Osborne's summer of pain starts here

TomTom

Reducing VAT will NOW have no effect. The course is set. The US default and Euro slow-motion dissolution make policy-making awesome for Chinese whose major export markets are going deep into the tank.

Christmas orders from retailers must look very fragile at present, and soaring energy and food costs make it impossible to stimulate the economy. We have still not digested the costs of Stimulus Packages since 1999 which have been repeated and ever-larger.

The Banking System is the one area of concern to politicians and they have sacrificed the entire economic system to serve their paymasters, now they will watch Banks consume real assets from frustrated households and demand para-military policing to hold down the dispossessed. This is Classic Ancien Regime behaviour.

Osborne should simply carry on because he has no possibility of changing course bringing any results - iacta alea est

an ex-tory voter

"Cutting VAT? Ed Balls would bluster and preen endlessly were that to happen"

Considering the state of the nation's finances it would be criminal to determine the UKs economic policy on the basis of whether or not Mr Balls gained a small and short term political advantage. Surely, we had enough of that mindless tribalism from Mr Balls and his incompetent boss. We need a chancellor who will determine economic policy purely on the basis of national need and not on the needs of his party, or of any external government.

Paul

Cut taxes on the lower paid by the equivalent of any prospective cut in VAT. It will completely wrong foot Labour. Oh, as well as being a genuinely decent thing to do.

strapworld

Does Osborne listen? If so to whom? He comes across, to me, as an arrogant person who does not take kindly to advice, from whichever quarter that advice may come from.

I agree that he has got an awful lot of questions to answer on Coulson and News International. Is he the puppet master operating Cameron's strings?

Things can only get.....worse!

Sir Everard Digby

Indeed,we should always listen to the Eds and take on board what they say. After all,they have only had 13 years of utter deceit to hint that we should do otherwise.

Interesting that the political classes have taken time off to navel gaze about phone hacking,whilst the rest of us cannot take time off from the economy or the tax regime.

As for high taxes,perhaps George will explain exactly what is right about the 160% + tax rate on fuel and the insidious VAT levy on the fuel duty?

Deferring a 1p duty increase was just taking the mickey

Hugo Chav

Our wonderful elite are running out of options:

~Debt financed consumption: party ended 2007.

~Money printing to pay the bills: can they get away with any more without trashing the currency further and embedding inflation?

If UK plc were a company the CEO and Board of Directors would slash costs and implement a growth strategy, it would take years to turnaround and would be a hard slog.

With politicians looking at the next headline and electoral cycle the chances of a serious turnaround are pretty low.

It seems our political elite are hell bent on a march of decline...

disenfranchised

any economist will tell you, no matter how crap his qualification today, that cutting taxes is one of the prime ways to promote growth.
pretty obvious, even to non-economists, but that doesn't mean that the geniuses who constitute our political elite, even those of an eton education, will ever fully grasp that one.....

Hard Hearted Perry

Is it really possible that you have managed, Peter, to write something without the word Whine in it? Congratulations.

However, whining there will be, and it's no use the Chancer saying he and others were not warned.

Standby for weak excuses and the inevitable 'U'-turn(s).

John Montague

If UK plc were a company the CEO and Board of Directors would ... be answerable to the shareholders, who in this case happen to be the workforce. Tricky one.

Demand for goods and labour is up but no company CEO in his right mind would expand radically into the incertitude ahead.

Osborne has raised one particular kite, and if he falters now, the speculators against sterling could come along and cut his string.

Olaf

Cutting VAT. What difference will 2% make when prices are going up by 20%.
If petrol came down by 30% it would still be expensive. It would cost businesses more to implement than it would save. We'd end up paying more to cover the costs.
Charity begins at home. We need to sort out our own house and quickly.

libertarian

@John Montague

WRONG, I'm a CEO and I'm expanding like mad, and yes I am in my right mind, my plan is working just fine thanks!

All we need is lower taxes and some investment incentives, ie expand the EIS scheme, remove corporation tax on profits reinvested in a business as in Germany and we would all be back in business.

I also agree with @Paul 9:27

Raise the threshold for income tax for the low paid, encourage them into work.

TrevorsDen

In a good year the UK growth is 0.5% a quarter.
Given the fall pout from the recession it would be foolish to expect anything more than 1.5%.
We can expect another year at least of slow growth and only steady growth after that.
Previously we have had 'growth' based on borrowing, it will take some time to acquire real growth based on productive output.

personally I see no fall of is one half of the nations selling cups of to the other half so in real terms I speculate that growth concerns are a bit misplaced.

Cutting VAT would be silly as thats one regular wway the govt can collect money.
Cutting the 50% rate would be fair enough but the other helpful and honest thing would be to significantly increase the tax allowance. Get the 10,000 ceiling target reached early, and let the tories get some credit for that.

Hugo Chav

John,

That is why the decline shall continue unabated.

PayDirt

Osborne could start by telling Boris to quit his Low Emission Zone lunacy which from Jan 2012 will force many small businesses out of Greater London. Boris plans to charge all van drivers (over a certain age) £100 a day to drive within the M25. Ecofascist.

Jeremy

Come along, chaps! There's been a lot of news this weekend, and the best you can come up with is a photograph of George Osborne walking along the pavement...

jilly

...an ex tory voter : hear hear!
But I fear that what is in the national good comes second these days to doing what is good for banks, keeping the coalition together, supporting the Euro etc.
Since leaving the ERM, when was the last major economic/political decision taken that was purely in the national interest?
Whether justified or not, there seems to be a perception that Cameron's and Osborne's cronies are no different from Blair's lot with the consequent erosion of trust in anything they do.

Rhoda Klapp

What is interesting here is the limited room for manouevre allowed to the government caused purely by what is politically acceptable. Tweak a tax here or a rate there. None of that works. What is needed is to stop accepting the decline. Stop accepting that we are constrained by a set of rules and notions which no longer apply. Go for growth. Stop the public sector from sucking up all the juice. Remove regulation, even if it comes in an area over which the EU has power. Let employers employer, without fear. Suspend rules which get in the way. Reduce the price of energy. Remove laws and taxes which act to restrict growth.

But no, we are left to argue about half a percent of interest rate here or 5% income tax there. Hopeless. Bloody hopeless, and all because of total poverty of imagination.

Liz Brown

Time to remind the Dim Lebs that they are very much the junior party, with the economic nous of a new born babe - their adherence to the belief that the Euro is wonderful eg.
As to Ballsup - his beliefs in his wonderful system which he shared with Mc Bruin - well, we can all see where that got us.
So I'll stick with Osborne for now, thank you

Publius

The usual on-the-one-hand on-the-other-hand repackaging of hot air from Mr Hoskin. I'd rather read a columnist who had a knowledgeable view and wasn't too timid to express it.

DavidDP

The principle issue is weak demand, which is in the main ultimately caused by consumers reducing their expenditure.

This is to some extent caused by price rises, including but not limited to taxation, but caused even more by a retrenchment in debt - consumers are coming off a decade-long debt fueled binge and are now paying for it.

Normally, government spending could step in to compensate to some degree, but thanks to the poor economic management of Labour, the room to do this is significantly curtailed.

Thus, the alternative options open to the UK are limited. It will, frankly, have to stick with the course and put up with anaemic growth until the public feel more comfortable with their debt levels.

Sir Everad Digby

Perhaps we should discuss the real issue here? Corporatism is rife and will finish us.

Big business has no interest in a free market -quite the opposite. Government is now modelling itself on big business. The two are intertwined. PFI would be a good example.(Remember how the taxpayer
took over funding of PFI arrangements during the recession?)

Most legilsaltion enacted in recent years has favoured big business. What percentage of tax does big business pay now? What did it pay 30 years ago?

Big business is being subsidised by Government (wind farms?) at the expesne of small business and the poor.

as James Madison said:

'Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes. And armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few'

Big business,politicians and media moguls are not our friends.

Mark M

Why do we continue to value the predictions of these experts?

Mark M

Pressed submit too soon there.

Anyway, have we not learned that these experts do not have a crystal ball? They are all just guessing. Let's just wait and see what the numbers show before jumping to any conclusions.

Boudicca

We are overtaxed and thatnks to the BoE's low interest rates and quantitative easing, inflation is taking off. People have little disposable income and what they do have is being looked after very carefully.

Osborne could do one simple thing that would give a bit of a feelgood factor and would help stimulate the economy: cut the price of petrol. About 85p in every litre is tax - VAT and fuel duty.

It is the cost of fuel that is dragging the economy down. Osborne should cut fuel duty by 20p.

FvH

@TrevorsDen - face it , this country is not going have serious growth based on productive output any time soon - Germany we ain't !!
The best we can hope for is well managed stagnation

John Montague

@libertarian
Congratulations, and good luck to you and your shareholders. Tomorrow will show if your sanguine approach is shared by your peers.

I don't suppose you're in the UK tourism sector are you?

Tankus

Policies aside ....Ozzys not a very safe pair of hands is he ?

Mincing with Mandy on oligarchs yachts, munching with the Murdoch's before the BskyB deal , and colluding with Coulson to get the tory media job .....

This is not the sort of guy who you want to bat for your team, is he ? !

E Hart

Osborne can't produce what he wants; he's gone off on a giant false premise with all that stupid nonsense about Britain being "like Greece" and "maxed out on the family credit card". His cluelessness will become more evident as time goes on.

Expansionary austerity is not only a very damaging oxymoron it is the seed-corn of his own political demise. He is destroying demand, increasing government expenditure, proposing to reduces taxes on people who don't need it and fretting about inflation when it is the least of his worries.

The guy is an idiot and his claim to be working to restore fiscal rectitude is so much political rhetoric disguised as a policy. Evidence for this comes from the fact that - despite very low interest rates and very low real inflation (except from VAT and commodity prices)- investment isn't happening. Also, he doesn't get it that what happens elsewhere has a direct bearing on our exports. His policies and strategy have brought the economy to a standstill. His ineptitude is matched by the eurozone which has driven Greece, Ireland, Portugal into long-term slow growth - soon to be followed by Italy and Spain.

Thank God the BoE has the sense not kill us completely by raising interest rates.

2trueblue

Boudicca, Yes fuel is one of every households outlays and therefore it would be intelligent to lighten the tax on it to help us all out.

Richard Marriott

Leave VAT at 20%, it is a sensible level.
Ideally, scrap the 50% rate and do more to help the low paid who are in work (as opposed to on benefits).

Plus, the Treasury needs to pull its finger out when it comes to scrapping burdensome red tape and regulations. How about scrapping Harman's Equality Bill for a useful start?

TomTom

Lloyds Bank has a splendid new wheeze. Credit Card "Personal" interest = 22.95% + BoE Base Rate currently 0.5% = 23.45% Interest.

If the evil BoE raises interest rates from 0.5% Credit Card rates will have to rise.

Retailers beware, your customer has a 23.45% Levy on top of your prices so if you want customers cut prices to the bone to feed the Banks

Dimoto

Yes, Julian Glover's piece in the Guardian is balanced and fair (he basically says we should stay the course because the other options are worse).
Andrew Lilico also has a nice article in the Telegraph (if you can struggle through his dire prose).

Any new tax cut now would just be Ballsonomics and would have the same effect - the bond markets taking fright, it is just the wrong time.
It is a time for hunkering down for the economic squall which has blown up, not ineffective gimmickry.

I do wonder what all these panicking (self-styled) "real conservatives" on here, were doing in 1981, writing letters to the Times perchance ?

Everyone seems to have forgotten the size of the mess Brown left us, and have started to blame Osborne. Really flakey chaps.

John Montague

Sir E

Big is good

Income tax accounts for something like 28 % of the Government tax take, more than half of which is paid by the top 10% of taxpayers, a majority of whom will be employees of big business.

National Insurance accounts for 18% of government loot; it's disproportionately drawn from the highly paid employees of big businesses.

The top 0.2% of businesses account for a bit less than half of UK employment and a bit more than half of UK turnover, but a much higher percentage of the corporation tax paid. The really big firms, the top 100 say, often with export business, pay a disproportionate amount of the corporation tax.