Is it just me or are we are all becoming a little blasé about money, or to be more accurate, the number of noughts that follow the £ sign? Let me explain. Ever since Gordon Brown announced a massive £500bn plus bailout of the banking sector, commentators and politicians have been talking about £billions in the same way as they used to talk about £millions. In other words, everyone seems a little punch drunk. In the sales arena, the constant mentioning of large amounts of money was known as conditioning, if you keep talking about £65k BMW’s, then when the salesman mentions ‘just’ £15k for a new Vauxhall, it sounds like a bargain. However, in my little world, a £million is still a lot of money, especially when you consider how long it takes us to hand that amount of money to successive governments.

At a time when everyone is having to tighten their belt, this government has announced that they will increase spending from £620bn to £650bn, the conservatives tell us that they will “only” increase it by £25bn. Forgive me, but this sounds like an awful lot of money! In my personal life and indeed my business life, I have always understood and accepted that there are excesses, in other words, there have always been things that I want, rather than need. Therefore, when times are hard, I am obliged to deal with my excesses, to reduce my outgoings and I suspect, that this will be going on in the majority of homes and business up and down the land. This is a painful but necessary evil when times are hard. Not so for the government. No, instead, they tell us how they are going to spend more money, not how they are going to provide better value. The conservative are no better, because they say that they will just spend less (£5bn), but their proposals still amounts to an increase of £25bn!

By spending our money more wisely, buying what we need, rather than what we would like and curbing our wasteful habits, I suspect that most of us could, conservatively, reduce our outgoings by around 10%, possible considerably more. I didn’t say it would be easy, nor did I say all of us, so please accept that I am referring to most, not all of us. If this is a reasoned argument, why is it that the government cannot reduce their own waste, surely they are not going to argue that they are lean and mean or that all of our money is spent both wisely and without excess? Not a cat in hells chance. Surely, it would be better to reduce government waste and excess to channel the savings into more relevant or deserving causes, rather than just borrowing more money. The government is effectively condoning living on the never, never. Failing to practice what they preach. What angers me most, is that the conservative party, petrified of being accused of being the party of cuts, has failed to talk convincingly about value for money, getting the most of each taxpayer pound collected or borrowed.

With an election likely to be just around the corner, now is the time for the other parties to get tough. I am not talking about an austerity speech, nor a doom and gloom scenario, as has become the conservative party mantle. No, I am referring to a party, any party, that offers realistic hope, leadership and direction. One that refers to government money as taxpayers money, borrowings as future liabilities and above all, the use of taxpayers money in terms of value, not numbers to be bandied about. The people of this country do not need to see doom and gloom whenever they turn on the TV or read a newspaper, the majority of us know that times are tough and that they will be for the foreseeable future. What we need to witness, are politicians that appear to know what they are talking about (a very rare bread) and political parties that truly demonstrate that they know how to run a country and a good start would be how to spend taxpayers money wisely in order that we, the taxpayers, receive maximum bang for our buck.

Politicians and government must stop ‘conditioning’ the British people by constantly bombarding us with numbers most of us simply can’t envisage or picture. Instead, they must do what most normal people managing household budgets do when times get tough. Ensure that we are getting value for money. It is, after all, possible to spend more money on a holiday if someone gives up smoking, or to buy a better car if we shop at Aldi’s instead of Sainsbury’s, buy tea instead of coffee, drink tap water instead of bottled or even to survive the recession if we cut our cloth to suit our circumstances. It is a question of priorities. Government, whoever they are, have a responsibility, in fact a duty, to ensure that they spend or invest taxpayers money wisely. They must not be allowed to pour more money into a bucket which is already leaking taxpayers money.

I have delayed writing about the Pre Budget Report because I was so angered by its content. Not so much for the state of the public finances, which most people expected, but the fact that we have yet another missed opportunity. The Gordon Brown touch was everywhere, because once again, it was about perception not reality and could never live up to its promise.

The principal part of this stimulus package was the reduction in VAT, which is estimated to cost £12.5bn over a period of one year. Which is what I shall concentrate on. Now, I would like to know how the government came up with a figure of £5bn, because we all know that sales are down, so is the estimate based on historical figures, or current sales? This is important, because the suggestion is that this £12.5bn is an injection of real cash into the economy, so a smoke and mirrors approach to presentation would just be a con and unforgiveable. Furthermore, if I had £12,5bn to spend I would have reduced direct taxation by 2.5% for a year not VAT.

VAT is a purchase tax, therefore in a sense, it is a voluntary tax and as a consequence no-one will feel any richer as a consequence of such small a reduction in retail prices. It is also essentially a luxury tax, in other words, it is added to non-essentials. Yes, I know that over the years this has been extended, but for the most part, it has to be remembered that there is no VAT on food, children’s clothes and so on. The VAT reduction would have had a direct benefit to people if it had been applied to fuel, but the government decided to raise duties to negate any benefit, they did likewise on alcohol, tobacco and spirits.

Many retailers have been offering massive sale offers, with cuts of up to 50% to tempt consumers to buy products in their stores, no doubt with differing levels of success. A reduction of 2.5% pales into insignificance set against this backdrop. Which is precisely my point, the VAT reduction had nothing to do with providing a fiscal stimulus and more to do with being able to brag about a big number, knowing full well that it would never cost as much as the forecasted figures. Moreover, it provided an excellent backdrop for the government to introduce new taxes on the basis that the ‘VAT holiday’ would have to be paid for.

Ask yourself this, if the government had £12.5bn to waste, why didn’t they put it straight into our pockets, by reducing income tax by 2.5%? A fiscal stimulus has as much to do with consumer confidence as it does ability to pay. If you want the public to feel wealthier, then the only way this can be done is by ensuring they have more  of their own money in their purse or wallet. That is tangible! But this had nothing to do with a desire to introduce a fiscal stimulus, it was only designed to con the British public into the believing the government were doing something. This will be an expensive failure because those that are in a position to buy products where VAT is applied will do so anyway and save 2.17%.  By contrast those that were not able to make the purchase will find that this 2.17% reduction will make no difference whatsoever.

Now lets take a look at another aspect of this ’smoke and mirrors’ tax con. The government has made this years increase in the personal allowance permanent and sold it as part of the fiscal stimulus. But all is not as it seems, because they had no choice. The only reason they increased the personal allowances this year was because of the last 10p tax con. They knew if they did not act to make this ‘tax concession’ permanent that they would have had a backbench rebellion which would almost certainly have lead to Gordon Brown being ousted in disgrace. Now that is almost a price worth paying!

Now here is the best part for the government. In exchange for introducing a highly questionable fiscal stimulus, in the case of VAT for just one year, they have been able to substantially increase their tax take. For example, the adjustment in duties to offset the temporary VAT reduction on fuel, tobacco, alcohol and spirits will remain in place after VAT has been put back up. So this is a very real and permanent price rise, not only that, it is worth remembering that the consumer always pays VAT on duties, yes, a tax on a tax.

Plus, they have announced an increase in National Insurance contributions of 0.5% on employers and employees. This will raise billions and is permanent! So, in comes the smoke and mirrors again, by setting this tax increase against the change in personal allowances, the government can claim that certain taxpayers are better off. But hang on a minute, the change in personal allowances was introduced because, according to the government, they made a mistake when they removed the 10p tax band, so this was only introduced to compensate for that error. In other words, it was already our money! Don’t think for one minute that this tax raising government don’t know that and so do the media, but they are so far up the backsides of the government, the media refuses to reveal the truth.

On top of this, the government have decided to introduce a higher rate of income tax and remove personal allowances for those earning more than £140k. This means that they will be £2,246.70 worse off in 2010/11 and £2,849.93 down the following year. Now many will say that doesn’t matter, because they are rich etc, etc.

But lets put this into perspective. Firstly, they already pay more tax in real terms than the average person, in fact someone earning £150k per year pays as much tax as 4 people on average earnings. Also, many, I accept not all, of these people are the very people that create employment and provide jobs for the rest of us. Often, they will have risked everything they own to set up a business which creates wealth for the country and jobs for the people. Under this government they have seen capital allowances slashed, corporation taxes on the rise, massive increases in business rates (money which is a direct taxation by the government on business) and now a much higher tax take from them in their personal capacity.

I do not and never would begrudge anyone earning those sorts of salaries where they have contributed to the wealth of this country by creating jobs and a contribution to GDP. Two things that are vital, no, absolutely essential to the wealth of every country in the world. We have already seen a number of companies moving their businesses to other countries, such as Southern Ireland, because the tax regime is so much better. Can you really blame them if they are hounded for being successful and punished with punitive personal and business taxes for creating jobs and wealth. We all need to get real, envy is a very dangerous thing and in this case, if there was an exodus of the very people that help create jobs and wealth, we would be finished as a first world country. This pre-supposes that we are not already as a direct consequence of Gordon Brown’s reckless mismanagement of our economy.

The other changes made by the Chancellor are hardly worth mentioning, because they are so insignificant… so I won’t. I will say this however, they Pre Budget Report produced virtually nothing for small and medium sized businesses. Given these account for 50% of our GDP and employs 12.5m people, this was a massive mistake and one we shall all be paying for over the next few months.

Never was there a greater need for an honest fiscal stimulus, but Gordon Brown could not resist conning the British public again. The VAT reduction had nothing to do with providing a real fiscal stimulus, because the affects have been so severely limited. Instead, he contemptuously used it to introduce massive tax rises, which were designed to allow him to claim that the countries tax receipts, PBR and balance sheet would not be as bad as would have otherwise been in future years. Alistair Darling even included an assumption that we would see strong growth in a little over a year, everyone knows that is justwishful thinking. Whislt no-one believes this argument it makes the government books look a little better. They have no shame.  As my old boss used to say, it is all jam tomorrow.

The most worrying aspect of all this is how many people actually fell for the biggest and most dishonest tax con in history. Gordon Brown and his motley crew make Robin Hood look like a philanthropist.

News that David Cameron has divorced himself and the Conservative party from Labour spending plans is both welcome and long overdue. As too, is the announcement, that the Conservative party supports a return to responsible public spending. However, once again, David Cameron talks prudence, but fails to provide any tangible suggestions, yet another missed opportunity and evidence of political cowardice. News commentators must be getting as bored as the public are of another soundbite which lacks any detail.

Sorry David, but it doesn’t take a genius to work out that government must live within its means, nor a rocket scientist to determine that anything borrowed today, will inevitably have to be paid back tomorrow. Now I know that Gordon Brown is too inept to gauge this concept, but the public, for the most part are not. As a consequence, David Cameron sounds like a preacher rather than a politician and is getting very close to patronising the public and that could be political suicide. Opposition parties must provide alternatives, not state the obvious. We all know what is wrong, what we need is to know that those people in a position to make a difference if elected, are full of ideas and initiatives, not just truth and consequence. We are adults Mr Cameron, don’t talk at us as if we are children, because it will cost you the opportunity to get into power.

David Cameron is petrified of identifying which areas would be in his sights if the Conservative party was voted in. The problem is, even though we know that Gordon Brown is inept and self-obsessed, he also comes across as strong, self-assured and as a leader. By contrast, David Cameron comes over as weak, scared of his own shadow and patronising. To lead, people must have the courage of their convictions, in life it is important, in politics it is essential. If Cameron does not tell us what areas will be targeted, the people of this country will be suspicious of him and he will leave a void where the Labour party can claim that the reason he is saying nothing is because he has no idea what he would do and/or he intends to cut so called essential services, such as education and health.

If David Cameron wants to dip his toe in the water, he could easily start with agreeing to shelve, or better still cancel many of the unpopular information technology projects this government has announced or are already underway. These include, but is not limited to the Big Brother Britain database estimated to cost the taxpayer some £12bn, this should be cancelled altogether, the NHS database, estimated to cost in the region of £32bn, must be shelved in the short-term and re-considered in the medium term, based on a genuine cost versus return basis. Other database systems, that this government has so badly commissioned, budgeted for and managed should also be shelved until such time as the economy recovers, this would include everything related to ID cards. The public would rather have tax cuts than a Big Brother Britain database, you don’t need a poll to tell you that!

There are also the costs associated with a bloated European Union and an overseas budget of some £5bn. None of these affect education or health, so no real political fallout. The LibDems have also suggested limiting the pension tax allowance for higher wage earners from 40% to 20%, maybe this has some merit. Tough, but perhaps for the greater good. In fact there are a whole raft of areas where this government has wasted and continues to waste taxpayers money and have nothing to do with health or tax.

There are other areas that a tough, conviction politician might also consider and that is the massive costs of the highly lucrative public sector, final salary pension schemes which are paid out of tax revenues rather than a pension fund. The bloated public sector, now home to 1 in 5 employed people, or the thousands of quangos that have been set up a government, drunk on massive tax revenues brought about by a boom and stealth taxes.

If the people of this country are to survive relatively intact from the consequences of this recession, then a fiscal stimulus is necessary, It is no good tinkering around the edges and there is no point in stating that “the cupboard is bare”. People must be able to eat, no-one will ever vote in a party that states that they must starve to death for their own good. A proper stimulus package, that includes a substantial reduction in direct taxation, even if it is short-term (2-3 years), is essential, it is okay to fund this through cuts, but whatever the medium term costs, the people of this country need this stimulus now, as do small business. There is no point in looking back at previous recessions, this one is different. More people are employed by small business than ever before, people have higher levels of debt than ever before, more people own their own homes, there are more people on pensions than ever before and the individual is taxed at a higher rate that ever before.

Small and Medium sized businesses need a stimulus package, thus far, the Conservative policies demonstrate a real ignorance of the needs of this sector, which employs some 12.5m people and accounts for nearly 50% of our GDP. Delays in paying VAT and small NI holidays are too little and will help no-one, it is tinkering, not encouraging. David Cameron needs to get down and dirty with small business if he is to understand their needs, not conduct a whistle stop tour for a TV programme. He needs to accept that he and most of his shadow cabinet know nothing about small businesses and their needs, but he cannot ignore such an essential part of UK Plc.

From an outsiders perspective, David Cameron appears to be hiding in Gordon Browns shadow, because he is so scared of his own. Cameron is intent on substituting rhetoric for policies, but what the public want to hear is, if elected, what will the Conservative party do for our country and the people of this country. Cameron is concerned that the Conservative party failed to win the past two elections because of their tax cutting policy, but that wasn’t the reason. It was because the public could see through the veneer, we could see that it was still a party that was not ready for government. I would not have said this 3 months ago, but today, I believe that in spite of the way Gordon Brown has destroyed this economy, he could still win another election simply because the Conservative party is too scared to tell us how they will get this country back on track and make a commitment to reduce taxes through a reduction is waste.

Gordon Brown has waged a vendetta against traditional Tory voters, so called middle income earners, they have been savagely and disproportionately squeezed for higher taxes. The highest earners have been left alone and the low income earners have benefited enormously. The balance has been lost, middle England has been shafted and Cameron needs to commit to redressing this imbalance. It is middle income earners that have paid for Gordon Brown’s social engineering experiments and it is middle income earners that will revolt against New Labour if there is a viable alternative.

A Conservative Party victory with a healthy majority is assured if David Cameron can commit to, and tell us how or when he will; return power to the people, by repealing the draconian, civil liberty busting, intrusive legislation that has been brought in by this present government., cancel the information technology projects that have been ill-thoughout, are way too costly and with questionable returns, address the thorny issue of public sector, final salary pension plans which this country cannot afford., reduce bureaucracy and the obsession with state control and voyeurism., address the issue of 2.5m people on long term sick benefits, deal with the situation where people are better off living on benefits than they are working and making a contribution, illegal immigration. There are a whole raft of policies that would, for the most part, receive majority support.

The Labour party has created a nanny state, where too many people are now reliant on state aid and support. Many believe it is a fundamental right, even if they haven’t contributed anything. Much is said about “free education” or “free health services”, it is not free, at least not to those that pay for it. Social responsibility is about encouraging people to stand on their own two feet, providing a safety net, not an easy opt out. There must be less state intervention, less nanny state and this will lead to a natural reduction in the level of taxes required to fund it. Cameron, you need to grasp the nettle, have the courage of your convictions and put a package of measures in place that reduces waste, reduces taxes, reduces state aid and above all reduces state control over its citizens.

If David Cameron cannot win an election in this current climate, then he never will, nor does he deserve to. If he is not willing to spell out his policies in detail, stand by them and sell them, then he should not be leading the Conservative party, he must stand aside and allow a real politician to take over. Cameron would not last 5 minutes in a real business, because no CEO would accept rhetoric over substance, ideas but no plan, smooth talk but a lack of backbone. David Cameron needs to learn to become a man, a leader of men and a politician who is willing to announce, stand by and sell his policies.

Unless David Cameron starts to put flesh on the bones, he will reach a point where no-one will be listening, Gordon Brown is shrewd enough to know that, he knows that Cameron will become his own worst enemy. Gordon Brown also knows, that fear drives politics, if the public fear that Cameron doesn’t know what to do, then they won’t elect him. If the public fear that Cameron’s policies are so unpalatable that he cannot outline them, then they won’t elect him and Gordon Brown will fuel that fear, by filling the void and telling us how the Tory party will cut services, such as health and education. David Cameron is being outmaneuvered by Gordon Brown and he can’t even see it, that is shameful, because the public want change, but we have to be able to see what that change is, before we can support it. If the public stops listening to Cameron and an election is called, then he will surely lose it and he would only have himself to blame, whilst the rest of us will have to pay the price.

Gordon Brown has been thrusting himself about the world stage as he tries, unsuccessfully in my opinion, to appear like a sort of financial guru. I honestly believe that many world leaders are laughing at him behind his back. Only someone as naive and self-obsessed as Gordon could run around having virtually single-handedly destroyed the UK economy and think he is King Economy. The man is a fool, but then most objective British citizens already know that. Anyway, let me get to my point.

As we all know, the Labour government spin machine always leaks its own announcements early so that they can guage ‘public opinion’, normally expressed by what the newspapers say (rather than the public), before making any final tweaks to their policy announcements. However, if the leaks are to be believed it looks, once again, that Gordon Brown is going to continue with his social engineering project, otherwise known as Robin Hood from Kirkcaldy and Cowdenbeath.

It would appear that Gordon Brown does not believe that everyone is suffering as a consequence of his handling of the economy for the past 11 years and the subsequent recession. Oh, no, Gordon Brown from his taxpayer funded home in Downing Street, believes that it is only those on “low incomes” that are in need of tax breaks. What world is he living in? He has spent 11 years long years targeting so called middle income earners with his tax increases, using this section of the community to fund his extravagant, cost-loaded experiment to re-distribute wealth. Now having squeezed the middle income earners until they are bordering on relative poverty, he has now abandoned them, by saying that any tax breaks will be targeted at “low income earners”.

During New Labour’s reign, top earners have remained relatively neutral in terms of total tax take, low income earners have benefited dramatically through allowances, tax breaks and various forms of income support and middle income earners have been seriously and relentlessly shafted. Now, he has got away with it so far, because the golden goose did not really feel all the affects of his shafting, as a consequence of a booming economy and the relative wealth created by higher house prices. That of course is no longer the case. As the economy starts to contract, the golden goose is starting to feel the pinch and because they were the primary target for revenue raising, they are feeling it more than any other section of the community. In spite of this, Gordon brown in his cosseted environment, turns his back on the very people that have funded his social engineering experiements.

Now I know that Gordon Brown needs to guarantee his core vote, many of whom will come from the lower earners and rightly so, because lets face it, they have been the only winners over the past 11 years. But he needs to understand that it was the votes of the middle income earners that actually brought New Labour to power and that irony cannot be lost on this section of the community. Nonetheless, it is all a bit academic, because there is no way that Labour will win the next election, even if Gordon Brown went around at Christmas and gave every Labour voter a £1000, oh sorry, that is the plan isn’t it, hope I haven’t spoiled anyone’s surprise!

Now enough of my sarcasm. Gordon Brown does need to provide a fiscal stimulus and I believe that everyone is agreed on that, even David Cameron, it won’t prevent the recession, but it may create enough of an impetus to save a few jobs and keep some businesses going if correctly targeted. However, it would appear that Gordon Brown intends to offer tax breaks in the form of increased allowances for low earners only. No widespread stimulus, just a further, last ditch attempt at social engineering, except this time, he can’t take anymore money from middle income earners, instead, he has to borrow it. Worst still, one of the reasons that Gordon Brown prefers to offer increased ‘benefits’ is he can always exaggerate the numbers, but this is not the time for one of his infamous smoke and mirror exercises. The economy will only get a boost if the money is real and tangible.

Gordon Brown has repeated many times that this is a unique set of events that requires a unique set of solutions and I couldn’t agree more. But he is just promising more of the same, take from one section of the community and pass to another, except this time, he wants to store the cost, so that middle income earners can pay it later. The man is a fanatic, he quite clearly has an ingrained almost psychopathic hatred of middle income earners.

What is needed is a simple and properly funded fiscal stimulus, which benefits everyone, not one section of the community. Everyone is suffering from the downturn in terms of the increases in fuel and utility bills, council tax, caps on wages, reduced pension benefits, insurance costs, travel, shopping bills, job losses, the list is endless. They all need to be able to see the benefit of a fiscal stimulus and the best way to do this is a reduction in the basic rate of tax. Everyone knows that Gordon Brown always exaggerates the affects of any government ’giveaways’ whilst moving swiftly over the small print that invariably takes back any benfits, with interest, so the reality is, most people have learned not to trust a word he says. Therefore, he more than anyone, needs to ensure that any stimulus is kept simple and results in people being able to keep more of their own money. This is no time for treasury tricks.

He also need to offer targeted assistance to small business, they employ 12.5m people and many, as a consequence, will not have huge cash reserves, nor can they go to the bank or shareholders. He ignores this area of business at his peril, small and medium businesses generate nearly 50% of UK Plc’s GDP, not an area to be ignored.  David Cameron’s suggestions are weak and will offer very little assistance to small business, I have already outlined what I think needs to be done for small business in a previous post.

The bottom line is many of the problems we are facing today are because Gordon Brown allowed, (inspite of warnings about the risks), this country to continue a relentless boom on the back of easy credit and rising house prices. He could and should have done something about it, but he chose not to. Our economy was booming and the relative tax take was increasing anyway, still he opted to introduce many, many stealth taxes. Often, but not necessarily, disguised as green taxes, but invariably targeted at middle income earners. This was not enough for the man Brown, on top of all that, he increased public borrowing during this period, spending like a man possessed, not saving anything for a rainy day. He was reckless in his handling of the economy and he allowed the public to become reckless, by not introducing measures to cool,things down, because it would have been unpopular and inevitably, would have required him to reign in his social engineering project.

As a consequence of this mans actions, not only has his reckless behaviour virtually bankrupted this country, it also means that Gordon Brown owes a massive personal debt to the people of this country. He can start to pay that debt by stop trying to be clever and spinning the numbers. He can help redeem himself in part by offering an apology to the people he has shafted in is quest to be the hero of the low income earners, by introducing a universal 5% reduction in direct income tax. This must be funded through capital project cuts and a good start would be all of these unpopular information technology projects that are invariably doomed to failure, always have substantial cost overruns and in most cases are not wanted by anyone and in particular the public. He must also tighten his belt on other forms of government spending, just like everyone else has to do in difficult times. Government has become a very lucrative place to do business, because many of those charged with negotiating terms are no match for the very professional, highly paid, highly skilled sales people on the other side of the desk. This has to stop!

New Labour’s social engineering project was a failure in terms of value, although I do accept that low income earners are substantially better off than they were when New Labour came to power. However, were it not for a booming economy, it could have been safely argued that Gordon Brown actually reduced the gap between low and middle income earners so much that they the differences are no longer discernable. Because as he boosted income for low earners, he took this money of middle income earners, pushing one section up and the other down. This will become self-evident as the New Labour Boom turns to Bust. Thanks Gordon!

Blink and you will miss it! After all the hyperbole, David Cameron has announced what the Conservative party would do to stimulate the economy and quite frankly it is pathetic. What a missed opportunity, he is so beset with trying to prove that he is ‘prudent’ that he fails to grasp the extent of the economic downturn on business and ordinary people. Quite frankly he is a fool. I did not think it was possible for the Conservative party to lose the next election given Labour’s pathetic 11 years of tax and spend, then spend even more and borrow. But I have to hand it to David Cameron, he is doing an excellent job of trying.

Now I know that Cameron relies heavily on his advisors, after all, what would he know about being unable to pay the bills? You could be forgiven for believing that I am a die-hard Labour supporter, but regular readers will know I am nothing of the sort. I have only ever voted Conservative, but I am now politically homeless, because I could never bring myself to support a party that lacks backbone, initiative and orginality, nor one that actively supports a leader that is clearly weak, patronising and lacking any conviction. Tony Blair didn’t win because he was young, it was because he was believable, love or hate his policies and beliefs, he divided public opinion in the same way that Thatcher did, but he was a conviction politician. For what it is worth, I also found him superficial, but that is my personal view because I didn’t like him either, I always felt he was quite prepared to heap icing on a biscuit and sell it as a wedding cake.

David Cameron proposes that business and the unemployed could be supported by a stimulus package which would provide national insurance tax breaks for those employers that are prepared to take on anyone that has been unemployed for more than 3 months. Now, this idea is not original, here is what I said on the 28th November 2008

Small business should be encouraged to take on the long term unemployed and those that are in receipt of disability benefits (some 2.5m), but can work. Small business employers could be offered a full rebate on all employer NIC’s for employees that are classed in either of these categories. This will assist small businesses, increase the opportunities available for the long term unemployed and result in a massive reduction in the burden on the state from those who are in receipt of benefits, rather than contributing. This initiative could be self-funding or even offer a surplus.

So clearly I would be supportive of this measure, but it just doesn’t go far enough, because it demonstrates a complete lack of understanding of the needs of small business. If a patient is bleeding to death, a bandage may make the first-aider feel as if he is making a contribution, but it will take a tourniquet to save the patient’s life. This tax initiative is okay, but it must be part of a package of measures, as I suggested in my original post on helping small business. Let me remind you Mr Cameron, in case your advisors haven’t told you, 12.5m people are employed by the SME sector, over 50% of all those employed. Something else many of your advisors will not have told you is that businesses will fight a lot harder to save a job, than they will to take on new people. In other words, you should be targeting help to keep people employed as well as supporting firms to take on new employees.

Of course no-one can criticise David Cameron for insisting that any tax cut measures need to be paid for, I couldn’t agree more. However, sometimes circumstances will dictate a variation in policy and outlook, even if it is short-term, of course natural leaders already know that. The current economic downturn in one such instance and a visionary, competent and an open-minded leader would recognise that. There are many government projects that could and should be shelved and this would save money, but equally, as Cameron rightly pointed out, it costs £8,000 per annum to support someone on benefits and there is the loss of tax revenues and national insurance to add on top of that. In other words, damned if you do, damned if you don’t. In this type of situation, I would sooner be seen as someone that was prepared to take risks, both financially and politically if I felt the results could save jobs and reduce the length and depth of the recession.

David Cameron’s tax tinkering would do more harm than good, he really needs to get out more. Relying on meetings with 3 business people for a TV show or advisors that have never run a business is not going to provide him with the depth of knowledge that is necessary to understand business, particularly small business. If he is relying on the same people to advise him of what to do on personal taxation, then I suspect there is no point in turning up to the press conference. David, get a grip, be a man for once in your life. Leaders lead, they don’t tip their toe in the water to see how cold it is, they must have the courage of their convictions but they should also be able to listen, digest and expand on new or radical ideas. This country does not need an also ran, to follow the Labour loser.

Well I have argued that there needs to be a combination of monetary and fiscal cuts in order that the economy can receive a well needed stimulus, although I am not naive enough to believe that it will stave off a recession. This country is already in a recession, even if the official measures used to determine a “real” recession have not yet been met, all we can do is try to lessen the impact on people, jobs and business.

Gordon Brown has indicated over the weekend that he believes fiscal policy should include tax cuts and rumours abound as to the extent of such cuts, with estimates of £480 per person through to an annual estimate of £15bn in tax cuts. Whatever the case, there are two things which I am wary of. The first, that Gordon Brown has a habit of double counting and this is no time for a sales pitch. The economy needs a real injection of cash and the people of this country need to know that they have a little more money in their pockets, no sales pitch is going to change that, so Gordon Brown, beware of New Labour spin. The second is the form that tax cuts will take.

Some “experts”  have suggested a temporary cut in VAT. What are they smoking? Lets take a look at that proposal shall we? There is no VAT on food, council rates, children’s clothes etc., what many will call essential items. Where VAT is charged, how can we be certain that retailers, keen to impress their shareholders and hold onto their bonuses, will not take the opportunity to increase their margins? Thereby minimising the affect of any price reduction which ought to be brought about by a fall in VAT to the proposed 12.5%. Also, there is the cost to business, especially small business, they are the organisations and people that will have to deal with the major changes to their business that would be brought about as a consequence of a short-term change in VAT. Are these people really advising the government? I hope Gordon Brown is not listening, fortunately, not one of his strong points.

What we need is a simple, clear cut, obvious reduction is direct taxation. It must be one that is both tangible and visible, no messing around withallowances, tax credits and bandings. Instead, there should be a significant reduction in direct taxation and I have suggested this should be a reduction in the bottom rate of tax from 20% to 15 %, with all other banding’s remaining static, so the full effect benefits everyone, in a way that cannot be fiddled. Fiddling, with one or 2% will make little or no difference to the man on the street. There is no point in targeting cuts to the poorest sections of the community, because,put simply, everyone is affected, especially so called “middle England”, that has funded virtually every one of New Labour’s ‘feel good’ initiatives over the past 11 years, through proportionately higher taxes.

I doubt that it will be possible to fully-fund such tax cuts, which I think, at least for the time being, should be limited for a period of 3 years, to provide the personal reassurance that most people seek in their lives. However, in these uncertain times, I go against my instincts in terms of government borrowing if required to as a result of a ‘funding gap.  I would insist, however, that some funding is gained through cuts in non-essential government and believe me there is a great deal of that. For example, the Big Brother Britain database estimated at a cost of £12bn, should be cancelled altogether, the NHS database, estimated to cost in the region of £32bn, should be shelved in the short-term and re-considered in the medium term, based on a genuine cost versus return basis. Other database systems, that this government has so badly commissioned, budgeted for and managed should also be shelved until such time as the economy recovers, this would include everything related to ID cards. The cost of being part of the European Union is rising year on year, our ministers need to ensure that the European Parliament also looks at their costs in these difficult times, so that member countries can see a reduction in their ‘dues’. A good start would be to stop the European Parliament introducing draconian, liberty busting, politically correct rules and legislation, which costs money as well as stripping everyone of their national identities.

At this difficult economic time, we must also consider revising the $5bn overseas aid budget, this amounts to 1.5% of all tax receipts and cannot, therefore be ignored. Similarly, the public sector now employs some 1 in 5 of all those employed in this country, it has bloated and is arguably out of control. Equally, the cost of public sector, final salary pension schemes is paid for out of tax revenues, not a pension fund, therefore, the costs are enormous. This needs to be curtailed, the economy cannot afford such generous pension schemes, particularly when the private sector, who were hammered 11 years ago by Gordon Brown, have ‘pensions’ on average, worth just 1/15th of the public sector schemes.

Mere mortals like me, do not get provided witha detailed set of fiancial accounts for UK Plc, therefore I am unable to go through each and every expenditure line, but one thing is certain, you can guarantee that there is waste and excess in a public sector the size of ours and it needs to be dealt with. The way any businesses would do at a time of crisis. The adult population are better positioned than the government to determine where any additional money is spent, which is why any tax cuts must be via direct taxation, not indirect taxes, lets face it, it is our money in the first place. But whatever happens, it will never cost as much as the headline figure the government use to sell the cuts. Because, if people buy, companies prosper, business tax revenues are preserved or rise, VAT is paid, more people are employed, therefore less benefits are paid out, even if people save, many of them will be taxed on the interest. The government never loses.

For the record, I do not believe that bringing forward public sector infrastructure projects is the right way to go. The impact would be very limited, and the benefits disproportionate to the costs. Most of these projects would be PFI initiatives and, mark my word, history will look back at these PFI contracts and wonder why it was, that a government was awash with tax receipts, would enter into contracts which are akin to a consumer buying their houses at credit card rates, rather than on a traditional mortgage.

David “the cupboard is bare” Cameron, with his austerity speech, which I am sure he thought would make him look clever and responsible is in a tight corner. Traditionally the Conservative party has been the party of tax cuts and enterprise, he has fallen into a trap and it was one of his own making. David Cameron thought we needed to be told how bad things were, we didn’t, because we can feel it! A good leader must never, never back himself into a corner, now he must either eat a bit of humble pie, or, more likely for a British politician, he will come out with a fudge. Either way, he made a mistake and he will pay dearly for it. He will not be forgiven for allowing Gordon Brown, one of the most despised men in this country, get away with using former tory policies, at a time when people want them most.

Let me provide David Cameron with one piece of advice, something that he will not appreciate from his privileged upbringing. There is no point in having a balanced budget if you die of starvation in the process. Government takes our money at will, then they spend it on their favourite pet project or group, without consultation, in the process, they keep as much as 35% of our money on ‘administration costs’. If government were an investment fund, it would need a bailout every year, in fact that is what they get, it is just government take our money when they get a bit short, forever dipping into our pockets when we are not looking, a kind of distraction theft. I have always voted conservative in the past, but this lightweight, ill-considered leadership provided by David Cameron frustrates the hell out of me, he just doesn’t seem to have a clue.

Now come on guys, whatever your party colours, pull your finger out. Do what is necessary to help the people of this country, interest rate cuts were the first part, the second is a reduction in direct taxation and the third to reduce wasteful public expenditure. To have a short term impact, the second was contingent of the first, but the second should not be contingent on the third, because the third must always be part of responsible government. Stop whining about losing your seats or creaming yourselves over the thought of winning the next election by default, not one of you has earned your pay yet, so you are all, still very much on trial. If you don’t grow up, we could see quite a few members of the Monster Raging Loony Party, as people register their protest. Still, from what I can see from the current crop of MP’s, it couldn’t be much worse.

Rant over, but have left in typo’s, poor grammar and other errors so you can see just how much I have smashed into this keyboard, off to PC World now to see if they have any cheap keyboards.

If you have heard him say it once, you have heard him repeat it 100 times. Gordon Brown keeps telling is that the UK economic fundamentals are strong. Now I am no economist and that will become self-evident when reading this blog, but I am blessed with a little commonsense and logic. My conclusion, the so called fundamentals don’t look so great from where I am sitting, so common Gordon enlighten us.

At the CBI Scotland Annual Dinner, Gordon Brown outlines what he considered those fundamentals to be, they are;

“First, Bank of England independence has given us low interest rates founded on sound macroeconomic management and so despite increases in the prices of food and fuel - and I understand the impact this is having on families and businesses - the sound framework for monetary policy which we have established means inflation remains far below the double-digit levels we saw in the earlier decades. And this will help ensure that interest rates remain similarly low by historical standards.

Second, the most flexible labour market in Europe means that even though unemployment has risen in recent months, employment remains close to record highs - and wage pressures are subdued, led by our own responsible decisions on public sector pay. And with the investment in the New Deal and our latest welfare reforms there is more support than ever before to help people back into work and to fill the 600,000 vacancies still in our economy. And a balanced approach to migration allows businesses to benefit from the specific skills that economic migrants can bring to our country and improves the responsiveness of our labour market to fluctuating demand.

Third - the underlying financial strength of British business reflects its improved efficiency - driven by your hard work in achieving the fastest growth in average productivity in the past decade across the whole of the G7. Britain remains a magnet for overseas investment and our export performance is improving, with our manufacturing productivity growth strong.

Fourth, low debt. The significant debt repayments we made since 1997 mean we have cut public debt as a share of national income from 43 per cent in 1997 to today’s 37.3 per cent. This means that, unlike in earlier economic slowdowns, we can sustain our ongoing commitment to investment in fixed capital infrastructure - up 58 per cent in real terms in the last decade. In 1997 we invested £144.5 billion. Today it is £229 billion. Even after inflation a 58 per cent rise.

And - while  no government can hope to protect people from the full impact of the global credit crunch or the worldwide spike  in commodity prices - I am determined that we should do what we reasonably can to help families and businesses through this difficult period of adjustment. So we will back up our investment commitments with careful interventions designed to provide targeted support for hard-pressed families - such as this week’s home-owners’ support package and the £120 a year tax cut for basic rate taxpayers that will start to feed into pay packets later this month.

Fifth – we are making all the long term decisions, difficult as they are, to boost our competitiveness; on energy, planning, transport, housing, digital technology, science and skills. And the 2002 Enterprise Act has given us one of the most robust, independent competition regimes anywhere in the world. The support for British enterprise - strengthened over the last decade with the launch of Enterprise Capital Funds, the Small Firms Loan Guarantee and administrative burden reduction targets. Britain today has four and a half million businesses - more than ever before. And the OECD says Britain has the lowest barriers to entrepreneurship of any OECD country. ”

Now lets have layman’s take on this, as I said, I am no expert on economics, but I am one of the people that is expected to understand what the government is telling us.

Fundamental One

One of the primary movers in determining interest rates is inflation and as we have seen over the past few months, Gordon Brown is limited in what he can do to control inflation. Yes he can keep public sector wage deals low, but he cannot control commodity prices such as fuel and food, which can have, as we have seen, a significant impact on inflation. Furthermore, government borrowing can also affect inflation, but Gordon Brown’s fancy footwork has managed to keep long term debt such as the PFI initiatives off the government balance sheet. This may have the affect of massaging government borrowings, thereby providing a knock-on affect in terms of lower interest rates.

Fundamental Two

Gordon Brown goes on to lecture us that the second part of the fundamentals is a flexible workforce, low unemployment, low wage settlements, economic migrants and welfare reforms. Really? Firstly, there is no explanation of what a flexible workforce is, but whatever it is, the government cannot claim the credit for it. The low unemployment figure doesn’t stand up to close scrutiny either. There are now 1.7, people out of work and on top of that those claiming disability benefits have risen to 2.5m, many of which, under the old system, would have been classed as unemployed. So, once again, this would appear to be a deliberate manipulation of the true jobless total.

Granted, the government can be credited with reaching low wage settlements with the public sector, although their ability to maintain these agreements may be questionable given the increasing militancy of the the public sector unions. But there is something else that Gordon Brown has omitted to include here. Many public sector employees benefit from excellent, final salary pension schemes and, even though many of these have been withdrawn in the private sector, Gordon has not had the courage to likewise in the public sector. Therefore, whether Gordon Brown likes it or not, it is an inconvenient truth that pensions are a cost of employment and it is estimated that our public sector pensions deficit is some £890bn, yet the government does not include this obligation anywhere in their figures.

So what about economic migrants, who do they benefit? Well yes, they benefit private companies that cannot or more likely, will not offer a wage sufficient to get ‘local’ workers to join their business, even though we have 1.7m unemployed. But what about the hidden cost, economic migrants can bring their families if they wish and many do, so when they are here, we must provide them with, at the very least, free education and free healthcare. So, in effect, by offering these benefits free, we, the tax payer are effectively subsidising employers looking for cheap labour. As the government knows only too well, these economic migrants could not possibly pay enough in tax and national insurance to cover the cost of these free benefits. If I was Mr Brown, I would be keeping my mouth shut, unless of course, he thinks we are all too stupid to work it out.

Fundamental Three

Gordon claims that we have the fastest growth in average productivity in the past decade across the whole of the G7. This may be true and therefore I will accept it at face value. But, can he really claim that their is an underlying financial strength in British business? Over the past few months, we have seen a high street bank have to be rescued by the tax payer, we have had a series of profit warnings from major retailers and manufacturers, we have had a number of high profile companies having to go to the stock market for more money to shore up their balance sheets and we have seen the failure of several airlines and the UK’s third largest travel companies. This doesn’t look strong.

In addition, we are now starting to see the highest level of business failures in over a decade, particularly small and medium sized businesses. Gordon Brown would do well to be remember that it is the SME market that has created many of the new jobs that he takes credit for, but also, because they cannot afford to go offshore or look at fancy methods of tax avoidance, they loyally pay their taxes. So what has he done for them?

Despite promised to the contrary, he has saddled them with a mountain of red tape, punitive fines and penalties for even the smallest misdemeanor in respect of tax or VAT returns. He has ensured through legislation that, the SME employer now has to have expensive experts on hand either as employees or consultants to advise on health and safety issues and employment issues as they have become one of the largest burdens on any small or medium sized business. In doing so, Gordon Brown, his cohorts and civil servants have demonstrated that they know nothing about running a business of this size.

Further, as a result of reduced central government funding to local authorities, business are having to pay ever higher business rates, even though they are getting less and less in return. Typically business rates now equate to 50% of the SME’s lease or rental costs. That is not business friendly, it is punishment. Far from taking credit for the business sector success, certainly in terms of the SME’s, he and his penal policies have made it increasingly difficult for them to survive as will be demonstrated over the coming months with a disproportionate number of SME business failures. You mark my words Mr Brown. This government also withdrew tapered tax relief a few short years after it was introduced to encourage entrepreneurship.

Fundamental Four

This takes the biscuit, Gordon Brown claims that government debt, as a percentage of national income has fallen from 43% in 1997, to 37.3%. As I have mentioned before, this is not a true figure, it is massaged. Mr Brown has become adept at using fancy footwork to ensure that government obligations do not end up on the government balance sheet. Now, I am not suggesting that he can’t do this, because he has, but what is the point in kidding himself, unless of course, the plan is to kid us? Between now and 2032, we will have to pay back some £170bn through the various PFI schemes used to pay for our schools, hospitals and other infrastructure projects. This doesn’t appear as a borrowing, so what is it? Then there is the debt from the failed Network Rail project and Northern Rock, as well as countless other obligations, why don’t these show up?

This man, even claimed in his speech, that he is using government intervention to assist families and business, bragging that basic rate tax payers will receive £120 a year in tax cuts. Have I missed something, this is the man that though he could rip us off using a classic trick of smoke and mirrors, got caught out and had to back down, Then he is trying to claim that it is some gift from the government. What an arrogant, deluded little man he is. 

Fundamental Five

This is really a more detailed repetition of Gordon’s ‘Fundamental Three’, but there are many more grandiose claims that do not bear scrutiny, but I haven’t got the time to analyse them one by one, so perhaps Gordon can enlighten as all be telling us how many of the 4.5m businesses he alludes to have actually been able to benefit from the Enterprise Capital Funds and the Small Firms Loan Guarantee? Precisely what red tape burdens has he removed and does this assessment include the new red tape this government has introduced.

I would also be very keen to hear precisely how this government can claim credit for boosting our competitiveness; on energy, planning, transport, housing, digital technology, science and skills. I don’t remember any of the companies operating in this sector thanking the government for their contribution. He also claims that our exports are improving, could this be anything to do with the fact that Sterling has weakened against all of the other major currencies, one of the primary reasons that our bills and inflation is rising, given we are a net importer of goods.

There are also other things that a government should be doing, such as planning. Gordon Brown makes no mention of the fact that as a direct consequence of his government’s prevaricating over nuclear power stations, there is a very real risk that we could suffer major power shortages in  3 or 4 years few years time, as the older power stations are de-commissioned and new one’s which take 10 years to build, are not ready. We could be reduced to third world levels of power shortages, with an estimated reduction of some 35%, affecting every family, every home and every business in the country. There is your legacy Mr Brown.

As I have stated at the outset, I am not a financial or economic expert, but when I analyse what Gordon Brown has said, against what had actually happened, I see a massive gulf. Therefore, this man must be deluding himself, or attempting to hoodwink the public. Either way, it is not good for us or our country. Step aside Mr Brown, before it is too late.