Ease the squeeze

I have urged this government to ease the double squeeze on the economy. They are hitting it with ever higher taxes, and squeezing it with tighter money. The squeeze has been particularly tough on the housing market and the car market, with the twin tax and credit attacks throttling transactions and hitting jobs in car manufacture, estate agency, removal firms, garages and furnishing businesses.

I have advocated a Brexit bonus budget. I had anticipated this in April following our exit on the promised date of 29 March. Now the government has delayed this, they need to review their economic policy anyway. Staying in the EU does not produce a lift in confidence and activity in the way they seem to think. It certainly does nothing to ease the money and tax squeeze they are deliberately imposing.

The action they should take includes

1. Cutting tax rates where the tax rate now collects less money because it is too high and acts as a deterrent to activity. Stamp Duty has to be brought down. The increased taxes on Buy to let should be cancelled. The rate of CGT on housing should be reduced. Vehicle Excise Duty rates should be returned to pre 2017 budget levels. These measures would bring in more revenue because they would stimulate more activity.

2. Cutting tax rates where there could be a short term loss of revenue. The government should cut all Income Tax rates by 5%, as our Income Tax levels are no longer competitive with the best in the world.

3. Cutting rates where there will be a permanent loss of revenue. The government should legislate to remove all VAT from all green products, in the spirit of Parliament’s concerns about environmental matters. The law would have to say we were deliberately and unilaterally derogating form EU law ahead of leaving the EU, given the importance of these environmental issues.

The government also needs to increase spending on schools and social care as a matter of priority.

The Bank of England should reconsider its too tight money policy. The Fed, the Chinese Central Bank and the ECB have all admitted they were over tightening and are taking offsetting measures. Meanwhile the Bank of England takes delight in threatening further tightening. It needs to re introduce facilities for the commercial banks that allow ore lending, and alter its advice on car loans which is damaging the car industry.

The combined effect of these measures will be to increase the deficit compared to current forecasts, as unfortunately my plan to spend the savings on EU account will not be possible all the time our exit is delayed. Assuming we leave in October the extra cost will not be great, as long as we then pocket full savings from the EU programme. I would also use Overseas Aid money for the housing budget to provide the homes new refugees and economic migrants need. This could offset the entire increase in the budget deficit if done on a sensible scale.

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40 Comments

  1. Pominoz
    Posted May 6, 2019 at 5:06 am | Permalink

    A superb article, Sir John, demonstrating your absolute suitability for the role of Chancellor, should you not become the next PM.

    Congratulations, also, on an excellent article on Brexit Central over the weekend. An accurate summary of so many of the issues about which ‘the people’ feel so aggrieved – all should read it. Whilst there, the article regarding the Canada – USA FTA is also well worth the read. Perhaps you, Sir John, can persuade our PM (sorry – can’t bring myself to say her name) to read and assimilate the content of both pieces. Andy might also like to do the same.

    I gather that, God forbid, ‘a deal is almost done’ between the deluded PM and Jeremy Corbyn (stitched up is probably more apt, especially as it is likely to include EU rules on worker’s rights). This expectation is reflected in a jump in the Sterling exchange rate this morning, as is always the case when something suggests we shall remain closely aligned to the EU. I suppose the exchange markets react to very short-term issues, but, if I was a really wealthy man, I would be ploughing funds into Sterling right now, simply because, when Brexit actually happens (and I pray that it does whatever the shenanigans of the PM and those around her) the incredible boost to the UK’s economy will rapidly be revealed and all those doom-laden forecasts will be exposed as myth and fear-inducing tactics.

    Whatever is agreed between the two inept party leaders – and the glimmer of hope is that even John McDonnell says he does not trust the PM – it must be defeated in Parliament. Please get rid of your boss and let the UK show the World what it can achieve when it is free from forty years of servitude and humiliation.

  2. margaret
    Posted May 6, 2019 at 5:18 am | Permalink

    I prefer income tax to be reduced.We should start thinking about our own homeless people initially . Why send aid to other countries whilst we have one single homeless person here?
    I believe in get your own house in order first but I do agree migrants also need a home and that should be the next step.

    I can understand your tax plans as you are business orientated but I am not sure reducing taxes on buy to let would help. There are some very responsible landlords , but overall I feel that the money would go into the pocket of a few and not necessarily in this country.

    • bigneil
      Posted May 6, 2019 at 8:36 am | Permalink

      ” migrants also need a home and that should be the next step. ” Shouldn’t that be legally here, WORKING migrants? Why are people allowed to arrive illegally, tell any sob story (which have even be proved later to be a blatant lie) then allowed to stay and bring multiple wives/children in to live on our taxes? An increase in living standards, better house, free cash, schooling and healthcare for the lot of them – all for one arriving illegally. Then they “contribute/force” their culture on us while WE are told to accept it – or else face the law for “hate crimes”.

      • Stred
        Posted May 6, 2019 at 9:07 am | Permalink

        There is an article by Alp Mehmet, director of Migration Watch, on Conservative Woman about the rate of returned illegal of rejected migrants. Under May, as Home Office minister and PM, is pathetic. Another failure of the May/civil service administration.

  3. Fedupsoutherner
    Posted May 6, 2019 at 5:31 am | Permalink

    None of this will happen with Hammond. They want us to think its the Brexit effect even though we haven’t left yet.

  4. Alan Jutson
    Posted May 6, 2019 at 5:38 am | Permalink

    Not a chance whilst May, Hammond, and Carney are in Control

  5. Mark B
    Posted May 6, 2019 at 5:51 am | Permalink

    Good morning.

    The government cannot do any of this as they are determined to fulfill the Labour Parties manifesto pledges. They also need to finance all the big spend projects that the corporates want.

    Tax the poor, the middle class and small business. Subsidise the rich and the multinationals.

  6. Posted May 6, 2019 at 6:14 am | Permalink

    While being laudable your thoughts will not get much support from the Treasury until Brexit is done and dusted. Reason, the chancellor is a remainer, pedalling doom and gloom throughout the process of remaining. When he has been replaced by a competent optimist we can begin thinking along your lines. I would go much further and advocate a comprehensive review of how much government we need in our lives in an individual and corporate sense.

    • James1
      Posted May 6, 2019 at 6:46 am | Permalink

      Your proposals are far too sensible to stand any chance of being implemented by the current government.

  7. formula57
    Posted May 6, 2019 at 7:13 am | Permalink

    Whilst it is of course true that “Meanwhile the Bank of England takes delight in threatening further tightening” we do not believe it.

    It is surely very courageous to contemplate using “…. Overseas Aid money for the housing budget to provide the homes new refugees and economic migrants need”. What will the indigenous population be told when they see their own housing needs unmet as the Home budget is exhausted but Overseas Aid money satisfies the needs of new refugees and economic migrants?

  8. Everhopeful
    Posted May 6, 2019 at 7:28 am | Permalink

    Why does govt want all this tax money anyway?
    It most certainly does not go to make the life of the taxpayer any better!

  9. Alex
    Posted May 6, 2019 at 7:31 am | Permalink

    Expecting economic literacy from this government is like expecting democratic decisions to be upheld. Not going to happen.

  10. jerry
    Posted May 6, 2019 at 7:33 am | Permalink

    “The government should cut all Income Tax rates by 5%”

    Thus doing nothing to help the vast numbers who pay no income tax! Would it not be better to cut 5% off VAT.

  11. NigelE
    Posted May 6, 2019 at 7:37 am | Permalink

    Yes to increased spending on social care BUT make sure the spending directly benefits those needing care and not just swells the already bloated state sector.

    And it would be nice if it benefited all who need care, not just those whose assets are less than the £23.25k threshold.

    • hefner
      Posted May 6, 2019 at 5:38 pm | Permalink

      Most of the residential care homes are in the private sector. And my wife’s one increased its tariffs by 5% on 1 April 2019. Not a CPI nor a RPI increase and not (unfortunately) an April’s fool joke.

  12. A.Sedgwick
    Posted May 6, 2019 at 7:40 am | Permalink

    The iniquitous Council Tax is off the radar for MPs, as with other too tricky subjects e.g. English Parliament, HofL

  13. Stephen Reay
    Posted May 6, 2019 at 7:54 am | Permalink

    A healthy economy doesn’t have interest rates below the inflation rate and yet we’ve being held back from increasing them although we’ve had 9 years of growth. One of the reasons being poor wage growth and other reasons to.

  14. Dominic
    Posted May 6, 2019 at 8:02 am | Permalink

    We will all have to adjust our behaviour to counteract the pernicious and oppressive actions of Labour’s client state which this Tory PM is working hard to maintain and indeed strengthen

  15. Julie Dyson
    Posted May 6, 2019 at 8:10 am | Permalink

    In all honesty, if this government wants to have even a glimmer of hope at being re-elected at the next GE then these are precisely the sort of common sense policies it needs to adopt, and the sooner the better.

    Quite frankly, its only saving grace is that the UK economy is still in pretty good shape (despite Brexit blah blah) and the time is ripe for some fundamental and significant changes to make the most of this. More positivity, not negativity, is what the country needs now.

    P.S. And please, please, ditch the awful Bedroom Tax. It was never about the cost, which is minimal in comparison to most other areas of welfare. This is instead a shameful, cynical and still-ongoing attempt to push some of our poorest and most deprived out of their own homes, without first providing enough suitable, smaller accommodations to actually house them. This simply leaves most stuck exactly where they are but falling into ever greater debt in order to avoid being made completely homeless. It’s a disgusting, cynical, deeply unfair situation and a continuing blight on the Conservative legacy.

  16. George Brooks
    Posted May 6, 2019 at 8:47 am | Permalink

    Of course that snake Hammond would blame Brexit.

    He is filling the Treasury coffers for the time when he and others will wreck Brexit or we end up half in and half out and then he can pay billions to the EU.

    How to mortally wound a country in three easy lessons!!!!

    You must get rid of May and Hammond PDQ. This coming week I am sure we will see more subterfuge and dirty tricks. The PM has moved on from just breaking promises to distorting the facts to achieve her aims

    Stand by for some convoluting and meaningless pros that she will try to sell to us as an agreement she has reached with Corbyn. It will be damaging and move us still further away from leaving the EU. This will be the prelude to the WA coming up for the 4th time.

    A comment made yesterday was, I think, very close to the mark indicating that the PM may have signed the WA last November when she did not have the authority of the House to do so. There has to be a reason like this for her to waste months of time and continually extend Brexit.

    • Posted May 6, 2019 at 10:22 am | Permalink

      Yes, this is certainly a theory that is doing the rounds – that May and Merkel got their heads together over this and May signed us away to appease her EU mistress. Now she’s trying desperately hard to get it retrospectively agreed. If this were true, and it were proved, where would she stand?
      Or is it just one of those bonkers conspiracy theories?

    • nshgp
      Posted May 6, 2019 at 10:41 am | Permalink

      1. EU debts payments (100bn)
      2. Direct payments. (13.5 bn per year)
      3. Subsidies to low paid EU migrants (30 bn per year)
      4. Tariff costs (8 bn per year)
      5. Cost of regulation (33-240 bn per year)

      ======

      Why do you think Hammond is screwing us with taxes?

  17. The PrangWizard
    Posted May 6, 2019 at 8:48 am | Permalink

    The other day we had a piece about trees, how wouldn’t it be nice if Tories were to plant more. That as a diversion after the party was taken apart in the local elections to indicate ‘green’ credentials and maybe get a sympathy vote. I dare say it will be defended on the basis that there needs to be some variety in subjects covered. Today we have a similar piece about easing the squeeze and the desirability of tax cuts. All very sensible no doubt but it is another item to divert attention from reality.

    Sir John, the Tory party has changed and left you at the bus stop. It is now a party of the Left, with a Globalist leadership. You yourself have moved in that direction to some extent, probably out of loyalty, being a keen advocate and promoter of minimum wage policies; I hope not out of conviction.

    It isn’t a free market Conservative party any longer so there is no point, as you do in many of your replies to comments, saying you will stay in the party and campaign for the manifesto promises. There is no chance with the present leadership, and that includes a large number, but particularly the PM and Chancellor, that you will get your wishes fulfilled, a minor success will not be enough. You are deluding yourself if you think you can somehow return the party to what it was three decades or so ago.

    The present corrupted party must die and be replaced by something new which might genuinely have those aspirations. Maybe after the EU elections, and if May does a deal on a second referendum for example, you may realise at last that the Tory ship is indeed sinking and can’t be saved, and that you have only one chance to get off before you go down with it.

    Reply These are not diversions but part of our lives. I give you plenty of chance to comment on the state of the Conservative leadership and the issue of Brexit, with another piece repeating much of that today. I need to represent people and their worries on a whole range of matters, and want to influence policy on domestic concerns.

    • Posted May 6, 2019 at 10:33 am | Permalink

      Your reply – We all know that you are honourable and that your efforts are laudable, and that you have to address a variety of issues.
      But surely it’s the case that you are struggling to represent people and their worries from a collapsing platform. We are criticising the leadership, yes (and appreciate the opportunity for a good moan), but it’s because your leader and her cohort have poisoned the whole party in people’s eyes that you’ll all be tarred by the same brush in the end.

  18. Bryan Harris
    Posted May 6, 2019 at 8:55 am | Permalink

    Please do keep repeating that message, although nothing will change while we have the present cabinet in place….

    As we should all know by now, all UK financial decisions are made on the basis of what is best for the EU, and if that means stifling UK growth, then that’s how they play it.

    When we finally have a government that works for the UK, then someone just might listen to your sensible words JR

  19. Gareth Warren
    Posted May 6, 2019 at 9:04 am | Permalink

    Overall I would be very happy with these proposals, since they give me more of my own money to spend as I wish, and spend the taxes collected better.

    I think there are downsides to taxing less on BTL here these people often buy the affordable housing supply leaving too many stuck in rent. Leaving the EU and having an immigration policy that lowers demand on housing would be the solution there.

    I fear the car market will suffer anyway over the next couple of years as it is oversupplied, looking around the estate I live on and its clear people have all the cars they need, and the picture is repeated across the country. Here reducing taxes will help, but otherwise leaving the industry to sort itself out.

    More money for the NHS would be a popular move, but forcing local GP’s and specialists to be more in charge of how it is spent. If a local private hospital offers the service cheaper then use it – as happens in a small scale today with procedures such as MRI’s. Politicians should be open in proclaiming they want the best medical service at the lowest price and leave the administration heavy support to labour.

    I would also be overjoyed to hear a conservative minister explain to the people that no money spent by government is ever charity since it is taken with the backing of the full force of the state. Followed by reducing that taxation with the end of overseas aid to allow people to spend their own money – people in the UK are exceptionally generous and will support work they believe is good.

  20. Wessexboy
    Posted May 6, 2019 at 9:09 am | Permalink

    Agree with most of what you suggest, however:

    “I would also use Overseas Aid money for the housing budget to provide the homes new refugees and economic migrants need.”

    Who will build these extra homes we need? Have we enough brickies, chippies, plumbers and electricians? If so, what are they currently doing?
    Surely it’s time we trained up more of the above, (along with Nurses, Doctors – and perhaps expected all qualifying professionals to work a stated number of years before emigrating to Australia/ America for greater reward, unless they repay their educational costs before leaving….)

  21. Narrow Shoulders
    Posted May 6, 2019 at 9:25 am | Permalink

    Much to agree there Sir John although with government spending already in deficit a 5% income tax reduction might be a stretch. The CGT on homes reduction you call for would be better served by the taper being reintroduced.

  22. St
    Posted May 6, 2019 at 9:37 am | Permalink

    The attacks on BTL and small businesses are a calculated tax grab. Business Rates are driving many out as they try to raise prices and economise and this leads to reduced turnover. Landlords now making a loss after paying tax on profits not made are forced to sell. Now the prospect of not being able to get their investment back is leading more to sell up. The capital gains tax is on unreal gains is a huge pool of private wealth, which the Treasury is cynically targeting. They do the sums like some banks, pull the carpet and rip off the fallen. It only works once and leaves the target unable to pay their own way. Perhaps the Treasury has calculated that the targeted will be dead soon and ripe for 40% Inheritance Tax and juicy profits on probate charge.

  23. St
    Posted May 6, 2019 at 9:38 am | Permalink

    The attacks on BTL and small businesses are a calculated tax grab. Business Rates are driving many out as they try to raise prices and economise and this leads to reduced turnover. Landlords now making a loss after paying tax on profits not made are forced to sell. Now the prospect of not being able to get their investment back is leading more to sell up. The capital gains tax is on unreal gains is a huge pool of private wealth, which the Treasury is cynically targeting. They do the sums like some banks, pull the carpet and rip off the fallen. It only works once and leaves the target unable to pay their own way. Perhaps the Treasury has calculated that the targeted will be dead soon and ripe for 40% Inheritance Tax and juicy profits on probate charge.
    .

  24. anon
    Posted May 6, 2019 at 10:31 am | Permalink

    As some have commented.

    1) Restore democracy. Bring in proper rights of recall in between elections.
    2) Remove the tyranny of LibLabCon and roque MP’s ignoring the electorate and attempting to bind the country into international treaties and costs we are not liable without a mandate.
    3) Hold MP’s finnacially liable for the bad faith contracts & treaties.

    The rest would fix itself, with a little help from more responsive MP’s.

    Using overseas aid money to house immigrants rather than locas would just illuminate the unfairness.
    We should reduce overseas aid to ensure locals are housed first.
    Needs assessment just allow government to (form a client state, a dependent voting class) this allows the government to change the electorate.

  25. nshgp
    Posted May 6, 2019 at 10:40 am | Permalink

    The WA

    1. EU debts payments (100bn)
    2. Direct payments. (13.5 bn per year)
    3. Subsidies to low paid EU migrants (30 bn per year)
    4. Tariff costs (8 bn per year)
    5. Cost of regulation (33-240 bn per year)

    You can’t have the money. May has promised to give it to the EU.

    Tax rises here, spending cuts here, to pay for a Tory deal with Europe.

  26. roger
    Posted May 6, 2019 at 10:55 am | Permalink

    Swallowing the green coolaid will not save the the Conservative Party. Last Thursday’s jump in the green vote was part of the revolution against liblabcon.
    We all know now that green taxes and impositions are a scam designed to to make landowners and troughers rich at the expense of the very poorest amongst us.
    When you can explain why China India et al have a free ride until 2030 to increase emissions by multiples of the amounts we save, why Germany are backtracking with impunity on their energiewende as fast as weasel words will allow
    and why so many members of the HoL and MPs past and present are financial beneficiaries in overt and covert ways, we might reassess AGW or Climate Change as it is now renamed but right now it is scam from both your houses.
    As for the spectacle of our representatives fawning over the utterances of a manipulated Aspergers syndrome sixteen year old girl, that was disgusting by any standards. Shame on them!

  27. acorn
    Posted May 6, 2019 at 11:08 am | Permalink

    Conservative stealth taxation has been very successful since 2010 in near attainment of the neoliberal fiscal holy grail of a budget surplus. Mr Trump is doing the exact opposite, he will run a $1,000 billion federal budget deficit this year with tax cuts and increased federal spending; 5% of US GDP and going up. Spare capacity is soaking that up and boosting US growth with, so far, little inflation.

    The UK general government deficit will be 1.5% of GDP, half the idiotic 3% limit set by the EU Excessive Deficit Procedure. Spare capacity has atrophied somewhat in the UK and Brits tend to save tax cuts for a rainy day. Government direct spending into the economy is more effective; but with little spare capacity available, it could be a slow going.

    There is a full fiscal year on https://www.ons.gov.uk/file?uri=/economy/governmentpublicsectorandtaxes/publicsectorfinance/datasets/appendixdpublicsectorcurrentreceipts/current/datdataset4appendixdfinal.xls See the percentage increases in tax receipts over the last three years.

  28. Iain Gill
    Posted May 6, 2019 at 11:21 am | Permalink

    They should follow trump on China.

    That would make a Hugh difference.

    And also start being a lot more hard nosed with India.

  29. Chris
    Posted May 6, 2019 at 11:46 am | Permalink

    The government should take a lesson from President Trump: the economy is booming, investment is coming back into the coutnry, employment rates are rising, and significantly amongst hispanic and black Americans, the industries run down by the previous administration are being brought back to life and are providing employment and prosperity to formerly decaying regions e.g. coal, iron and steel, car manufacturing, bureaucratic regulation is being reduced greatly, including the stultifying effects of overzealous green regulation from the previous administration.

    See this tweet from the last few days from GOP Chairwoman:

    “Our economy: *263,000 jobs in April, beating expectations. *5.4M jobs created since @realDonaldTrump took office. *Unemployment at 3.6%, the lowest since 1969. *Record low Hispanic unemployment”.

    Also this excellent interview with the Chair of the Council of Economic Advisers (their annual report just published): on Conservativetreehouse.com website:
    CEA Chairman Kevin Hassett Discusses USA Booming Economic Success….
    Council of Economic Advisors Chairman Kevin Hassett appears with Lou Dobbs to discuss the current state of the U.S. economy.

    The CEA report is sourced on the White House website:
    https://www.whitehouse.gov/articles/summary-2019-economic-report-president/
    A Summary of the 2019 Economic Report of the President

  30. Sue Doughty
    Posted May 6, 2019 at 11:47 am | Permalink

    A lot of people now have a car on a full servicing leasing contract instead of owning it outright on a car loan. This has got to be worrying as the charges are higher than a bank loan would have been.

    • hefner
      Posted May 6, 2019 at 6:15 pm | Permalink

      Why complain? Isn’t that the private sector working at its best.

  31. Phil
    Posted May 6, 2019 at 6:53 pm | Permalink

    Some excellent suggestions John, but I disagree on this one:

    “I would also use Overseas Aid money for the housing budget to provide the homes new refugees and economic migrants need. This could offset the entire increase in the budget deficit if done on a sensible scale.”

    We’ve had too much immigration already under this Conservative government as well as previous governments, and it’s immoral to tax British people in order to pay for foreigners to live in our country.

    If they’re unable to provide for themselves, we need to deport them immediately.

  32. Arnie from Newington
    Posted May 7, 2019 at 10:04 pm | Permalink

    Good article especially the request to stop the attack on buy to let. It’s like trying to shut down cornershops as they are a threat to supermarkets. If they force landlords to sell up then this means that the tenant has to find somewhere else to live. I have no qualms with the additional dwelling tax if they want more home ownership but the ban on interest payments is going to be bad for landlords and tenants.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. 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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