I went to a local shopping centre in an attractive town near my constituency yesterday. With just a few Saturdays to go before Christmas, the shops were practically empty. Sales assistants stood around talking to each other, and the tills were little used. One shop employee told me of the problems they were having with suppliers going bankrupt.It was a good reason for tax cuts, to put more money into people’s pockets so they might go and spend.
The cuts in interest rates will have some beneficial impact for those with tracker mortgages. Looking yesterday at the best buys in the money section of a leading paper, I saw that most of the mortgages on offer were for rates below 6%, whilst in the column of best savings rates most were above 6%. That dos not augur well for stronger and more profitable banks, and shows us just how damaged the banking sector remains. The truth behind the best buys is more sanguine. There are not many new mortgages on offer, and there are not many people who want to take one out.People are too worried about their job prospects and meeting all the other household bills.
Labour’s latest challenge to the Tories shows they still think attacking the Opposition is more important than governing well. They ask us if we would dare borrow to finance tax cuts, knowing that George Osborne has just made a good speech on the need to control borrowing. It is juvenile Labour nonsense, and the media are pathetic to go along with it as the story.
The answer is simple. Of course we need tax cuts to stimulate spending and help limit the downturn. Of course we also need more discipline on public borrowing, otherwise the strain on longer term interest rates and sterling will too great. The way you do both is to abandon Labour’s ruinously expensive bank nationalisation policy. Banks should be made to raise their own capital and get their own balance sheets into trim. Government should make cash,guarantees and if necessary short terms loans available to any bank in trouble, as of course no major bank should be allowed to go under.
The 1964 Labour government spent and borrowed too much, triggered a sterling crisis, had to devalue the currency in 1968 and then had to cut spending to get some confidence back. The 1974 Labour government spent and borrowed too much, and had to go to the IMF for a loan in 1976. The IMF made them cut spending. This Labour government when it came to power in 1997 seemed to have learned that lesson. It started by adopting cautious Conservative spending plans, and repaid some debt. Now it seems to have forgotten past disasters, and is throwing caution and Prudence to the wind.
Yes we need tax cuts. No this government cannot afford them. Yes we might afford them if they abandoned their crazy ideas of owning large Scottish banks. After all, the by election has now been won, so why not find another cheaper way to keep those banks going?