End austerity

People are rightly tired of austerity politics on the continent, where it is an integral part of the Euro scheme which has led to deep cuts in pay and jobs in many of the participating countries. It is important the UK uses its freedom outside the Euro to follow a policy that promotes more jobs and higher pay. The good news is that the last eight years have been good years for jobs growth here, but we could do better on the pay front. We have not had to suffer the cash cuts in pay in the public sector seen in some Euro countries.

The UK economy has been deliberately slowed by policy since March 2017 when I first started highlighting the actions being taken. Tax hikes on homes and cars allied with a marked tightening of credit and money did slow the growth rate, led to a sharp decline in car sales, a big fall in buy to let activity and to a big drop in turnover in parts of the housing market. The policies were designed to do just this and they succeeded. We were told this was necessary for a combination of reasons, including the need to be more prudent and the wish to accelerate electric car sales at the expense of diesel and petrol before there were sufficient good value and attractive electric cars to buy.

The government should now relax policy a bit. Take home pay should be lifted by tax cuts, as the current tax take from employee earnings is too big. Stamp duties should be lowered to make homes a bit more affordable. Sensible rate reductions will also boost tax revenue which has been reduced by penal rates. Vehicle Excise duties should be put back to pre 2017 levels, and car loans to buy new vehicles freed up a bit. Business rates, particularly on shop premises, should be reduced.

The public services including schools, defence, the police and social care are in need of more money. They should be asked to submit bids for what extra service they could supply for increased funding, with payments made for good plans for improvement.

The tax cuts and spending increases should be financed from the EU savings, as I have explained before.

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47 Comments

  1. Lifelogic
    Posted September 17, 2018 at 5:22 am | Permalink

    It is indeed important that the UK uses its freedom outside the EU to follow a policy that promotes more jobs and higher pay. The way to do this is not daft legislation to increase pay, kill the gig economy, control pay and prices and over regulate absolutely everything. It is by allowing industry to compete and become more efficient at running their businesses without the distrations of government endlessly getting in the way. This with higher investment per worker, cheap reliable energy and more efficient work practices.

    The complete opposite of the idiotic May and Hammond & Carney agenda of tax, borrow, destroy confidence & regulate everything to death.

    You need to kill as many as possible of the millions pointless jobs in the UK economy that arise from daft laws, bonkers regulations, idiotic employment regulations, misguided banking controls & heath and safely rules, half witted green crap subsidies, the anti-car agenda and all the rest of the lunacy we get from the essentially socialist May govenment.

    Fewer bureaucrats, lawyers, legislators, HR, tax and Heath and Safety “experts” and other essentially parasitic activities and more people actually doing useful things is what is needed. Far simpler and far lower taxes are also needed.

  2. Lifelogic
    Posted September 17, 2018 at 5:38 am | Permalink

    Meanwhile is seems (VAT on private school fees and electric dog collar ban) Michael Gove has gone completely bonkers. He thinks Carney is doing an excellent job (of destroying confidence one assumes). He supports the appalling Checkers plan and has even fallen for the “a few extreme weather events prove that Climate Alarmist is sensible” drivel. We have always had “extreme weath events” they are not increasing in frequency nor in severity and far fewer people die from them as they are now richer and far better protected. Better protected and richer largely due to the sensible use of fossil fuels.

    Extreme weath events do however get far more TV footage pumped into people’s living rooms which does often misleads people that they are increasing.

    Boris is right today in the Telegraph:- “The Irish backstop is a monstrosity that wipes out our sovereignty”.

    May’s idiotic plan is to volunteer for ongoing foreign rule. The plan must be killed dead and May/Hammond/Carney all replaced with people who understand economics, inspire confidence (rather than the exact reverse) are not total electoral liabilities and possess a working compass.

    https://www.telegraph.co.uk/politics/2018/09/16/heading-car-crash-brexit-theresa-mays-chequers-plan/

  3. Narrow Shoulders
    Posted September 17, 2018 at 5:40 am | Permalink

    Does you call include restoring universal child benefit?

    • Cheshire Girl
      Posted September 17, 2018 at 6:01 am | Permalink

      I would make two suggestions as to Child Benefit,

      1. Child Benefit only allowable for the first two children.

      2. Child Benefit not allowable on children who do not live in the UK.

      • fedupsoutherner
        Posted September 17, 2018 at 8:48 am | Permalink

        Good suggestions Cheshire Girl

    • agricola
      Posted September 17, 2018 at 7:04 am | Permalink

      I hope not, in fact I would consider taxing those who had more than one child. Our population is soaring and needs curbing where it is having an excessive expansionist effect. I know immigration is the main cause, but not the only one.

      • Narrow Shoulders
        Posted September 17, 2018 at 8:06 am | Permalink

        @agricola and @cheshire girl

        I will not argue with either of your points other than to say the treatment should be universal.

        Certainly we should not be encouraging procreation for profit nor off shoring of tax payer funds

      • fedupsoutherner
        Posted September 17, 2018 at 8:49 am | Permalink

        Agricola

        I think you’ll find that immigrants have a higher birth rate than UK born residents.

    • Lifelogic
      Posted September 17, 2018 at 8:42 am | Permalink

      And restoring personal allowances, cutting insurance tax now 12%, Stamp duty up to 15%, 45% income tax, double taxation of landlord and thus tenant interest, 28% CGT without indexation, keeping the £1Million IHT promise ……. we are taxed to death by the grim reaper Hammond.

  4. DUNCAN
    Posted September 17, 2018 at 5:42 am | Permalink

    ‘The public services including schools, defence, the police and social care are in need of more money. They should be asked to submit bids for what extra service they could supply for increased funding, with payments made for good plans for improvement. ‘

    I despair at you John. You know full well that the public sector is a sea of waste and an unreformed mess. A suffocating sense of entitlement allied with employee privileges that we in the private sector can only dream of and still the Tories pander to the cult of the State vested interest. It’s akin to virtue signalling but with a more pronounced degree of insincerity

    Why should I be asked to pay more tax to finance Labour’s client state? Why?

    We have a political class taking taxes to pacify the public sector unions (political spending) while all the while State actors construct an environment in which my freedoms are slowly being strangled with the rise of liberal left fascism and all the legal tactics that this employs to demonise and criminalise white hetero-male. And you expect me to pay more in tax to finance my own demonisation and the destruction of my freedoms

    laughable

  5. ColinD.
    Posted September 17, 2018 at 5:42 am | Permalink

    Why do politicians always regard creating more jobs as a benefit? This country is approaching full employment. Creating more jobs is likely to suck in more people from abroad when the country is full up and we are short of housing and services.
    We should now concentrate on raising productivity and training more doctors, nurses and vets etc. from the indigenous population.

    • Lifelogic
      Posted September 17, 2018 at 6:11 am | Permalink

      What is needed is better paid jobs where people are actually doing something useful. The goverment had created (through endless bonker regulations, bloated government, greencrap lunacy, daft employment laws, over complex and high taxes, daft planning restriction and building regs and the rest) huge numbers of essentially parasitic and pointless jobs. These make almost everyone far poorer.

      Should I watch the Appeaser May Pantomime on Panarama tonight I wonder? Just the clips of her on the news aready make feel like vomitting on her.

    • Bob Dixon
      Posted September 17, 2018 at 7:41 am | Permalink

      Tony Blair could not find posts for 30,000 trainee Doctors in one year.

      • fedupsoutherner
        Posted September 17, 2018 at 8:50 am | Permalink

        Bob. And yet we are told there are numerous posts in our hospitals unfilled.

  6. hans christian ivers
    Posted September 17, 2018 at 5:45 am | Permalink

    JR,

    The majority of EU countries no longer have any austerity at all Denmark, Sweden, Finland, Germany, Holland, Austria, Poland, Estonia, Slovenia, Czech Republic Slovakia, Hungary, Latvia, Lithuania,Romania, Ireland and to a certain degree Portugal.

    So, I am not quite sure what austerity you are talking about?

    • David Price
      Posted September 17, 2018 at 6:20 am | Permalink

      Interesting you leave out Spain, Italy and Greece. The EU and it’s headlong rush for federation has blighted once proud and great countries.

    • Dave Andrews
      Posted September 17, 2018 at 7:23 am | Permalink

      The UK hasn’t had austerity either.
      Austerity is when you tighten your belt to pay down your debt, not carrying on spending and borrowing yet more.

      • Rien Huizer
        Posted September 17, 2018 at 2:04 pm | Permalink

        True

    • Peter VAN LEEUWEN
      Posted September 17, 2018 at 7:24 am | Permalink

      @hans christian ivers:
      Brexiteers have a need to skew their contributions against the EU. You may already have found it in countless comments in the past and do not expect this to change after the separation, whatever form the post brexit arrangements will be. This process, supported by some mainstream (tabloid) media has been there for decades. It is interesting to watch, but maybe even better ignored, as there are much more interesting and challenging developments in mainland Europe.
      Both Denmark and the Netherlands have a lower debt than the UK, both have balanced budgets, and an even lower unemployment. Neither have austerity policies and are in much better shape than the UK.

    • Ian wragg
      Posted September 17, 2018 at 7:46 am | Permalink

      You quote 18 countries but omit France, Italy, Spain and Greece which are significant economies and have high youth unemployment.
      As regards Portugal it is only a shadow of its former self with lots of rough sleepers and beggars.
      We were in Lisbon and Oporto ‘recently. There’s plenty of austerity in Europe.

      • hefner
        Posted September 17, 2018 at 9:44 am | Permalink

        “Austerite” was taken out of the French economic vocabulary when Macron was Ministre des Finances under Hollande, and out of actual policy with Philippe as Prime Minister.
        Based on some recent visits in both North (Lille area) and South (Montpellier area) of France during last year, French austerity (as you call it) looks much more pleasant than the SE English one.
        Reading town Centre certainly has its not-so-small contingent of rough sleepers and beggars.

      • hans christian ivers
        Posted September 17, 2018 at 11:53 am | Permalink

        Ian Wragg

        and yes there is also plenty of European money in Lisbon as house prices have gone through the roof, so two sides of one coin, Ian

  7. Peter
    Posted September 17, 2018 at 5:52 am | Permalink

    The government seems to be set in its ways.

    Its approach to Brexit will not change and neither will its approach to economics.

    So it is up to opponents to stop the government in its tracks. That now means more than scathing articles in the Daily Telegraph.

  8. Mark B
    Posted September 17, 2018 at 5:56 am | Permalink

    Good morning

    The austerity is being forced upon other EU countries because Germany will not allow bank transfers.

    The areas of the economy that benefited most from the Euro was the Public Sector with large pay rises and generous benefits. This has had to be scaled back. Think of all those Spanish airports with no planes or passengers.

    As many here seem to agree, both the car industry and the housing market have enjoyed spectacular growth. But this growth cannot continue without a massive fall. So I welcome some measures which help to reduce this.

    I agree with our kind host when he states that personal and company taxes are too high. If we are to raise interest rates we need to let people have more of their own money to spend.

  9. Lifelogic
    Posted September 17, 2018 at 6:00 am | Permalink

    “The UK economy has been deliberately slowed by policy since March 2017”

    “The government should now relax policy a bit” – not “a bit” but “massively”, Hammond’s policy is insane.

    What has our grim reaper chancellor got against people who choose to rent rather than buy? How is taxing property businesses on “profits” they have not even made going to be sustainable? How will it ever increase supply or keep rents down?

    Also he is against people who buy or move with his outrageously damaging 15% stamp duty rates?

    Government ministers and manufacturers refer to electric cars as “zero emission” which is of course complete and utter drivel. Electric cars are actually often worse (after you take into account the generation of electricity losses, transmission losses, the short life of the expensive batteries, the large energy losses in charging & discharging the batteries, the addition electicity charging infrastructure and the massive energy use and pollution caused by electric car & battery production. When the technology works and is competitive people will buy them without subsidy. So why push duff, expensive and redundant technology onto people before it works using tax payer bribes?

    It is just as idiotic as all the greencrap bribes for wind & solar roof panels in the nothern & cloudy UK. If they work they do not need grants (and they are far better sited in sunny places anyway).

  10. Nig l
    Posted September 17, 2018 at 6:27 am | Permalink

    Austerity, what austerity? The government has not got the current account deficit into credit despite record tax receipts and umpteen years after it promised to do so.

    Your problem is that you have allowed the Corbyn narrative of ongoing austerity to continue to run as indeed you are now.

    As the future of this government is far from certain, surely more important is the political aspect. Carry on as you are now, you will get Corbyn. Cutting taxes and spend more will end the austerity theme and give people more money in their pockets,giving them a feel good factor.

    I agree with a previous correspondent about this obsession with more employment plus it will,inevitably be inflationary as is the fact that we rely on personal debt to give us ‘growth’ and devaluing the pound.

    Our productivity remains woefully poor led by grossly inefficient government spending. Sorting this should be a priority, nonetheless with the ministerial team we have at the moment, I am not holding my breath.

  11. Adam
    Posted September 17, 2018 at 6:59 am | Permalink

    It is strange that a Conservative Govt has not been making sensible, efficient decisions in many instances during the past few years.

    • libertarian
      Posted September 17, 2018 at 10:29 am | Permalink

      Adam

      Thats because we haven’t had a “Conservative” government since 1990

      We’ve had a succession of virtue signalling, wet , Libdems who care more about the stories in the media saying they are nasty than actually leading the country and addressing the real issues we face

    • John Fitzgerald
      Posted September 17, 2018 at 10:44 am | Permalink

      Agreed Adam but perhaps this is not really a Conservative government is it? It is a left of centre Liberal mess!

  12. agricola
    Posted September 17, 2018 at 7:11 am | Permalink

    While I agree with what you say I would have a different approach to business rates by scrapping them in the retail sector. I would replace them with a turnover tax so that they are proportional to the level of retail activity. This would take in the Amazons as well as the corner shops. It would be a national tax , not one run by local councils, who could benefit as they improved the local environment.

    • acorn
      Posted September 17, 2018 at 9:49 am | Permalink

      Just like VAT?

  13. libertarian
    Posted September 17, 2018 at 7:19 am | Permalink

    One of the major contributors to slow wage growth despite the fact we have full employment and 833,000 unfilled jobs and a skills shortage is The COST of Employment

    Government has continually heaped costs on business in the form of new Workplace pensions,flexible working directives, tax rises, Business rates, stupidity regulations like staircase tax, GDPR etc . As the bulk of new jobs are being created by SME’s small business can’t cope with these extra costs and big wage increases .

    Government needs to start to use the tax system to solve problems, not create more.

    Just one idea , housing in the South East is beyond affordable for most, how about tax relief to work from home if you work in south east but live further out?

    • sm
      Posted September 17, 2018 at 9:34 am | Permalink

      Libertarian, the problem is that many vital jobs CAN’T be done from home; how can you build a house, or clean drains or perform a medical operation, for instance, via your computer?

    • Rien Huizer
      Posted September 17, 2018 at 2:17 pm | Permalink

      Mr Redwood,

      Repeating the mantra that tax cuts should be financed from EU savings ignores the fact that thopse “savings” (if the happen to be savings at all, because tax receipts (esp corporate) are highly sensitive to the business cycle and -you will disagree- there may be a pretty large shock on the horizon, unless things turn out in a way you don’t like.

      So that 39 bn (over an average of three years) represents appr 39/3*800 = appr 1.6%. ..

  14. L Jones
    Posted September 17, 2018 at 8:14 am | Permalink

    There are some really sensible, solid and well-thought out posts here today, Dr Redwood. Your blog is probably the most interesting site for morning reading. It is comforting to know that there are some right-thinking people around – I trust there are far more of them than only those who appear here!

    What a pity you can’t form a Government advisory committee from these people!

  15. ChrisS
    Posted September 17, 2018 at 8:22 am | Permalink

    If true, reports this week that Hammond has asked all non-ring fenced departments to draw up plans for 5% cuts, show he has a complete lack of political nous.

    With McDonnell and Corbyn preaching their magic money tree politics, the very last thing the Conservatives should do is cut more. It will be a veritable gift to Labour come the next election. Whatever the cost, some of the cuts already imposed need to eased or, at the very least budgets need to be increased incrementally from current levels. So called “Austerity” needs to come to an end.

    Taking such a large proportion of lower and middle income people out of income tax, has been a huge mistake because upwards of 30% of voters now have no interest in keeping public spending under control. These people all have votes !

    Furthermore, almost no Conservative voter or constituency association will tolerate further cuts at home only to see the huge and wasteful Aid budget increased with inflation yet again.

    I don’t believe that Ministers and Parliament appreciate just how large a political issue the aid budget is with voters : with most MPs and the leadership of all political parties in Parliament in favour, they are completely at odds with a large majority of the public on this issue.

    Following his entire attitude to Brexit, this is just the latest mistake by Hammond that demonstrates that he is very clearly past his sell-by date.

  16. The Prangwizard
    Posted September 17, 2018 at 9:26 am | Permalink

    Austerity does not seem to apply here in the Netherlands if the state of the roads is any measure. They are smooth, well marked and clearly signposted and no potholes. My daughter who lives and works here tells me that this applies everywhere round the country in her experience not only around Leiden where we are.

    I gather the country has a surplus in its balance of payments which says a lot for the proper management of the country, unlike the economic incompetents who run ours and are happy to sell our assets rather than build our industrial capacity and brands for export.

  17. dennisambler
    Posted September 17, 2018 at 9:36 am | Permalink

    The car industry would benefit from the withdrawal of subsidies for electric cars. They should be required to stand on their own wheels.

    There are no swingeing penalties on diesel cars in developing countries, like India. Honda expect 80% of their new CRV sales there to be diesel.

  18. acorn
    Posted September 17, 2018 at 9:50 am | Permalink

    Just like VAT?

  19. John Fitzgerald
    Posted September 17, 2018 at 10:42 am | Permalink

    Well said sir. But will Hammond do any of these things? I am very doubtful as he wishes to blame it all on Brexit! Make us suffer for a dead project!

  20. VotedOut
    Posted September 17, 2018 at 10:46 am | Permalink

    Austerity is something that should be applied over a short term and with extreme care.

    Crime rates are reaching alarming levels and social care facilities are reaching endangered species scarcity levels. These things are beginning to get noticed. Once Brexit is done, it would be prudent to address all public sector spending quickly before the political initiative is lost.

    It is now a fact that if your house is burgled the criminal has a better then 95% chance of getting away with it. The same is almost true for other crimes. This under a conservative administration…

    What is most concerning is that we are nearing the end of the present economic cycle and many people haven’t seen any respite from austerity. Time may not be on the side of the present administration.

  21. Christine
    Posted September 17, 2018 at 10:47 am | Permalink

    We keep being told that immigration is good for the economy. If it is so good then why haven’t we got loads more money? It’s because most immigrants take low paid work that is subsidised through benefits like Tax Credits and Housing Benefit. The employers benefit as competition keeps wages low. The rich get richer and the poor stay poor. We need to be encouraging highly skilled jobs to come to our country.

    • Simon Coleman
      Posted September 17, 2018 at 7:21 pm | Permalink

      There are huge numbers of highly-skilled EU workers in this country. Scientific / medical researchers, doctors, dentists, lecturers, administrators, teachers…etc. All you people ever talk about are the ones doing low paid jobs. We keep hearing the explanation – UK people don’t apply for them. But you’ve got to blame somebody from outside the UK. The same old claptrap. The country hasn’t got any money because the government spent trillions bailing out our banks 10 years ago. Nothing to do with foreign workers.

      • Edward2
        Posted September 17, 2018 at 8:59 pm | Permalink

        So why has gdp per head not been rising a lot if you are right?

  22. Horatio McSherry
    Posted September 17, 2018 at 12:35 pm | Permalink

    It’s hard to get taxes down when socialists are at the helm. From the Adam Smith Institute:

    “With an index starting at 100 in the year 2000, wages are up at 166, labour costs at 171.4 and other costs per hour at 211.9. That is, one good reason why wages haven’t been rising along with the rest of the economy […] if the bosses aren’t getting it and the workers aren’t then we’d have to do some real work to find out who is, wouldn’t we? That it’s government swallowing the economic growth wouldn’t accord with a number of narratives….”

  23. Simon Coleman
    Posted September 17, 2018 at 7:08 pm | Permalink

    ‘People are rightly tired of austerity politics on the continent’…but we’re still loving it here. But at least someone’s told you that pay isn’t that great these days. Guess it was some little old lady who comes to your constituency surgeries. And as for the economic slowdown from 2017, part of it is down to uncertainty over Brexit, with companies hesitant to invest.

    • Edward2
      Posted September 17, 2018 at 9:00 pm | Permalink

      There is no actual austerity.
      State spending continues to rise every year.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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