Derek Emery
    Posted February 16, 2013 at 2:58 pm | Permalink

    There are known to be future capacity problems as ageing power plant has to be closed down and coal stations have to shut down to meet EU regulations. Power cuts could occur on a regular basis in a few years time. Gas fired powered stations take over 2 year to build in the Us and will take longer here as he UK has a long planning process prior to build.

    Railways are Victorian technology. Cost bases were very different then. EU costs are similarly just as high as railways here and reliant on subsidies to exist. Without subsidies there would be no railways as the charges to passengers would be far too high, just as there would be no wind turbines without subsidies. How solid is the government case for the extra growth railways create? See the government report on HS2 at http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtran/writev/rail/m85.htm

    If energy prices become high and/or there have to be regular cuts the downside to the UK economy will be quite soon and major in extent.

    To raise living standards requires economic growth year in year out. In turn this requires reforms to strengthen the the flow of capital into long term investment by government and institutional and private investors. See “Long Term Finance and Economic Growth” at http://www.group30.org/

    Miliband’s proposed titivating of the 10% tax by adding mansion tax will have no more than the minutest effect on economic growth (far less than 0.1%).

    The UK needs to make itself a part of the world that is very attractive new business on the scale of Google and the like. The EU will be no help here as it will insist on ever increasing rules and regulation to keep the bureaucrats busy and to scare private enterprise away.

    The UK cannot rely on London as a financial centre to generate the same wealth in future so will need to replace that income loss.
    Hong Kong will become the world’s biggest financial centre by 2016 see http://www.scmp.com/business/banking-finance/article/1104322/hong-kong-track-become-top-financial-centre

    Hong Kong has been rated as the world’s top financial centre for two years thanks to the strength of its business environment, infrastructure and a favorable tax regime. See http://www.reuters.com/article/2012/10/31/us-financialcentres-wef-report-idUSBRE89U0BD20121031

  39. Mark
    Posted February 16, 2013 at 5:20 pm | Permalink

    Another post gone AWOL…. reply to John Maynard about shale gas.

  40. Jon
    Posted February 16, 2013 at 8:00 pm | Permalink

    Good to hear you think the government are going top look at the cost of the railways and the fares.

    I know the South East needs to subsidise the rest in a single currency but it just seems to have become an annual norm to increase costs on the South East.

  41. Daniel M
    Posted February 18, 2013 at 12:14 pm | Permalink

    What I don’t understand is why transport fares are so expensive? Particularly the railways and tubes.

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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