Some advice for Osborne
Peter Hoskin 3:11pm
In the latest issue of the magazine, a flock of politicians, commentators and economists
offers George Osborne some advice for growing the economy. There are ten contributions in total, but here are three for CoffeeHousers' consideration:
Arthur Laffer
Chairman, Laffer Associates
Cut the 50p tax
Reducing the burden which government places on the economy, through tax cuts, is the surest way to promote growth. I have never heard of a country that taxed itself into prosperity. Yet Britain last year raised the top rate of income tax from 40 per cent to 50 per cent. For more economic growth, and more tax revenue, this rate should be lowered immediately.
This paradox — lower rates, but higher yield — has been demonstrated time and time again, the world over. Between 1980 and 2007, the US cut tax rates on every form of income, the highest, the lowest and all those in the middle. The result was that the rich paid more, even if their tax levels were reduced. Let’s take the top 1 per cent of earners. Over this 27-year period, their contribution to the income tax collected in America doubled from 19.5 per cent to 40 per cent. The same dynamics applied in Britain: when the top rate of income tax was lowered to 40 per cent in 1988, the share of income tax collected from the richest 1 per cent rose from 14 per cent then to 27 per cent last year. Raising tax rates on the rich is about as bad an idea for the UK as I could imagine.
The government doesn’t need to do something. It needs to undo much of what it already has done. If you want poor people to do better, create jobs, not welfare — and to do this make
taxes lower, not higher. ‘The best form of welfare,’ in the words of John F. Kennedy, ‘is still a good high-paying job.’
Norman Tebbit
Former Conservative party chairman
Reduce fuel duty
George Osborne is severely limited in what he can do without risking a loss of confidence in the determination of the government to address the problems of the deficit and debt which he inherited in 2010. He should, however, look at the impact of fuel duty. While it is possible to argue that many motorists fail to bother to shop for cheap fuel and pay 6p or 7p a litre more than they need, there is a heavy impact on drivers on low incomes as well as on the CPI, with its knock-on effect on expenditure. He should call next door and tell the Prime Minister that the Cabinet must override the absurd posturings of Vince Cable. It is essential to reduce the risks for employers in taking on new employees by making it easier to reduce staff again if growth fails to increase. He should tell the Prime Minister that he is unwilling to allow financial strategy to be imperilled by Lib Dem demands to veto government policy.
After that, any other tax relief should be concentrated on income tax on the lowest earners. That would help reduce the costs of Duncan Smith’s reforms as well as neutralise Labour’s squawks about his other measures.
Dominic Raab
MP for Esher and Walton; Newcomer of the Year, Spectator Parliamentarian Awards 2011
Make sacking easier
The venture capitalist Adrian Beecroft recently advised No. 10 to replace unfair dismissal with ‘no-fault dismissal’, to allow firms to replace underperforming staff with greater ease. It was vigorously opposed by the unions and some Liberal Democrats. But can’t there be a compromise? One solution might be to introduce the option of ‘no-fault’ dismissal, but retain the right to claim unfair dismissal. The law should be changed to help employers defend unfair dismissal claims, by widening the concept of ‘fair dismissal’ to include inadequate performance. (At the moment, it’s just inherent inability or neglectful incompetence.) That would safeguard claims with merit, but shield firms from the costs of defending weak ones.
Previous
Nickle
November 17th, 2011 3:47pm Report this comment1. Publish all the debts - present value - pensions and insurance included.
2. Send every tax payer a personal statement, pro rata - with their share of the government debt.
3. Repeat this annually.
If that doesn't light the fire in the pubic as to who is to blame, then nothing will.
andrew
November 17th, 2011 3:51pm Report this commentI can't believe that Mr Laffer really thinks the 50p tax rate is the greatest priority at this time. (I presume Mr Laffer would benefit from this cut and if so does he declare that?) If Osborne was to do this then there would be a real danger of civil unrest.
I also can't believe that I agree with Norman Tebbit on fuel duty and tax relief. On this it seems he is in the real world whereas Mr Laffer is out of touch with what is really going on in peoples lives.
Russell
November 17th, 2011 3:52pm Report this commentHow about getting rid of 1 million public sector workers, but with the proviso that the majority (if not all possible) are single and have no children.
The wages of these 'workers' cost the taxpayer millions more than just basic unemployment pay would cost.
Solve the 16 to 24 year old unemployed by Conscription, same cost to the taxpayer (unemployment pay), strengthening our armed forces numbers and allowing further reductions with older non fighting expensive regulars.
Scrap all advice (legal and otherwise) being provided at taxpayers expense in swahili and numerous other non english languages. Let people who don't speak english pay for their own interpreters (as the British have to when abroad).
Reduce House of Lords to half the number of MP's.
Leave the EU, saving £billions in contribution plus getting back our own fishing rights, employment rights, legal rights etc.
I'm sure Mr Osborne can be provided with hundreds of other savings of many £millions.
Sean Haffey
November 17th, 2011 3:53pm Report this commentCutting fuel duty has to be the one. And it needs to be 50p off the duties and taxes.
It makes it easier for people to pay their bills. It lowers the cost of virtually everything - inflation down. It makes SMEs more profitable: fewer bankruptcies, more people employed. So it reduces benefits payments. By cutting the cost of transport it makes it affordable for people to commute: I so often hear of people who would like a job but getting to and from work is too expensive. 50p off would also make our transport companies more competitive around Europe.
Whether it's the pensioner, the unemployed, the young family, the small or large business or government as a whole, cutting the duty on petrol and fuel is the best thing that can be done to give the economy a shot in the arm.
BenM
November 17th, 2011 4:43pm Report this commentWow! Arthur Laffer! What a deluded fool!
Hugo Chav
November 17th, 2011 4:50pm Report this commentThese are not radical solutions, they're sticking plasters.
Once again the 99% got it totally wrong on the UK economy, including the BoE, OBR, Treasury, Cameron and Osborne.
The 1% have been shouting since 2007 that this is a National Emergency and that radical solutions are required to stabilise our standard of living.
As 99% of our econo-politico elite are Social Democrats they've not been able to discern the huge structural issues facing our economy. They thought because we have been, and are wealthy, it was our right to have such a standard of living, that the past was the future.
Well, the future is now starting to catch up with the Western welfare state, it's getting ugly and we'll continue to decline until the econo-politico elite decide what is a LUXURY and what is a NECESSITY in public spending.
Politicans will spend us to bankruptcy, the only way to stop this in the future, if we can resolve our current crisis, is to introduce into law a balanced budget amendment. The Social Democrats must be tamed.
As Thatcher said:
“The problem with socialism is that you eventually run out of other people's money. ”
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BTW, Dr. Tim Morgan has proffered a radical solution to move forward:
http://www.tullettprebon.com/strategyinsights/strategy_notes.aspx
Dennis Churchill
November 17th, 2011 4:54pm Report this commentAre you sure a “flock” is the correct collective noun?
PayDirt
November 17th, 2011 5:24pm Report this commentScrap the ridiculous LEZ (Low Emision Zone) regulation which is due to come into force on 3rd January 2012 on vans and which will drive many small businesses operating in Greater London to either shut up shop or buy expensive new vans the cost of which will be added to customers bills. A proper smoke test on ALL vehicles driving into an LEZ would be a much better target. Why legislate AGAINST businesses with perfectly servicable vans? The London LEZ will unnecessarily drive up costs, pure ANTI-growth, unless you count the adding costs as growth.
tom jones
November 17th, 2011 5:42pm Report this commentThose calling for the 50P tax rate change need to realise it's not going to happen and nor should it until the deficit is under control.
Liberty
November 17th, 2011 5:51pm Report this commentA flat rate income to all paid for out of a flat rate tax. The only variation to be a points based extra for the disabled plus a fixed child allowance for the last born child and to qualify for anything other than disabled one must have worked for at least two years full time equivalent.
The level of benefit could be low and not count towards personal allowance that should be high, perhaps 15k with a flat tax of 30k on all subsequent income.
This way, there would be no marginal rate, living on welfare could easily be topped up with low paid work, no-one could escape and the cost of administration would be a fraction of currently. The IT costs about £100bn a year in admin alone and welfare £250bn pa. Almost all of that could be saved and virtually eliminate fraud and provide a way of tracking any illegal immigrants with continuous monitoring of applications with in depth investigations only of anomalous claims.
John Moss
November 17th, 2011 5:59pm Report this commentGovernment action is limited in its effect, but Arthur Laffer is on to one thing. "undo" trade barriers. Scrap tarrifs, end subsidies.
SCRAP the CAP and allow Africa to export its way to prosperity, in doing so attracting investment, creating jobs and reducing aid budgets.
With money printing exhausted, low interest rates exhausted and borrowing a no-no, free trade is the last bullet the West can fire in its defence. It needs to pull that trigger now.
Oh, and merge Income Tax and NI give every employee £10,000 personal allowance and set a single flat rate of 40% above that.
ButcombeMan
November 17th, 2011 6:33pm Report this comment1. Reduce Stamp Duty at lower levels, increase it over £1 million, "Smooth" the steps, with the increase only payable on the price above the steps.
TGF UKIP
November 17th, 2011 7:49pm Report this commentIf you asked any of the 515 people who are to be made redundant from the Alcan aluminium smelter in Lynmouth, Northumberland, they might have tell you that your government needs to change the ideological energy policies which have cost them their jobs.
Danielle
November 17th, 2011 9:37pm Report this commentHow will making it easier to sack people help with trying to combat rising unemployment? Dominic Raab suggestion is outrageous. If people are insecure in their jobs then they will not spend and confidence in the economy will plummet. When people lose their jobs they often lose their homes so it will cost the Government increased welfare and housing costs. Also if you sack one person and replace them with another worker there is no NET job creation, it's one job with two workers so it will not create growth. It's policies like this that have earned conservatives the nickname the NASTY PARTY. The pressure job insecurity puts on family life leads to family breakdown which has enormous financial and social costs. The economy has to have a balance between workers rights and employers rights, to have it skewed in either direction does not benefit anyone. The last thing this country needs is a totally deregulated Labour market like America. Germany has strong Unions and workers rights yet their economy is strong and growing, the German model is the one we should be emulating NOT the American one.
Dimoto
November 17th, 2011 10:15pm Report this commentSpot on TGF UKIP, (but Alcan/Rio have been dying for a good excuse to close the smelter for years - nice of Huhne to give them one).
Mr Laffer evidently hasn't noticed that "government" in the UK, is now under new management.
Then again, the concept of one party in a democracy, deliberately laying economy-destroying, land-mines for it's successor, is probably difficult for an American to grasp.
Marcher Baron
November 17th, 2011 10:18pm Report this commentI agree with PayDirt about the LEZ. I went to Kenley this summer in my campervan to see where my uncle had served during WW2. After I got back, I received two brochures telling me that I'd be fined £500 or have to pay at least £100 a day for venturing into the LEZ after January if I didn't upgrade my engine/buy a new vehicle, thanks to not meeting EU regs. Result? Next year I shall avoid the LEZ like the plague and not spend my money within it. I really wonder why my uncle, and thousands like him, ever bothered in 1940.
Conservative Libertarian
November 18th, 2011 1:11am Report this commentI'm sorry, but I still have the old-fashioned belief that if an employer wants to terminate a contract with an employee they should be able to do so. They shouldn't have to "give a reason." Three months notice or three months pay is a perfectly reasonable settlement. The current situation just discourages employers from taking on new people.
alexsandr
November 18th, 2011 9:38am Report this commentscrap NI and roll it into income tax
Stabalise petrol at about £1 a litre
raise personal allowances. Get the middle classes spending again.
and start a special alexsandr benefit just for me - no that one is a joke!
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