Tag Archive | "unemployment"

Who is running the country?

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Who is running the country?


It is not lost on me that, at a time when our country is in economic meltdown, our soldiers are dying on the front line, unemployment is rising at a phenomenal rate and businesses are going bust every day, our government is just not interested – Note: I have excluded ‘Swine Flu’ because this is just a convenient distraction for our government.

Instead, they are intent on squabbling like spoilt school children. Little wonder we are in such a mess, each and every one of them should be ashamed. Headlines no longer deal with the issues that concern the public, instead they are dedicated to those within the Labour party that seek to criticise or defend New Labour and/or Gordon Brown. Whilst I am all for the discredited New Labour machine going into self-destruct mode, I am concerned that it is happening whilst they are still in government, it is akin to sending a text message on your mobile phone, whilst travelling at over 100 mph on the motorway.

It is clear to me, that only now, have Labour diehards realised that their social experiment has been a failure, both in terms of policy and implementation. Instead of bickering, they should call a general election for the sake of the country and let the people decide who is fit to get us through this mess. But no, they couldn’t give a toss, they choose to fight each other rather than concentrate on what they were elected to do…run the country. Their selfishness clearly knows no bounds.

To save the party arguing the toss for the next 12 months as they desperately and unashamedly hang onto power, let me explain why they failed, in simple terms, that even children can comprehend. Now I will not get into the detail of whether or not the policies were right because this is neither the time, nor the place. However, the failure can be simply put, it is not about the plan, it is all about the implementation. New Labour came up with a vision, a plan for the United Kingdom and instead of placing the very best people in charge of these plans, they resorted to cronyism. The decision on who would be responsible for implementation of New Labour’s grand vision was determined on reward, not merit.

Government is not the place for ‘on the job’ training. Take for example Jacqui Smith, how can a background in teaching economics at a high school qualify her for the position of Home Secretary? Or Alan Johnson, before entering parliament, he was a postman and then a full-time union official, so how is this going to help him run one of the 3rd largest employer in the world, the National Health Service? David Miliband is now Foreign Secretary, yet before entering parliament, he was a researcher for the Institute for Public Policy Research. How does this qualify him as the best person to represent our interests on the world stage? Even the Chinese questioned Ed Miliband over his “qualifications” to lecture them on climate change, his response was that as a politician, he was in effect, charged with selling the concept.

Take Gordon Brown for example. Some may think that he had some sort of financial background, an accountant perhaps, or a financial analyst. But no, this man who was to become our Chancellor of 10 years, had no such qualifications, little wonder that he lead us into the biggest economic crisis in 60 years. Gordon Brown was a Rector of the University of Edinburgh, after that, he was employed as a lecturer in Politics at the Glasgow College of Technology. From 1980, until he was elected a member of parliament, he was a journalist at Scottish Television, later becoming an editor for current affairs at the same television station.

As for Tony Blair, his background prior to becoming an MP is so scant, it is not worth mentioning, so I won’t. Little wonder then that this government of ,very little talent, has had to spend £billions on consultants throughout their term of office. 

It never ceases to amaze me how, in politics, ministers are offered position not based on merit, but based on loyalty. If the private sector were to resort to such cronyism, it would fail miserably, instead, with a few exceptions, the private sector employ the best people for the job, based on experience, knowledge and ability. No so ministers. If those in the private sector fail, they are fired and replaced with someone else that can do the job. Not so ministers, they are normally forgiven, occasionally moved, but rarely sent to the backbenches.

The internal squabbling of New Labour is lamentable, but it is also dangerous. The public are not stupid, they can work out that if the party, including government ministers are fighting amongst themselves, then they are not fighting for us. If the party had any sense of self-respect, they would admit that they had lost the plot, lacked any direction and had demonstrably failed the British public and in doing so, offer the people of this country the opportunity to decide on their future as well as our own. They won’t of course, because now, more than at any time in our history, MP’s of all parties are in denial of the fact that they are elected to serve, not rule. And chief amongst this philosophy and belief are members of the Labour party.

Posted in Conservatives, General, Labour, Lib Dems | Comments (11)

The unpublished cost of the shorter working week

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The unpublished cost of the shorter working week


As the recession bites, there has been a great deal of publicity surrounding the fact that workers, in fear of losing their jobs, have accepted a shorter working week and/or a reduction in their wages. However, there appears to have been little or no coverage of the cost to the taxpayer associated with these reductions.

Gordon Brown is keen to tell us that there are 500,000 jobs in the UK, even though he will be only too aware that some 40% of these vacancies are for part-time work. My concern is, that a shorter working week or even a reduction in salaries may keep the unemployment figures lower, but there is almost certainly a cost associated with the reduction in income which is not being considered. This relates to income support and/or benefits.

As we all know, the Labour government has introduced a raft of income support benefits and various other allowances that are available to people that fall below a pre-determined threshold. It is, therefore, highly probable, that many of these workers that have had to make a financial sacrifice on their take home pay to remain in work, will now be eligible for some form of benefit payment or income support. It is not my intention to focus on whether or not they should be entitled to these benefits, but whether or not the government is being candid about the additional cost to the taxpayer. Because, whilst the workers will not be registered as unemployed and therefore in receipt of job seekers allowance and benefit payments, they will in fact, be entitled to a taxpayer funded subsidy.

I would argue that government should be completely open with the taxpayer. For example, they must distinguish between how many full-time jobs are available and the number of part-time. This would provide everyone with a number that reflects the true situation rather than introducing false hope. Similarly, when the number of unemployed is published, the government needs to be more open, for example, identifying how many are unemployed, how many are on a disability payments etc., but now, they must include how many people are on a shorter working week and therefore entitled to some form of benefits payment.

This would not change the situation, but it would, at the very least, provide the people of this country with a more accurate picture of the effects of shorter working weeks and/or salary sacrifices. That is to say, if employees opted to go to a 3 day week, rather than have the lottery of losing their job through a comparable reduction in the workforce of 40%, then this loss would not be accurately reflected in existing statistics. For example, if an employer with a 1,000 strong workforce reduced the working week from 5 to 3 days, many employees would be entitled to state benefits or support, but the published statistics would not reflect this. Whereas if they reduced the workforce by 40%, the statistics would pick up the fact that there was a further 400 people unemployed. I would hate to think that this government would be able to massage the true state of our employment situation in the same way as they do everything else!

I live in hope that an enterprising journalist or an MP will, respectively, use the freedom of information act, or a parliamentary question to find out the true state of affairs. Otherwise, we will all be lulled into a false sense of security believing that it is not as bad as it seems, whilst struggling to secure an interview. I hope, at the very least, Alistair Darling has considered this aspect before he presents his budget, otherwise he could find himself missing yet another target. Par for the course when it comes to this government, but increasingly unacceptable.

Posted in General, Labour | Comments (1)

How to condition taxpayers into Billion pound mania

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How to condition taxpayers into Billion pound mania


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.

Posted in Conservatives, General, Labour, Lib Dems | Comments (2)

Gordon Brown, tax cuts for Labour Party supporters

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Gordon Brown, tax cuts for Labour Party supporters


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!

Posted in Conservatives, General, Labour | Comments (0)

Labour race to introduce tax cuts

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Labour race to introduce tax cuts


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.

Posted in Conservatives, General, Labour, Lib Dems | Comments (0)

Big Brother Database or Tax Cuts?

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Big Brother Database or Tax Cuts?


Yesterday, I wrote an article suggesting how this government could reduce taxes to help stimulate growth in the economy. This was partly a Keynesian approach, given I argued that it was possible that these tax cuts could be self-funding, if my proposals worked. The reason for this was, if we do nothing, there is likely to be a significant surge of people claiming benefits, rather than generating income for government coffers. My proposal was, if the government was going to borrow to invest, they would be better off doing so, with a natural stimulus, rather than bringing forward capital building projects which would only benefit a small section of the economy.

My proposal, amongst other things, was that government should reduce the basic rate of personal tax by 5%. Over a period of 3 years, this would cost around £45bn, less than 10% of the cost of the banking bailout. However, by allowing us to retain more of our own money, we could decide how and where we would spend the extra money we were ‘permitted’ to retain. If we were to spend it in much the same was as we did before the crash, my argument was and is, that more small and medium sized business would survive and therefore more people would remain in employment. I noted that some 13.5m people were employed by small businesses and these same companies accounted for, just shy of 50% of UK Plc’s output. However, I also noted, that the Keynesian approach was that government should adopt a balanced budget, that is to say, they should cut back government spending in certain areas, to allow them to invest in other areas. Having read my post this morning, addressing the usual, inexcusable typos, I decided that I should expand on my own theory.

For example, my pet hate is the government’s proposed Big Brother Database, which I think is a massive attack on the civil liberties of every person in this country and an unforgivable intrusion into our right to privacy. That said, this government, if it goes ahead with this initiative, is expected to spend some £12bn on this massive Big Brother Database. Now quite apart from the fact that we know this government has never yet managed to bring an IT project in on budget, the figure that needs to be allocated is huge.

Therefore, the question I wanted to ask was:
Which would you prefer a Big Brother Database that infringes our civil liberties and intrudes on our privacy at a cost of £12bn or an immediate 4% cut in the basic rate of income tax for at least 1 year? From 20% to 16%? – I know what my answer will be.

Then I went on to look at other large government capital expenditure projects, this time I focused in on the much criticised NHS Database Project. It is worth noting that the original cost was estimated to be £2.3bn, by 2006 that had rocketed to £12bn, with some independent estimates suggesting it could cost as much as £32 billion. Most medical professionals question the viability of this project, the public have barely been consulted on such a massive project and even though some £2bn has already been spent, there is little to show for it. So, lets be generous, and take a middle figure between the governments estimate of £12bn and the independent estimates of £32. This leaves us with a likely cost of £22bn.

Therefore, my question is:
Which would you prefer, to shelve or cancel the NHS Database or receive an immediate cut in the basic rate of income tax of 5% for at least 18 months? The reason I have said ‘at least’ is because if this additional money prevents people losing their jobs and claiming benefits, then it would be possible to extend the period of the tax cut, perhaps indefinitely.

So what of the ID Database Project. Yes, I know, this government is completely obsessed with databases, it is a pity, they do not also consider the massive security risks associated with having all of this information on computers. However, I digress, this particular project, is simply aimed at having all of our personal ID information in one place. The cost, an eye-watering £5.4bn.

So, once again, my question is, which would you prefer, an ID database where only the government and its agents see the benefit, or an immediate cut in the basic rate of income tax of 2%, for a least one year, from 20% to 18%?

My basic premis is that this government has an obsession for massive information technology projects, most of which have been so poorly considered, specified and planned that they are either doomed to failure or massive cost overruns. This governments track record of waste is well documented and appalling. Most of these pet projects are not wanted by the public and it has to be said, the vast majority will allow government to know everything their is to know about every single legal citizen in this country. Because this government is obsessed with using IT to spy and control its subjects. At this time, the biggest threat to our security (apart from the government itself) and our well being, is the state of our economy, not terrorism. Yet no-one from government has suggested shelving, postponing or cancelling any of these Big Brother databases. Even though, combined, these 3 projects alone, will cost a staggering £40bn. If the government were to add an extra £5bn, we could all benefit from a reduction in the basic rate of income tax of 5%. From 20% to 15%, for a period of 3 years, if we are lucky, this would be able to see us through this period of recession. In addition, as I have argued earlier, if this money is invested into the economy by us, then jobs could be saved, government would benefit from the revenues brought about by indirect taxes, business taxes and fewer unemployed claiming benefits.

So, my final question, is which would you prefer? Government to spend £40bn on 3 highly questionable information technology projects at a time of this massive economic downturn, or more money in your pocket. £40bn on IT projects, or a 5% cut in the basic rate of tax for 5 years. QED!

Footnote:
I have also argued strongly for a significant, simultaneous cut in the Bank of England bases rates from 4.5%, to 2%, with all taxpayer funded banks being ‘required’ to pass on this cut to their customers. This will reduce the number of repossessions and/or increase the amount of money available to us, to reinvest into the economy. I am sure there will be economists out there that can or will pick holes in my arguments, well go ahead, someone needs to come up with some ideas, because it is pretty clear to me, this government hasn’t got a clue, the Conservative Party has backed themselves into a corner with their negative, one size fits all ‘austerity’ assessment of our economic future and none of the other parties have any influence. Sad, but true!

Posted in Big Brother, Civil Liberties, Conservatives, General, Labour, Lib Dems | Comments (7)

Gordon Brown, its time to introduce tax cuts

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Gordon Brown, its time to introduce tax cuts


At prime ministers questions time, Gordon Brown, once again, decided to take all the credit for “creating 3 million new jobs” and none of the responsibility for the ‘bust’ brought about by the credit funded boom that was his creation. Instead, he avoided all of the questions he was asked and once again, came out with the same old mantra, that the problem was the fault of the Americans and the bankers. Nothing new there then.

He did imply, however, that he believed that the government should invest in times of recession, a sort of embracing of the Keynesian approach. However, John Maynard Keynes did not suggest that government should simply spend, but that there should be a balance. He also argued, that it was possible that if government used borrowed money wisely, it could be self-financing. For example, most people want to work, which means that given the opportunity, they will not be a burden on the state, but an asset. In addition, companies want to sell their goods, at a fair price, employ people, succeed and therefore, be an asset to the state.

To achieve this, people need to have money to spend, yet the state takes nearly 50% of what we all earn. That is way, way too much. A reduction in direct taxation, would be much less expensive than building new schools and hospitals earlier than was originally intended. Moreover, a construction boom will be very limited in terms of assisting the wider economy. What we need is more money in peoples pockets, which they can invest in buying goods and services offered by retailers, service providers and manufacturers. In other words, a natural stimulus, not a false one.

If people feel poorer, then they will push their employers to pay them more, this adds a further burden to struggling businesses and places inflationary pressures on the wider economy. In addition, public sector workers, who account for some 20% of all employees in the UK are starting to get increasingly vocal about higher wage increases and they are backing this up with threats of industrial action. This is no good to anyone. Furthermore, if they succeed in getting higher wages, this will be a cost borne directly by the taxpayer and will inevitably result in a cut in services as the public sector attempts to balance the books.

We know that a boom based on easy credit is not the answer, nor does the equity in a property really amount to tangible wealth. The Keynesian approach advocated, amongst other things that borrowing to provide tax cuts can provide an aggregate increase in demand and, that properly targeted, it could be self-financing, because demand will create or save jobs and people that are employed, are not a burden on the state. In addition, companies that are selling goods, will be pay tax and sell goods that, for the most part, attract VAT.

A cut in direct taxation would have an immediate and tangible affect on the publics ability (not necessarily willingness) to spend. If this would was coupled with a substantial, perhaps 2 or 2.5% cut in bank base rates, then the benefits would multiply as would the potential speed of recovery. The government has indicated that they want to spend £12bn to create a database to spy on the public, apart from the fact that this is both unnecessary and a massive attack on our civil liberties, it is also something that is a nice to have, rather than a need to have. That notwithstanding, even if they proceeded with this database, the chances are, the contract would be awarded to an American company! Yet this £12bn, could ‘fund’ a 5% cut is direct taxation for nearly 3 years, if you were to ask the public what they would sooner have, there are no prizes for guessing their likely preference.

In addition, the government is intending to proceed with the £13bn NHS computer system. There is no proof that the system will work, nor has their been a sensible cost/benefit analysis. This project should be shelved and the money used to invest into small and medium sized businesses. I wrote an article yesterday, outlining some of my own ideas to assist small businesses. These companies employ 50% of our workers, some 13.5m people and provide nearly half of our output. An investment in this area, could secure jobs, companies and tax revenues.

It is true, governments cannot prevent a recession, but they can, through careful management of their (our) finances, targeted initiatives and the shelving of non-essential investment programmes, reduce the length and severity. Had the conservative party not nailed their colours to the mast, with an austerity assessment of the UK economy, claiming that “the cupboard was bare”, then they could have proposed this type of solution. Instead, they must either say that they got it wrong, or the Labour government, if they are bright enough to steal the initiative, will be able to come out of this smelling of roses.

For what it is worth, I am not convinced that this government, or the other political parties will want to endorse my suggestions, because they seem more interested in telling us what won’t work, rather than what might. It is this dithering and indecision that will damage this economy. Whatever action is taken it needs to be bold, decisive and meaningful. Therefore, in summary, my suggestions are as follows:

  1. Shelve the £13bn investment in the NHS computer system
  2. Cancel the proposed £12bn Big Brother Britain database
  3. Reduce direct taxation by 5% for a minimum period of 3 years
  4. Implement a package of incentives and tax reductions for small business
  5. Instruct the independent Bank of England to slash rates from 4.5% to 2%
  6. Ensure that all taxpayer funded banks pass on the full cut immediately, which should encourage the others to follow or lose

My suggestion will cost a tiny fraction of what the government has already invested into the banking system and provide a tangible stimulus to the economic activity of this country. Above all, it may just ensure that we can watch the news and receive some good news. If the government introduced, or the other parties proposed such an initiative, I do not believe anyone, other than a few discredited bankers and economists (who already got it wrong), would criticise the move. The bottom line is it is our money and we should be allowed to keep more of it and decide where we will invest it.

Posted in Conservatives, General, Labour, Lib Dems | Comments (3)

Don’t let small businesses become a political football

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Don’t let small businesses become a political football


There is a real risk that the plight of small business, the so called SME (small and medium enterprises) are becoming a political football as each party attempts to outdo the other. Labour are saying they will “do whatever is necessary“, where have we heard that before? Then they put up a pittance to address the issue, to put this in perspective, the amount proposed is probably much less than they paid the consultants for advice on the banking bailout. I am not advocating state aid as such, but less government interference and an understanding of what makes small business tick.

David Cameron suggests that a 1% cut in national insurance contributions for companies employing less than 4 people. This he claims will save these businesses up to £600 per year! What? Is he serious, this would barely cover an organisations business rates for one month. He then suggests that small businesses should be allowed to defer VAT payment and PAYE etc., for up to 6 months. Yes, I agree, this will aid cashflow, but the reality is, for many who need to take advantage of this option, it will only delay the inevitable, leaving a large hole in the HMRC balance sheet.

What is clear, is that none of these ministers really have a clue how small businesses operate, what is important, or what policies will make a real difference. They seem to believe that a little tinkering here and there will make it look like they are doing something positive. Wrong, wrong, wrong! Our MP’s visit one or two businesses, ask a few questions and then try and portray themselves as in touch, or knowledgeable on the subject. Instead, they have had, at best, a very limited overview of a couple of businesses. There are 13.5m small and medium sized businesses, yet they talk to a handful, what is the point?

What is clear is that there are many ways in which government can aid small business, some initiatives will cost money, most will not. Some options will work for some businesses and others may only receive a small benefit, but it is something. That said, there has to be a starting point, and I would like to include my two penneth. Firstly we need to look at some hard facts, so that government, ministers and members of parliament can truly understand the risks of doing nothing or just tinkering with the issues. This subject is so important, that it needs to be addressed in the same way as the banking bailout, I am not talking about numbers, but effort and thought.

The UK’s 4.4m small and medium-sized businesses (SMEs) are the engine room of our economy, accounting for 47% UK employment (13.5m), 99.7 per cent of all enterprises and 48.7% of UK Plc turnover. Within the SME sector, some 4.2m actually employ less than 10 employees and a further 167,000 less than 50. In fact, SME’s actually employ 60% of the ‘private sector’ workforce. It is, therefore, self-evident that small business is the primary vehicle for innovation which leads to new jobs, new industries and new wealth for this country and its people. Tangible and effective moves on issues such as tax, regulation, education and infrastructure are areas which are most likely to have a positive impact on small businesses. Only government can do this, because in most cases, they caused to problem in the first place.

It is worth noting that the government currently has in excess of 3000 ‘business support schemes’, yet the Federation of Small Business claims that just 4.4% of their respondents confirmed that they had used any of these schemes. This cannot, by any stretch of the imagination be called a success, but that is hardly surprising, with this number of schemes. Where is a small business to start? Okay, so the government has indicated that they want to rationalise this to around 100 schemes, but given few of these schemes have any tangible method to measure success, it is difficult to see how this government will determine which schemes to scrap.

Business Link is probably one of the best known and supported schemed, but even this ‘local’ initiative has many detractors, who complain that emails are not answered, those charged with supporting small business have little understanding of their needs and that there is very little depth within the organisation. This would imply that whilst the initiative has merit, it needs a vast overhaul.

So what would I do? Well I am going to put forward some of my ideas, some relatively simple, others rather more controversial and perhaps complex. Nonetheless, if we are to avoid a genuine catastrophe within the SME sector, it will require bold, new initiatives and the introduction of some former programmes that have been withdrawn by this government.

I believe Business Link is a good programme, but it truly lacks depth and promotion. There are a good number of semi-retired and retired business people and out in the market and their skills are going to waste. I believe Business Link should look to recruit these people and bring them on board on a casual or self-employed basis and utilise them as business mentors. Many will have sector experience and/or specific skill sets such as finance, sales, marketing and so on. To waste this resource is ridiculous and many, I am sure, will be grateful of the opportunity to get involved in something tangible and the additional income that could top up their pensions. Of course, the recruits don’t have to be retired, there is no reason why full-time, experienced business people should not be recruited to this programme.

In addition, I believe that Business Link should be able to provide small business with specific advice on key areas, such as sales, marketing, health & safety, legal, employment law, exports, finance and so on. I know that Business Link will claim that they already do this, but my point is that they should seek to employ the best, not the cheapest, so that the small businesses can have access to the best advice.

This government has wielded the stick over everyone ever since they came into office, particularly where it comes to HMRC and regulation. They do not appear to have understood, that most ‘normal’ people use and respond better to a combination of carrot and stick. The New Labour government has always and continues to act as a schoolyard bully, not supporters of small business. They are the first to claim to be business friendly and that may be the case where businesses can afford the services of lobbyists, but it is most certainly not the case for small business. This has go to stop. Government must act and act now to reduce the burden of red tape imposed on small business.

Here are my proposals, in no particular order.

  • Government must reduce personal tax for all by 5%. This will cost around £40bn over 5 years. However, it will reduce the pressure on businesses to increase wages, it will negate the public service sectors claims for higher wages to take account of higher inflation, so at least in this sector it will be self-financing and above all, it will (potentially) provide a natural stimulus to the economy. If people spend more, jobs can be saved and government will not have to pay out tax payer funded benefits. Instead, they will benefit from tax receipts through national insurance contributions, income tax, VAT and so on. Contrary to popular belief, this type of initiative introduced now may even be self-financing.
  •  Government must extend the ‘small business rate scheme’. Business rates are often the third largest expenditure for a small business, after wages and rent and proportionally higher for those with turnovers of less than £1m. I believe businesses with a turnover of less than £1m or employing less than 10 people should receive a 100% rebate, with a progressive programme for larger businesses. Furthermore, business should not have to apply for these rebates, they should be automatic, given many small businesses are not even aware that they have an entitlement.
  • There should be a cut in small business corporation tax (businesses with a turnover of less than £5m) from the proposed 22% (2009) to 17.5% and the introduction of a tax threshold (before tax is payable) of £50k
  • The VAT registration threshold should rise from £67k to £200k. HMRC, whilst retaining their vital role of collecting VAT revenues, should be directed to be supporters of business, in partnership, rather than assuming that every unpaid tax collector (anyone registered for VAT), is out to shaft them. They must also stop issuing threats to “wind up” companies that are a little late with their returns. A late return does not mean that the business is in danger of folding, it is more often than not, something that is considered a bind, a burden and therefore, not necessarily something at the top of the priority list. Fines for late returns from small business should be ceased immediately, except for persistent offenders, particularly in the current climate.
  • VAT rules on exports need to be simplified. Current HMRC will offer advice, but cannot be held responsible for it, unless they agree to put it in writing (a ruling). Missing Trader Fraud has now meant that HMRC assumes that everyone is trying to do something dodgy on exports. As a consequence, they make life very difficult, especially when it comes to Europe, because often HMRC will tell the trader that they must charge VAT, the European customer argues that this is wrong and the order is lost to the business and, of course, UK Plc. In addition, small business are expected to shoulder the financial burden if VAT cannot be recovered by HMRC, even if the HMRC provided the information that exempted a transaction. I know many companies that despair of HMRC when it comes to exports, so much so, that many now avoid European exports,rather than take on the VAT risk!
  • Unlike sole traders, for tax purposes, if you are a director of a limited company, you are an ’employee’ of the company. You are therefore liable to pay Class 1 NIC’s on your earnings. The limited company is also liable to pay Class 1 NIC’s as your ’employer’. This practice should cease for businesses that turnover less than £1m or employ less than 5 people.
  • Small business should be encouraged to take on the long term unemployed and those that 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.
  • Small business often have to use large commercial vehicles out of necessity, yet they are now being penalised as a consequence of the increased vehicle excise duty, under the guise of an environmental or green tax. This should be reduced to the lowest tariff for small businesses with a turnover of less than £5m
  • Government should understand that a ‘one size fits all’ approach to business is not appropriate, especially where employment laws are concerned and specifically in the case of businesses with a small workforce. For example, parental or maternity leave obligations may not adversely affect a company employing 100 or more people, but a small business employing 4 people, could lose 25% of its resources overnight. The employment laws must be relative to the size of the workforce and the regulations relaxed for all employers with a workforce of less than 50. Employees have a choice, if they want all of the benefits of parental leave, maternity leave, paid sick leave and so on, they must look to find a job with a larger employer.
  • Government bodies, local authorities, NHS trusts, agencies and so on, must be required to actively encourage trading with small, local businesses. Most small businesses are not aware of  supply opportunities with government agencies and if they are,  they find the paperwork too time consuming or complicated, especially for what may be low level or uncertain returns. Therefore, many do not pursue this opportunity. Businesses with a turnover of less that £1m should be given free access to www.supply2gov.uk, rather than charged £180. Many local authorities, for example, use the same suppliers as they have done for years, instead, they must be required to encourage new suppliers, they must assist these companies to complete the paperwork and offer constructive advice. Tenders have to remain open and unbiased, but the process of encouraging new local suppliers has to become a priority. Similarly, where possible local government bodies should be required to share their tenders amongst more companies, rather than using a single source.

Cashflow
Cashflow is important to small business. In fact, many small businesses fail or cannot expand, not because of a poor business model, but because of the pressures on cashflow. Invariably, this is the fault of larger companies that will not adhere to agreed payment terms, this problem now is all too common. The small business is often reluctant to chase too hard, in case the supplier refuses to place further orders. Government must legislate, to require all large companies, perhaps those with turnovers of over £5m, to pay on time and where they do not, offer a fast track legal recovery system for small businesses to recover their outstanding invoices.

Public companies should be required to sign up to an ‘ethical small business practice’, where they undertake to pay all SME’s businesses within 30 days. This objective should be audited by the firms auditors and included in the company’s year end accounts. Where public companies fail to meet these obligations, they should lose the support of investment funds and/or face fines based on turnover. Further’ all companies with a turnover of over £5m should be required to provide their ‘average payment terms’ to Companies House in the form of, for example: 1. Average payment terms 30 days., 2. Percentage paid within terms 85%. Legislation does already exist in part, but it is not enforced by Companies House.

Banks & Credit Card Processors
Two organisations that can have a significant impact on small businesses are banks and credit card processors and yet, they are very lightly regulated and, for the most part, operate a virtual monopoly in terms of financial support services to small business. Banks can change terms, conditions and rates on a whim and often do, whilst credit card processors, successfully pass of much of their financial risk in relation to fraud, directly on to the retailer, through a set of onerous terms and conditions.

Many small business operate with a bank overdraft. Banks can, in many cases, withdraw these facilities with 24 hours notice, change the risk profile requiring further security, higher charges or apply penal interest rates and/or the interest rates are variable. Government must legislate, alternatively the regulators must insist that banks offer their customers the alternative of a fixed rate of interest or variable on all bank overdrafts, reviewed annually. Banks must be required to provide small business at least 6 months notice of their intention to withdraw or reduce overdraft facilities. Banks must permit small business to convert, on request, overdrafts into short or medium term loans at rates no less favourable than the overdraft rates.

Government or the regulator must come up with a formula to ensure that interest rates are ‘reasonable’ taking account of the risk, available security and Bank of England rates. For example, many overdrafts are charged at very high rates, even though banks have personal guarantees and/or a fixed and floating charge over all business assets. Where a bank acts unreasonably, small businesses should be able to refer the matter to a fast-track arbitration service which is binding on both parties. Banks that ignore these rules should be open to litigation if a business suffers or fails.

Currently all business credit card processors have a similar set of terms and conditions. These terms, in effect, pass off the risk of fraud to the retailer. Even when the retailer has had the transaction ‘authorised’ by the card processor and followed all of the rules. The card processors have an appeals process, but this is long-winded and I am not aware of anyone that has ever ‘won’ their case.  It is estimated that credit card fraud costs small business upwards of £200m every year and the figure is rising rapidly with the advent of the Internet.

Card processors automatically charge the retailer, whenever there is a suspected fraud, it is then up to the retailer to demonstrate that they followed the rules. However, where the transaction is ‘cardholder not present’, even if the retailer has used a terminal to verify the validity of the card, the address, transaction amount and signature strip number…if it turns out to be a fraudulent transaction, the card processor re-charges the retailer. Worst still, the card processors, may take 6 weeks or more, before they re-charge the retailer, even then, the first time the retailer is aware of it is, invariably, when they receive their statement.

These terms would undoubtedly be considered unreasonable in a court of law, however, any business that needs to transact debit or credit cards, has little choice, because all of the card companies have the same onerous conditions attached. If the retailer complains, the card processor will just terminate the contract. Government must legislate, alternatively the regulator must investigate this unreasonable practice as a matter of urgency. Card processors that have approved a transaction, must be required to honour the transaction, unless they can provide incontrovertible proof that the retailer was party to the fraud.

Now, I know that I have not included everything here and I am sure that more ideas could be added. Equally, I am certain that it is possible to pick holes in some of my arguments or suggestions. Although I hope that anyone that wants to criticise will be constructive and perhaps, offer alternatives. What I am adamant about however, is that whatever steps are taken to assist small business, they must be bold, swift and meaningful. Not all of my suggestions will cost money, some just require new or tighter legislation. Some will be self-funding and other initiatives may cost money, at least in the short-term. However, to ignore the plight of this sector, is, in many ways, more risky that allowing the banks to fail. Too much of our economic well-being is reliant on the SME businesses, from GDP, to taxes and employment to enterprise. Politician’s that use this aspect of UK Plc as a football, do so at their peril!

Posted in Conservatives, General, Labour, Lib Dems | Comments (5)

Government ignore plight of small, medium sized businesses

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Government ignore plight of small, medium sized businesses


The Labour government ignores the plight of the so called small and medium sized businesses at their peril. Forgotten amongst the many problems facing the UK economy are the 3.6m SME’s, many of which are struggling to make ends meet and the government could do more, but choose not to.

Many SME businesses are bound in a mountain of red tape to do with tax, VAT, employment and paternity rules, health & safety issues and the many other headaches passed onto them by the government departments of this Labour administration. The vast majority of the people that work in these government departments haven’t got a clue as to the value these business owners add to the UK economy (some £1100bn per annum) and for that matter, couldn’t care less. Ask any business that exports products to the European Union. Because of the problems associated with ‘carousel fraud’, something that was very much related to the mobile phone industry, the VAT office now passes the burden for VAT checking onto the business owner. Often the VAT office will instruct the business owner to charge another European company VAT, the latter objects, the VAT office stands firm and the order is lost for ever.

Add to that the raft of existing and new health & safety rules. If the company employs more that 5 people, they are literally swamped with rules and regulations. The business owner now has a choice, they can ignore them at their peril, or employ a consultant, a full-time health & safety officer or digest the rules and do it themselves. Instead of driving the business forward, the business owner is expected to spend valuable time and resource on what can often be described as, unnecessary health & safety rules. Don’t get me wrong, some of these rules are necessary, but they have now become so burdensome that they are suffocating many small and medium sized businesses.

If that was not enough, what of business rates? These often account for some 50-55% of the lease or rental costs of the office, factory or industrial unit. Ask any business owner what he gets for his money and he will not be able to tell you. They are even charged, often 3 times as much as the cost of a private contractor, for collecting their waste. If they suffer from anti-social behaviour, vandalism or the like, they cannot get a police officer to investigate, because they are too busy with their own paperwork, instead, if they are lucky, they might get a visit from a well-meaning, but utterly useless Community Safety Officer.

On top of all that, tax breaks for small and medium sized businesses are virtually non-existent, removed, for the most part, by this Labour government. Therefore, you have to ask these business owners why they bother, it is probably because they are so far in, they cannot extract themselves without losing everything!

Apart from the red tape burdens, small businesses are invariably at the mercy of larger businesses. Many, especially when things are tough, or their year end is looming and they want to maximise their cash reserves, pay their invoices late. Some SME’s will tell you how they have to wait for 6 or 9 months to get paid by companies, that can, but won’t pay until they absolutely have to. More businesses fail as a result of poor cashflow that for virtually any other reason. You can have a sound business, but if you don’t get paid in a timely manner you are in trouble.

So, maybe they could consider factoring, this is one way, if expensive, that SME’s can get the cash they need to survive. But this is now becoming more and more difficult as the banks increase the criteria, raise the interest rates and reduce the amount of money available. In addition, banks are increasingly asking for more and more security, which can include a fixed and floating charge or some other form of personal surety.

New Labour in general and Gordon Brown in particular has made much of how “our policies” have allowed small and medium businesses to thrive. This is quite simply a lie. Business owners have set up their businesses and developed them in spite of the governments high taxation, red tape and indifference, not because of any initiative introduced by this government. SME’s have been very much on their own, but I suspect that many will feel, more than ever, the abandonment that is the New Labour policy towards the SME sector. I predict, that unless there is dramatic, sustained and immediate action by this government in relation to the SME sector, that more will go to the wall than at any other time in our history and the responsibility can be left firmly and squarely with Gordon Brown when he was chancellor and New Labour.

The government may need reminding that there are estimated to be some 3.8m SME’s in the UK, of which over 99% employ less than 50 people. Some 3.6m actually employ less than 10 people and a further 167,000 less than 50 people. Yet, the SME sector accounts for nearly 99% of all UK businesses, some 12.6m employees and an estimated contribution £1100bn or eleven Northern Rock’s. Many of these same companies are suffering and if their failure rates continue to rise, this will have a direct affect on unemployment and tax revenues. In terms of the latter, the government would do well to remember that many small businesses and SME’s do not have the benefit of fancy accountants looking at ways to reduce their corporation tax.

If just 10% of these businesses fail due to the continued indifference demonstrated by this government, there will be an increase of 1.3m unemployed. Quite apart from the personal affect on each and every one of these individuals, the government, via the taxpayer will have to support these people until they can find alternative employment, which will provide a further burden on the remaining taxpayers, plus the government will no longer benefit from employees tax, employees NI, employers NI, VAT and corporation tax.

For every business owner that suffers a business failure, you can fairly certain, that a good proportion of them will not try again and that means that some of these employment opportunities will be lost forever. Gordon Brown always likes to take the credit when things go well, even if he had nothing to do with it, it is now time he put something back and helped these businesses before it is too late.

Posted in General, Labour | Comments (2)

Gordon Brown: UK has strong underlying fundamentals, Really?

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Gordon Brown: UK has strong underlying fundamentals, Really?


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.

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