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.