It’s been a fascinating few weeks e Labour conference and the start of Parliament with Labour’s new leader. It has been a struggle for some of the MPs to adjust, as they discover just how out of touch with their members their policy positions and statements had become. It is also a reminder that political leaderships do need to lead. They do have to explain to passionate followers what is possible , and to remind them they are there to serve the wider public and not just the believers in their causes.
Labour now say they are against austerity. This is the party which first spent all the money, then announced the need for major cutbacks to get the budget deficit under control. This is the party that slashed capital spending especially heavily prior to 2010 as their downpayment on getting the accounts into shape.
They need to discover this truth. Any sensible politician or party is against austerity. I want prosperity for the many, and an economic policy which delivers it. Labour delivered massive austerity to voters through the great recession in 2008-9. The issue in politics is not between proponents of austerity or prosperity. One of the central issues is how do you best create prosperity for the many?
Labour seems to think you create prosperity by raising taxes on business and successful business people. It thinks you create prosperity by spending more on benefits. It wants to legislate its way to prosperity with more laws and regulations. History tells us this is the opposite of how you bring prosperity about. You do not make the poor rich by seeking to make the rich poor.
Labour also hopes you can create growth by more public spending and more public borrowing. As our economy recovers the danger of such a route is you might end up with more inflation, and far too high a debt interest burden. Labour is wrong to say the Conservatives are balancing the books at the expense of the poor. Conservative tax cuts take people on low incomes out of tax altogether. Conservative economic policies promotes more jobs and better paid jobs. The best way out of poverty is to have a job, and to move on to a better job.
October 19, 2015
You correctly say:-
The issue in politics is not between proponents of austerity or prosperity. One of the central issues is how do you best create prosperity for the many?
Labour seems to think you create prosperity by raising taxes on business and successful business people. It thinks you create prosperity by spending more on benefits. It wants to legislate its way to prosperity with more laws and regulations. History tells us this is the opposite of how you bring prosperity about. You do not make the poor rich by seeking to make the rich poor.
I do not think Labour really think this, they cannot all be that stupid can they? They just believe that their voters are sufficiently stupid to vote for this magic money tree agenda of bitter envy and the proposed thefts from the hard working and landlords. But they didn’t go for it when the dreadful would be landlord thief Miliband tried it in May.
The problem we have is that Osborne is doing exactly this nonsense too. Huge net tax increases all over the place in the last budget. Double taxation of landlord interest (thus pushing up rents), daft centralised wage controls, daft enforced pensions, over regulation of everything, energy at double US prices by regulation, ratting on his IHT promise and foolishly abolishing the non dom system.
Where is real the difference other than in degree?
October 19, 2015
Some “tweaking” of the in work benefit changes will certainly be needed, you cannot take up to £1600 PA off the take home pay off some of the lowest earners without a lot of resentment . Especially not while lying that people will be better off, due to centrally dictated higher wages. Wages many, such as the self employed, just will not receive and very many companies cannot afford.
October 19, 2015
Yes it was interesting to read about that woman who was crying on BBC QT about the removal of tax credits – it seems she is a set up as a sole trader which doesn’t make a profit so there is no way she can be paid higher wages when the tax credits are removed. In my view tax credits shouldn’t be used in this way to prop up failing companies in the first place but I wonder how widespread the practice is, it seems like a bit of a loophole.
Reply The problem of arguing over one person whose circumstances have not been definitively published is we do not know the truth. I gave read that she may not lose any tax credits.
October 20, 2015
The vast majority will not benefit from the increased wages, as they are not on in the minimum wage area, or will loose their jobs or are self employed. Companies that have to pay more (to lower wage employees) will clearly have less left for others. Where are the compensatory tax reductions?
The net effect is just a massive tax grab by the government, the complete opposite of what the country needs.
October 19, 2015
Lifelogic
“….you cannot take up to £1600PA off the take home pay of some of the lowest earners without lots of resentment…..”
Absolutely.
Indeed you should not be taking this much at all, unless other arrangements are in place to narrow that gap.
All changes to tax should be gradual if the rules are going to change massively, because that is simply moving the goalposts after people have made decisions.
If tax credits were such a massive problem, then that problem should have been tackled years ago by politicians, before it got so huge.
Politicians should realise that at the lower income end, (or people who have just started a family after years of waiting and planning) do live hand to mouth for a time.
If all of theses other benefits/arrangements are going to be in place to minimise the effect of the Working Tax Credit reductions, then EXPLAIN THEM to people properly.
Once again the Conservative Party is proving absolutely hopeless at communication.
Unless of course there is not explanation, and it is what it is, a massive cut for those who are trying to help themselves by actually working !
Yes Labour are in Chaos, but the Conservatives are not that far behind, just look at the Eu fiasco called re negotiation.
October 20, 2015
£1000 £1700 and £2400 cuts were inflicted on those of us “rich” enough to no longer be awarded child benefit in the near past.
We had also made decisions and had the goalposts moved.
There was no outcry then.
First they came for those in receipt of child benefit. Next they came for those in receipt of tax credits. When they came for me there was no one left. (To paraphrase).
Our benefit system has become too large. I think George Osborne should have made these changes gradually (and the child benefit changes too) but the welfare bill (excluding state pensions as they are not a benefit they are earned by paying in for others) needs to reduce.
If pensions need to be reformed I suggest that NI increases to cover the liability. Let everyone realise how much they cost and how our increasing population is growing the future bill.
October 20, 2015
Narrow Shoulders
I did not agree with stopping child benefit to those receipt at the time, and said so on this blog.
I do agree with lowering it to one child per person, from a date 1 year forward, and have stated that on here as well.
When planning finances over a long time scale the last thing you need is for the goal posts to be moved, or even removed.
October 21, 2015
Thank you for your stance.
Fully agree with you on child benefit going forward
October 19, 2015
I cannot ever see Osborne replacing Cameron as leader, he will even more unpopular by then and rightly so. He needs to stop pissing money down the drain on green crap, HS2 and the many huge inefficiencies and misdirection that riddle the whole of the state sector. He needs to reduce taxes and reduce government waste. We need austerity and efficiency gains in the bloated, incompetent state sector and a release of the productive 80% from over taxation and over regulation.
We need simpler taxes but he is increasing complexity. We need him to keep his IHT promise in full, not his fig leaf complex botch up which fools no one.
October 19, 2015
Corbyn fans in the Labour party don’t realise quite how unappealing he is to normal voters. Osborne fans in the Conservative party suffer from the same problem.
October 19, 2015
What are we to make of the well-educated Guardian journalist who said the other day: “There is a magic money tree. It’s called the Bank of England. That’s how countries make their money.”?
October 19, 2015
Well educated (or rather over educated) perhaps, but clearly lacking any basic common sense.
I even read that Faith in “BBC think” can now be considered a ‘religious right’. So belief in the magic money tree, the exaggeration of catastrophic global warming, loony left economics, the “discrimination”/gender pay gap, an ever larger state and the rest can be legally “protected”. Rational (evidence based) views will, I assume, get no such protection just the lefty loon ones based on “belief” or “faith” rather than evidence.
http://www.thesundaytimes.co.uk/sto/culture/film_and_tv/tv/article1620894.ece
October 19, 2015
She also came up with this gem:
“Poverty is not a naturally occurring germ or virus; it is anthropogenically created through wealth extraction.”
October 19, 2015
How can these people talk such complete and utter drivel with a straight face. Are they really daft enough to belief it themselves do you think?
October 19, 2015
Firstly I would make the general point that being “well-educated” is far from an infallible protection against ignorance and silliness, in fact some might say that perhaps it’s because this journalist is “over-educated” that she’s lost touch with common sense.
Secondly I would make the specific point that Osborne legitimised her idea by getting the Bank of England to create £175 billion of new money for him to spend when that was more a matter of convenience than necessity.
Faced with having to borrow a quarter of all the money he was spending, and fearing that he might run out of normal lenders be willing to supply the vast sums he needed, Darling turned to the Bank of England as an abnormal lender and arranged for it to create £200 billion of new money almost all which was channeled to the Treasury via the gilts market.
Initially Osborne condemned this plan, but then he fell silent, and when he became Chancellor he did more of the same but without the excuse that it was a last resort as it had been for Darling.
It’s not surprising that with cross-party support for money printing as a way the government could ease its financial difficulties we now see people saying they would like more of it, and seeing no problem with it.
October 19, 2015
Perhaps just that he is bonkers? Or has been watching (and even trusting) far too much of the lefty BBC agenda.
October 19, 2015
They believe in the Zimabwe School of economics.
Print create spend.
Legislate poverty away.
October 20, 2015
There’s no “magic money tree”? I’m sorry to hear that! I’ve been told to use my “common sense” by Lifelogic and Denis.
OK so I’m using my common sense to think up a few questions. Where does the Government get its money from? Yes I know it can get it by taxing those who do happen to have some ££ in their possession or it can sell some gilts to those who have some ££.
But where do those ££ come from in the first place? Does the BoE create them and just give them to the Government or does it lend them to the government?
Or does the BoE lend them into existence by lending them to the private banks. If so are the private banks in massive debt to the BoE?
Has anyone given these kind of questions any thought or is a matter of “common sense” that we shouldn’t ?
October 19, 2015
The “degree” is more severe under the Conservatives. Since 2010 how many people have migrated to the UK? How much has the national debt increased by? Bring back Nick Clegg! In comparison to what is happening now he seems to have been a restraining influence on the leftward drift.
October 19, 2015
Labour do not need to be in office to get their wishes.
October 19, 2015
Just six Tory cabinet ministers demand freedom to campaign for Brexit it seems? Which six and how long before they are kicked out by Cameron as the sensible Owen Patterson was?
http://www.telegraph.co.uk/news/newstopics/eureferendum/11939358/EU-Referendum-Six-Tory-Cabinet-ministers-demand-freedom-to-campaign-for-Brexit.html?WT.mc_id=e_DM56085&WT.tsrc=email&etype=Edi_FAM_New&utm_source=email&utm_medium=Edi_FAM_New_2015_10_19&utm_campaign=DM56085
October 19, 2015
You forgot increased dividend taxes the likes of which Labour never dreamt of doing. The original post is fantasy – Labour and Conservatives are both tax raisers in equal measure, it’s just that the MSM backed up by articles like this tries to paint the picture otherwise. They both meet an agenda.
October 19, 2015
Mr Redwood, you mix (I hope) with members of parliament: all I can do is to go on the Labour blogs. They, believe me, are all over the place.
The Labour blogs assume that Labour are the party of equality – which means levelling down other people who are richer. It means that the 2008 crash was entirely down to dishonesty by the Bankers. It means that Global Warming is True and that the electricity will work because it always has worked in the past. It means the Comprehensive Education system and the present University System and leaving school at 18 years old are Right and the NHS is on its last legs because of Tory meanness.
Anyone who questions any of this is attacked personally.
A hundred years ago the Liberal Party (which dates back to at least 1688) crashed and burned. A century later, I think we are seeing the same thing with the Socialist Movement in this country.
October 19, 2015
Mike.
Anyone who questions any of this is attacked personally.
Got that right in one. Same with the SNP.
A good example is today up here in dictatorship Scotland we had early morning temperatures of -3C and we passed windfarms with over 150 turbines and none of them were turning. Still the government has not fully woken up to the fact that the turbines are only there for the subsidies and these people have the neck to battle on about poverty, food banks and job losses in the steel industry you cannot make it up. We need people with the right industrial, scientific backgrounds and qualifications in the really critical areas of importance in this country and not those with some micky mouse degree and three fifths of naff all experience in real life. The whole political establishment is akin to a house of cards. It is time to wake up and smell the roses.
October 19, 2015
Following on this mornings comment:
Found today on the net
The pursuit of large-scale, ridgeline wind power in Vermont represents a terrible error of vision and planning and a misunderstanding of what a responsible society must do to slow the warming of our planet. It also represents a profound failure to understand the value of our landscape to our souls and our economic future in Vermont. —Steve E. Wright, “The Not So Green Mountains”, New York Times, Sept. 29, 2011
Sad that it is not only the UK that are completely on the wrong train and track.
Still nothing changes.
If the SNP try and scream murder in the chamber about steel job losses, please ask the ex First minister to remind the House where all the steel comes from for the new Forth bridge and other devolved projects. If he says it was Europe then that is a very good Scottish reason to get the hell out of it.
October 19, 2015
The Labour blogs assume that Labour are the party of equality – which means levelling down other people who are richer.
Labour is a party in favour of less inequality. That’s not quite the same thing.
Less inequality doesn’t mean levelling down people who are richer. Even if the super rich were to lose 10% of their wealth, how would having a fortune of ‘only’ £9 billion rather than £10 billion make any difference to their lifestyle?
But an increase in an hourly rate of £10 per hour from £9 per hour can make a significant difference.
So reducing inequality is much more about levelling up than levelling down.
October 19, 2015
“Labour is wrong to say the Conservatives are balancing the books ….”
You’ve got that right. The whole debate about “austerity” is nonsense, the Conservatives are increasing government spending in real terms just like Labour are advocating – no difference – tax and spend. Next year I will be hit by the new dividend tax for example.
October 19, 2015
I do not think leftists are that interested in prosperity. Loll for example at the current Pope, clearly a leftist. He thinks ‘consumerism’ is a problem – he doesn’t like the idea of all this consumer choice, spending money etc. Same with Corbyn and his ilk. What they are concerned about is economic equality. I suspect they well understand that the UK would be more prosperous if it was like Seitzerland or Singapore with
October 19, 2015
Balanced budgets and tax/GDP at 20-30% max. But that’s not what interests leftists.
October 19, 2015
Nor does it interest Osborne/Cameron it seems. The last budget was a massive tax grab & totally misguided.
October 19, 2015
What austerity are the left decrying. As you have pointed out many times government spending has been increasing year on year. A point that the left studiously ignores and at the same time perpetuating the lie that spending is being cut. So I suppose what they mean is that they want the increase to be significantly higher despite the inherent dangers of doing so.
Of course in a society that has a culture based on entitlement and dependency that sees being personally responsible and self reliant as unreasonable and grossly unfair they will embrace anyone who will guarantee the continuance of that culture whatever the cost. That cost as any sensible and rational person knows is that it will be self defeating and in the end leave us much worse off by impoverishing us.
Prudence, sustainability and economic reality are not words that are part of the modern day lexicon of most people. To use those words and deny them the bounty of unearned largess that they now take for granted is something the public will not accept. Under these conditions the right are fighting a losing battle and instilling common sense into the masses is something we will have to accept is never going to happen.
George and Dave it appears have recognised this and despite my misgivings about their competence they appear to be making good strategic decisions. If you cannot beat them join them seems to be the pragmatic approach of the pair. Dave taking the party left and George adopting some left policies may be a stroke of genius even if it is an anathema to some in the Conservative party. They believe I think that you cannot wean the public of the public teat as they would react angrily to the withdrawal symptoms they would experience. A better way they believe is that they should slowly dry up the teat and so that the public hardly notices. The reduction of tax credits and hiking up the minimum wage is to see this policy in action but perhaps the tax credits reduction could have been done in a more subtle way.
October 19, 2015
The next problem looks to be the SNP because what I heard from Sturgeon of late was that most services are to be free in Scotland. No detail again. Apart from getting money from UK and the EU and contributing to the EU I wonder how many money creators will remain there to give them their taxes? They also have debt contribution.
On job/money creation R4 Today tells us we need 830,000 engineers from FE’s that are failing. I think thats mechanics, fitters and some technicians really. FE’s were failing in the early 90’s when I used them (HNC, HND/CGLI), so no lessons learnt there…again. We certainly don’t need the output of many expensive Uni’s. Of course you can’t borrow to attend an FE so either employers or self has to pay. Badly skewed arrangement by Blair and friends.
October 19, 2015
“It has been a struggle for some of the MPs to adjust, as they discover just how out of touch with their members their policy positions and statements had become.”
Presumably you mean tory MPs?
October 19, 2015
What John said is true for Some Labour MPs. I agree, bratwurst, it is indeed true for some Conservative MPs as well.
October 19, 2015
Watching Bill Turnbull (it could just as easily been Owen Jones, Charlotte Church or JC himself) interviewing Theresa May this morning made me realise and see in action how the BBC and all lefties think. That is that spending evermore amounts of money is the way to cure public bodies ills and create a prosperous society. Does it not occur to them that money is not an infinite resource (unless of course you have a magic money tree which the left apparently do have) and if we are to achieve the goals of better public services and create wealth then we have do things better more efficiently and less wastefully. So we have to do things with the same or less money better by devise methods innovatively that circumvent the systemic failings of state provision and funding.
October 19, 2015
Commendable though it is for you to say ” I want prosperity for the many…”, why not for all? Who are the excluded ones here?
October 19, 2015
You are preaching to the converted here, unless you feel the need for reassurance from your followers. Even the majority of Labour supporters will see the contradictions in their own party outpourings. The only ones who have any belief in this nonsense are such as the “Labhadistas” who formed the honour guard at your recent conference.
You the Conservatives are in danger, in the euphoria of power, of miss reading the essential sense of fair play within the British. You did it historically with the Poll Tax. Sensible in principal but inept in application.
I assume you wish to replace the welfare payments to those in poorly paid work with higher earnings. To impose the cuts prior to the higher earnings is again inept. There should be a seamless transition, otherwise you will be rightly seen as penalising the most vulnerable who have shown the right attitude to work. Those who have been willing to work, as in the historical Poll Tax, could become the petard on which you are hoisted, if you fail to show fairness in the period of transition. I suspect the basic problem is that there is a complete disconnect between those who run your party and the working people in this area of movement from welfare to work. None of your leaders have had to sell oranges from a barrow on a wet Saturday afternoon.
October 20, 2015
A valid warning graduated reduction would save less but likely deliver more.
Just as investing a few billion in housing (and genuinely cutting immigration) would save large amounts of housing benefit down the line.
October 19, 2015
When you said the people realised how out of touch the leaders were I thought you were talking about the Conservatives and Europe.
The actual reality as I see it is that the Conservatives won the election through very clever use of targeting on social media. So in reality the actual population are disconnected from both parties. The Conservstives are over confident and at the moment don’t see the huge anti establishment ground swell is against both them that was also against Labour.
Everybody’s gripe is that the politicians are being paid by large corporations to flood the job market with cheap labour from Europe.
The Conservatives have no reason what so ever to believe this will not happen to them.
October 19, 2015
Javelin – By 2020 ‘vote for us because Labour is worse’ will not work for the Tories.
By then very many more areas will have been under pressure from uncontrolled immigration.
October 19, 2015
Wasn’t sure if you were talking about Labour Tories or the limp dumbs. You are all wedded to tax borrow and waste. Camerons stupid aid payments and open ended donations to Brussels.
We are currently having our house decorated. The same company for the last 15 years or so. The boss has been telling me how immigration is destroying the business. He has completely withdrawn from outside house painting as his insurance insist on scaffolding or 2 men. East Europeans have taken over. Cash in hand no overheads.
He has had to reduce prices significantly and his staff salaries have dropped by about 5 per year on 2008 levels. This of course has reduced the tax and national insurance he pays monthly to the government. Obviously a net benefit to the British taxpayer.
October 19, 2015
Should read 5k.
October 20, 2015
Ian
Wage/job Rate compression has been happening for years in the construction industry (as well as others)
legitimate companies operating within all of the health and Safety guidelines, who pay for proper insurance cover, who employ approved contractors and staff, and complete correct monthly returns to HMRC are slowly being wiped out because they can no longer compete, due to price undercutting by those who do not play by the same rules.
Afraid many of those from overseas tend to operate as they did in their own country, because that is their nature and mindset, until they are caught out by the authorities.
October 19, 2015
There has been a phoney argument going on for at least the last 6 years. I have written many times before how it has suited your party and Labour to concoct this delusion. Despite all 2010 pre-election promises Osborne didn’t balance the books and from day one had a strategy of reducing the deficit by extra taxation, whilst overall government spending increased. He is continuing along the same lines. It suits Osborne as he doesn’t want to be seen to be increasing taxes and Labour want to be seen to be defending spending.
Your voice of factual objectivity, whilst gratefully received here, has been drowned out by the spin machines of your party and the official opposition.
October 19, 2015
Create prosperity? Why then has your party been dithering about the Heathrow runway?
October 19, 2015
” The best way out of poverty is to have a job, and to move on to a better job”
The problem with that is millions of migrants have come to the (dis)UK and make finding work even more difficult.
October 19, 2015
Surprised at the “Labour doesn’t believe in austerity” comment. Which party is putting foreign illegals ( criminals) in hotels and chauffeuring them round the country in stretch Hummers? – Isn’t it wonderful what smuggling yourself into a country and destroying any trace of your identity will get you – -hotels, waited on hand and foot, rooms cleaned, housing, more money than the people who worked 40+ years, etc.
October 19, 2015
Having lived with an income somewhat above average, but by no means large, and now in comfortable retirement, I suggest that the best way to prosperity is to not waste money.
Both political parties might benefit from that advice.It is irksome to be careful, and then see excessive taxes wasted.
October 19, 2015
David Murfin
You are absolutely right. Its the sheer waste, pork barrel politics and stupidity of politicians with taxpayers money.
I run a small charity as a volunteer ( unpaid). I was called in last week by County Council to be told that my already tiny budget of £20k ( to look after 800 people) was being cut by 25%. Austerity dont you know.
I got back to my full time paid job to find 3 emails from the same council offering me free £3k vouchers, unsecured interest free loans up to £50,000 and a fully expensed trip to Europe to look at trading there.
Our council lost £2 million on running a failed TV station and another £75k on consultants looking at establishing I kid you not a council airline !!!
Taxpayers money should be highly targeted on essential public services and thats it.
Not one of our political parties and as far as I know not one politician has ever suggested cutting back on the sheer waste and scrapping vast amounts of the public sector in favour of spending the saved resources on essential public services.
Bonfire of the quangoes , I’m still laughing at that. Tories scrapped SEEDA then formed LEP with a budget of £70 million. Give me strength
October 20, 2015
The latest reverse bonfire seems to be the ‘pension advice service’, set up by the powerhouse enthusiast. This is supposed to tell us what to do with our withdrawn useless private pensions, which the government advised us to take originally. So few of us wish to take their advice and the budget for their office is so large that it is costing £1700 per enquiry. (re Money Box R4)
October 19, 2015
Comments from political parties and their leaders are made only against current news , they seldom consider long term issues . Horizon sweeping is not the forte of politicians ; their interest is purely that of immediate popularity . At the moment the far left aspect of the Labour leadership is only interested in the divide between rich and poor and not what drives an effective economy through good times and bad ; they will never understand that it is the successful that the not so well-off depend on .
October 19, 2015
Living abroard and on our pension only, I was amazed to hear a Minister say that ‘people, including MPs are receiving’ the tax credits that caused a tea-cup storm on Question Time. Any family/household with one or two adults in work and income over £40,000 pa should not be getting any benefits surely?
October 19, 2015
Labour MPs could resign as Labour MPs and stand as Independents, immediately, if they feel they “serve a wider public” and ” have to explain to their followers what is possible”.
Not likely. The Parties have rubbed-stamped them into their jobs and they know it. Those who arrogantly forget that usually end up unemployed. Mr Carswell is an exception though his majority is greatly reduced. Will the Tory Party campaign against him at the next Election? Why? Surely he ” serves the wider public” and will only “have to explain what is possible” to his followers?
October 19, 2015
I’m interested to learn how membership of the EU increases energy prices. Is it the requirement for renewable percentages or something else?
October 20, 2015
Last year British civil servants and politicians were using EU membership to persuade the other members to adopt our own higher carbon reduction targets by 2030. This, presumably gave the others 15 years to keep their metal and cement industries going, to say nothing about rebates and business rates. What’s the betting that, after most of our works have closed beyond repair, we all get together again and ban Chinese dumping or even selling at lower prices, as they did to protect German solar panels?
October 19, 2015
There is no doubt that Labour policy is in a muddle on many issues. It also seems to be true that when they settle on a policy it is, more often than not, ineffective in promoting either general well-being or GDP. Nevertheless the story Labour tells appeals to a significant minority (say c30%) – it is entirely possible that this loyalty to the brand will survive the takeover of the Labour party machine by the Corbynites. Corbyn and his close associates are playing a long game.
There are plenty of opportunities for the Conservatives, and Cameron/Osborne, to crash and burn by the time of the next GE. For starters there is the EU Leave/\stay referendum to be navigated. Then there is the relentless taxation of more and more items of income and of expenditure to alienate voters. Finally there is the failure, so far, to control government debt, leaving the government extremely vulnerable to the next financial crisis and the charge that “it failed to fix the roof while the sun was shining”. Some of these failings are down to the government`s own delusions. Can we have a post about these in the future?
October 19, 2015
“This is the party which first spent all the money, then announced the need for major cutbacks to get the budget deficit under control.”
Yes, but apart from the capital expenditure you mention those cutbacks were not to take effect before the 2010 general election, and to tide himself over during that year leading up to the election Darling arranged for the Bank of England to indirectly lend the Treasury almost £200 billion to fund the budget deficit.
More than six years on and I still can’t fully understand why Osborne decided to let Labour off the hook over this sleight of hand, which in my view was the biggest single reason why the Tories failed to get an overall majority in May 2010.
October 19, 2015
I enjoy reading this blog even though I don’t normally agree with it.
But this is a really weak article.
The last Labour government delivered a decade of economic growth. So they do (or did) know how to get the economy growing. They also kept inflation under control- in part by making the Bank of England independent.
They introduced a national minimum wage. Even the Conservative party seem to like that particular ‘legislation for prosperity’ nowadays although I don’t think John Redwood MP was always so keen.
If you look at GDP/capita – the UK is still poorer than it was in 2007.
This is prosperity for the many?
Reply They lost most of the gains in the Great recession of 2008-9 thanks to ignoring the advice I and others gave on credit, banks and bank capital.
October 20, 2015
You’ve previously stated in another blog (June 2015):
“We agree that institutions which take clients money and place it on their own balance sheet or mix it with other funds, should have to meet capital adequacy requirements, and strict reporting requirements.” [Quoting from your 2007 Report]
That is not the same as saying- capital requirements need to be raised. In the context of listing all the other regulations you were planning on scrapping- I would say it counts as support for the status quo at the time. Perhaps you thought that they should be raised- but you didn’t say it.
You also state- Our deregulatory proposals were elsewhere “there is not necessarily a good reason why a regulator should have to be involved in product design and marketing for rich and sophisticated investors”
I’m not an expert on this- but a lot of people who are have blamed the financial crisis on supposedly sophisticated investors failing to understand the financial products they were buying. Surely this proposal would have made that worse?
I wrote and said elsewhere that the banks needed more cash and capital!
October 19, 2015
Yes you are correct about the Labour party, but their previous incarnation in the Blair/Brown/Miliband years was just as bad in different ways.
The Conservative party is not perfect either.
Really the biggest problem is the main stream media though, not the parties, and I don’t know what to call them other than the metropolitan elite who seem to think they have a monopoly on being right. The metropolitan elite have infested all main stream media and the main parties and they have managed to dominate so much that many of their views are now considered untouchable. Views which in many cases are just plain wrong are not being challenged by anyone but the grass roots.
Both labour and your own party have their own client voters which they try to grow and manipulate, and skew the system in their favour, in quite cynical ways.
I don’t have a big problem with taking money off “the underserving” rich, your defence of rich people and businesses goes a bit too far at times.
But like most things these are not black and white extremes as the media tend to portray things, the detail is where the real issues are but we seldom get to see that discussed honestly or without the outrageous bias of our main media.
October 19, 2015
The Conservative Party at one time, in the 1960s and right through the Thatcher years in the 1980s heralded the American economy as paradigm. By golly Mr Tory cannot find America on a map nowadays. Reason? Because America, despite its Hooray, Hooray , Hooray free-enterprise Conservative rhetoric is and has been using a concentrated and extreme form of Corbynomics for quite some time.
In terms of political economics, the Fed, ECB, and the Bank of China are at total odds with Mr Osborne’s economic agenda. According to figures obtainable via Republican Senator Paul Ryan’s twitter account from one of the two twitter accounts he follows the National Debt of the USA as of 16th October 2015 =$18,152,716,828,322.01. Oh in May they had an Osbornesque Budget Surplus of $157 Billion which was pretty meaningless as the Deficit for the previous 12 months was still $460 Billion. Therefore US Debt continued to rise.
Heaven knows where the NHS would be now if the Labour Party had not “thrown tax-payers money away ” and to the laughs and snorts of ignorant Tory MPs “invested” in hospitals and increased the Deficit and Debt. Well we would have less hospitals for the 310,000 migrants (net ) last year. With no beds available for the extra 20,000 Syrians Mr Cameron so generously invited to our shores. Where would his kindness be without tax-payers money rifled from our pockets by Fagin Labour?
Osbornomics is a con. Corbynomics is wrong. They ruin our country.
October 19, 2015
All the Conservatives are offering is a slower rate of decline than Labour.
What am I to do?
I have the choice of:
Communism = Labour/Greens
New Labour = Conservatives
All things to all men + No chance of power = UKIP/Liberals
If my vote is wasted whoever I vote for I may as well waste it on a party with the right policies and that is The Libertarian Party UK
October 19, 2015
I have never voted Labour, yet I have voted for over sixty years. However I think they have produced a few very great politicians in the past, examples being Ernest Bevin, Emanuel Shinwell and Nye Bevan, furthermore Clem Atlee was a competent Prime Minister. There have been others like Blair, who made a lasting difference to the UK. But those days have gone and all sign of greatness with them. Democracy needs good government and an active, and effective opposition. Frankly, I just cannot see the present Labour Party providing such an opposition. Our government needs to remember that it did not win over all voters, by a very long way, so needs to demonstrate a degree of humility.
October 19, 2015
Labour also hopes you can create growth by more public spending and more public borrowing. As our economy recovers the danger of such a route is you might end up with more inflation, and far too high a debt interest burden.
The other way we can create growth is by less taxation which might appeal to readers of this blog more than increased government spending. That’s fine. It’s natural that there are those who will prefer a smaller size government to a larger size.
The same objection can be made to having lower taxes. They might at some time in the future, when the economy recovers sufficiently, lead to increased inflation.
So you then put taxes back up to control inflation. What’s the problem? This can be done very quickly if the economy does show signs of overheating. But we’re a long way from that right now. It’s really not a reason for not reducing taxes right now.
On the point about interest rates, they are currently at historical lows. They are low because government wants them low. If the Government wanted 10% it could have 10%. If it wanted negative interest rates as we see in Switzerland for example, it could have them too. Interest rates are never a problem to a Government which controls those interest rates.
October 19, 2015
This is ridiculous!!!
I have never paid as much tax as I have since 2010!
More in 2015/16 than ever!
You really are on another planet if you think that Conservatives cut tax and Labour imposes them. Labour doesn’t do either because it’s not in government and the Conservatives don’t cut them in government.
October 19, 2015
Yes taxation rates in the UK are generally far too high. If rates were cut the level of economic activity would increase. Growth would increase – taxation revenues would improve as the economy improves.
The downside? Possible higher inflation. But as it’s now negative we can take the chance on that, surely! If not now, then when?
If, and when, inflation does prove to be a problem again we’d have to put taxes back up! That would be true regardless of the Govt’s budget position. Sorry about the bad news on that point!
October 20, 2015
Have you any thoughts on the inflation that will result from the large wage rises awarded recently, which will affect retail and other service industries. Also the removal of tax credits from higher earners unable to pay their bills will either lead to them demanding higher pay or leaving work, so their employers will have to raise prices. Same goes for self employed.
On the other hand, some Treasury chappie has told us that the savings equate to £500 per taxpayer. So tax rates will be reduced presumably?
Then when we ask the Chinese to finance things like Hinkley Point and HS2, how do they make a profit? Answer. By guaranteeing them higher prices or subsidies paid by the taxpayer. So no worries there then.
October 20, 2015
@stred,
The days when employers could simply pass on any increased wage costs to their customers in the form of price rises are long gone. The market is ultra competitive now. Which is a good thing. IMO. Except we’ve pushed it too slightly too far in that direction and there isn’t enough aggregate demand to create growth any longer.
Personally I think it’s crazy to rely on the Chinese to build nuclear power stations. Nuclear energy co-operation for peaceful purposes? Yes. Reliance? No.
October 21, 2015
Peter,
Well, if employers don’t raise prices after raising wages, they will go bust,. I think all the supermarkets and other businesses will all pass on the cost together and thereby not lose sales. The Treasury is planning to have an increase in inflation to ‘healthy levels’ and this will be another stealth tax. While, of course taxation will stay as high or rise.
October 21, 2015
@stred
“if employers don’t raise prices after raising wages, they will go bust”
That’s possible. Alternatively they might have to settle for lower profits. But more likely, they’ll look to see how they can get more production from their (more expensive) workers in order to maintain those profit levels. So a rising level of wages is the key to achieving greater productivity. If wages are too low there is simply no incentive for employers to look for that.
Inflation is a rationing mechanism. If there are 100 buyers always chasing 100 loaves the price will always be the same assuming that the buying power of the purchasers remains the same. If we have 101 buyers the price will rise. If 99 loaves the price will rise. But if we have 99 buyers or 101 loaves the price doesn’t have to fall as classical economists might argue. The baker will simply throw one loaf away. There will be overproduction.
So to ensure everything clears in the market its better to have an inflation target of something like 2% rather than 0%
And it is a target. It’s not meant to be an upper limit.
October 20, 2015
And the additional tax of the worker contribution to the workplace pension scheme. Another (up to 5%) tax while still paying NI for others’ pensions in real time
October 19, 2015
Actually, let’s just break one of these paras down:
Labour seems to think you create prosperity by raising taxes on business and successful business people.
So do Conservatives – does NEST, dividend tax increases and keeping panic income tax rates in place ring any bells? Not to speak of cutting pension contribution allowances to the bone.
It thinks you create prosperity by spending more on benefits.
Labour might think this but the Conservatives are doing it.
It wants to legislate its way to prosperity with more laws and regulations.
Well I think we could name a few from the past 5 years? Name any which have been removed.
History tells us this is the opposite of how you bring prosperity about. You do not make the poor rich by seeking to make the rich poor.
Well you make nobody rich by taxing them to the hilt and paying benefits so they don’t need to work, then importing millions more to support….
This complete post is totally hypocritical.
October 19, 2015
Ans let’s not forget CGT kept at a panic 28% when it was 10% under labour, and indexed….
October 20, 2015
As far as I can remember, Gordon cut CGT to 18% and quietly took away the inflation allowance- indexing, because he said it was to complex. Actually it was very simple originally devised by N.Lawson. When Gideon came in, he put CGT back up to 28% and quietly kept the lack of indexing, in effect putting CGT for real gains on assets held for 20 years to 56%- higher than the original 40%. Assets held for more than 20 years are taxed proportionally more in real terms.It is now not worth making any long term investment, unless it is certain that tax exemptions will be kept.
October 20, 2015
Oops, too complex
October 19, 2015
OT – is Angela Merkel now authorised to single-handedly promise EU membership?!!!
Obviously she isn’t, but it’ll be interesting to see what Turkey’s reaction will be if they get refused it now.
Migrants? Floodgates? More like a Tsunami!!
October 19, 2015
Re: tax credits. I am amazes by all the lefties complaining about reduction in tax credits. Why would anyone work full time if they can get their wages topped up and more by the taxpayer I.e.me?
They should be reserved for disabled and people who genuinely cannot work full tim. The girl on question time has 4 children. Isn’t that a life style choice and why should I have to help bring them up?
October 19, 2015
Too right. It’s about time these single women who have all these planned children started looking after them themselves.
October 19, 2015
@Fairweather,
The problem for us heterosexual males (am I right in thinking you are male?) is that we can’t walk away from the problem of single mothers because, short of wholesale DNA testing and registration, we can never be sure just how many of their children are really ours!
October 20, 2015
About 20 years ago, I was letting the house I am living in now. A single mother came to see it and brought four of her children with her. I asked whether she would put two in the big front bedroom. She said she would need the big room herself, as she had ‘occasional partners’. She could guarantee the rent would be paid by the council. Fortunately, some Glaswegian steel workers who were building the power station turned up afterwards, I let to them and they were excellent tenants.
October 20, 2015
Speak for yourself @PM.
I have kept mine trousered long enough to know only those I support are mine to support.
October 19, 2015
Labouring with delusions. Nice play on words Mr. Redwood but sadly if Mr. Corbyn ever becomes PM it would be an economic nightmare.
We are a long way out from 2020 and I can’t see him being Leader of his Party in the run up to the GE unless the current Chancellor carries out fully his proposed 40% cuts and a section of the electorate once again label the Cons. as the nasty Party.
When Mr. Corbyn was asked how he would fund his extravagant infrastructure policies he replied by QE. It’s the same old mantra borrow to spend. Perhaps the daftest of his policies is to set no limit on benefits to the poorest in society. Who is going to determine the poorest and what is the ceiling for all this largess? And why would anyone seek employment if this should come to pass? One role he did receive this weekend is Head of CND and for this he is just the man. No nuclear button to press here just the one that prints money.
“Con. economic policies promote more jobs and better paid jobs. The way out of poverty is to have a job and move on to a better job.” I doubt if any one would disagree with that but until it is accepted that we don’t need 50% of young people going to university then there is a mismatch between the Chancellor’s aims and the Sec. for Education. The reason we have so many Polish plumbers is because there was a vacuum to fill in the UK and this applies to almost all trades.
The good news is apprenticeships are now being valued again. Long may it continue as it gives opportunities such as starting your own business or working overseas and a good tradesman with a good reputation can earn a lot of money. Bring back the technical colleges, they served many like myself well. No way am I against a uni. degree it’s just a case of horses for courses.
October 19, 2015
Now that Corbyn’s in charge there is no real Labour Party. It has been hijacked by the Communists and who amongst the British electorate would now vote for them?
October 19, 2015
There has been no hijacking.
If you are old enough to have been around in 1997 to 2005 then you will know that the “Brownites”, the “Left” voted against the “Blairites” the centre.
60% voted for the (words left out ed)Labour leader, in trhe last 100 years it would have been 60% or more.
Nothing has changes in the Labour party.
October 19, 2015
What not just the UK has to face but America too is that their economies are being blown out of the water by economies and countries which owe their existence and prosperity to Karl Marx.
America and the West thought it would bring Russia to heel by Hedge Funds and Stock market activity after scores of its national armies were annihilated in various interventions in the last 100 years. Failed.
The Sick Man of Asia, China. Guess who is Guest of Honour today in Albion? All the King’s Horses and all the King’s men with wooden begging bowls no doubt sit around him hoping he flicks the odd pea with some coagulated rice in their direction. His flag is redder than that of a future Labour Government’s balance sheet, even a Tory one for that matter.
Ideology of the so-called Free Market and indeed the very British Socialist agenda are rather puerile. Both of them. Neither British system can even run a reliable or profitable bus service. A Communist with a hole in his head and an abacus can do better and has done better all over the world. Even now, the American Democratic Party has declared America cannot afford an NHS…they wanted one desperately, but could not and cannot afford one.
Mr Corbyn should have actually read Karl Marx then his theories would not be so silly and unworkable. Mr Osborne cannot read anything to prevent his eventual demise. He should hold his wooden begging bowl much higher today. He may be lucky.
Reply The UK is a much richer country per head.
October 20, 2015
Reply to Reply – you never say where fundamentally this richness comes from – still don’t know?
October 19, 2015
Off-topic:
https://euobserver.com/political/130737
“EPP and Commission to strengthen links”
“One European Commission vice-president and two other commissioners are running for executive functions in the centre-right European People’s Party (EPP).”
“Fourteen of the current 28 commissioners are EPP members, including president Juncker, who is part of the EPP executive body.”
That’s strange, I’m sure I’ve read that the Commission is just like a civil service impartially carrying out the will of the member state governments, and yet it seems that many of them have party political affiliations.
“The declaration also says that the EU should go towards “the creation of a common EU army”.
“The defense and security policy is not taboo anymore in the EPP,” the party’s president Joseph Daul told a group of reporters last week.
Because of the current migrant crisis and security challenges, he said, “we’ll move forward to an EU army much faster than expected”. ”
That will be the EU army which doesn’t exist and which nobody is planning to create, we have been told by our government more than once.
Just as well the Tory party is no longer affiliated to the EPP, and therefore doesn’t have to follow the positions it will adopt at this Madrid congress.
October 19, 2015
http://www.dailymail.co.uk/debate/article-3278597/Our-idiotic-leaders-obsessed-green-sabotaged-Britain-s-steel-industry-writes-DOMINIC-LAWSON.html
The above link spells out what Labour have done for our economy and our once great nation. Dave is just as negligent in that they haven’t listened to the experts and gone their own way with the green religion. Shame on them all.
October 19, 2015
I have read many comments and articles from both of the major parties. Unfortunately I am not financially literate enough to know who is right. I always believe in not toppling the scales in any direction , but being perspicacious enough to see the danger signals and act upon them before things get out of hand.
I don’t believe that wages of the rich and poor should become too polarised. I do believe that the taxes should be relative to earnings and the richer should pay more tax, but not ridiculous amounts to render the extra earnings null and void and not able to make that money work to create more wealth.
As another commenter has said it is all about degrees.
Politicians must also realise they are not there to engage in personal pedantry and verbal warfare, they are not there to show how they can bully individuals, they are they to discuss important issues. This is where Corbyn shines. He is calm and considerate.
October 19, 2015
The Lefties that I know blame Thatcher for all.
Logic, knowledge, experience does not come into it.
Bit like ISIS, or ISL or Al Qaeda etc. Logic does not exist.
The SNP know this, they have a cult and pursue that. Labour have something similar.
The Conservatives rely on logic and sense, often not attracting the mentally troubled. Not perusing the SNP path.
This is Darwinism, it doesn’t mean the right path is chosen within our generation but will be in the long term.
It is a waste of time trying to argue with the left. Time and Darwinism wins in the end.
October 20, 2015
The Lefties that I know blame Thatcher for all.
That’s hardly fair on Mrs Thatcher. What about Tony Blair? He’s to blame for quite a lot too!
October 19, 2015
“You do not make the poor rich by seeking to make the rich poor”
Of course this sort of soundbite would , no doubt, attract a round of applause at a Conservative Party conference, but what does it really mean?
In medieval times there was a conflict between the King and his Barons. The King was richer, and more powerful, than his Barons and no doubt would have said to them that you won’t make yourself richer by making me poorer. The Barons wouldn’t have been convinced by that argument when they had their tax bills to pay.
The genuine poor who worked on the Baron’s land would have the same argument with the Baron. “Give us some of your land” they would have demanded. “We want to work our own land rather than someone else’s”.
“Ah but you don’t get richer by making me poorer” the Baron would have told his tenants. Those tenants who were of a right wing political disposition would no doubt have given him a round of applause too!
October 20, 2015
But that is not a very relevant tale for todays sophisticated trading world.
We now have one person one vote.
We have democratic societies with regular elections
We have in many countries a decent welfare sytem of social security, free health services and free education services.
We have the right to earn our living as we want and to choose who we work for and where we work.
We have the right to travel wherever we want.
And perhaps more importantly the right for everyone to own, hold and pass on to their heirs, freehold land and property.
None of these things and more would have applied to the Baron and his peasants in your tale.
October 20, 2015
Peter Martin
Your little story is about feudalism, a system introduced here by your friends the French following the Norman invasion. Prior to that we had an Anglo Saxon, common law tribal society. Luckily we managed to throw off the yoke of feudalism many hundreds of years ago. After a period of mercantilism . How? by introducing freedom of the individual and free markets. A process that you and your Labour party friends would now like to overturn by actually reintroducing a form of feudalism based on the State and state appointed apparatchiks running things whilst the rest of us operate as wage slaves.
The left and Labour are the very worst people to help the poor and disadvantaged of our country . Karl Marx called for the proletariat to own the means of production. Well 5.6 million workers now DO own the means of production and that is growing by the day. Labours response? To attack them, make up silly stories about zero hour contracts and self employment being forced on people. Labour has spent the last 5 years attacking business without it remotely dawning on them that there are MORE small business owners than trade union members.
October 21, 2015
Edward2 & Libertarian
How about saying
“You don’t make the rich richer by making the poor poorer”
I thinks that sounds pretty good. If you say it quickly before anyone has time to think about it too much, that could get a round of applause at a Tory party conference too.
And of course it’s true. If a businessman wants to make money he needs to have customers who, even though they may have quite a lot less themselves, have at least some money to afford to buy what he’s selling.
October 22, 2015
Peter Martin
No business person with a brain cell has ever wanted to make the poor poorer for the simple reason that they would then have nothing to spend. Its this fundamental fact that makes you and your Labour mates look so silly when you discuss these issues.
Business people and the free market believe in raising prosperity for all and as I’ve told you many times you and your Labour mates carry on believing what you do because you convince yourselves that we have a zero sum economy and that if someone has billions then everyone else gets less. This is just not true but of course if you admit that you suddenly realise that being poor wont be aleviated by taking money away from wealthier people
Dont ever try and run a business Peter you have very little understanding
October 24, 2015
@libertarian,
Thanks for the advice but it’s come too late I’m afraid. I’ve been running my own , admittedly small, business, since 2001 !
October 20, 2015
“The best way out of poverty is to have a job, and to move on to a better job.”
The more employment there is the more difficult it is to move on to a netter job. How much unemployment is best?
October 21, 2015
How much unemployment is best?
That’s an interesting question. At one time economists, usually of a Keynesian persuasion, would talk about “full employment”. That wouldn’t be zero unemployment. It meant , in practice, something like 2-3%. There are always some workers who were between jobs or looking for their first job. Maybe 1% were just about unemployable for whatever reason. But it did mean that anyone who wanted work could find work. It used to be like that when I was young in the 60s and 70’s. I never signed on the dole and would always find a new job easily enough whenever I wanted one.
Mainstream economists don’t talk about full employment any longer. They talk about NAIRU. The non accelerating inflation rate of unemployment. You might want too Google the term. In other words politicians deliberately create unemployment to peg back inflation. You don’t hear politicians use the term in public, but they all know what it means, so they must just use it in private.