Osborne needs to come up with radical growth policies, and soon

Olaf

Taxes up, prices up, wages down all means less money to spend and less tax income so taxes go up...
Nothing is happening until that cycle is broken.

tom jones

Great article and I agree with all of it apart from the end bit. I used to have confidence in Osborne, but I don't anymore. We're not even hitting our deficit target and we're probably headed for recession. Maybe if the government actually adopted some of the ideas coming from all those growth boosting idea lists they get then we might get somewhere. We need a chancellor unafraid of being massively unpopular for a bit and Osborne seems to be trying too hard to be liked. I'd get people in the treasury who know what they're doing - JOHN REDWOOD springs to mind.

merlindragon

> Right now, economic policy looks like
> the weakest link in an otherwise
> radical government.

How true. And it's human nature to focus more on failures than successes. George needs something outstanding, something tangible and noticeable that will make the future seem safer.

sinosimon

No Fraser, Darling's plan was the pathetic halving of the overspend on four years. this government is eliminating the deficit over 5....yet you say they only plan to halve it...you know this isn't true, so why say it?

John Moss

Simplify taxes.

Get rid of Capital Gains - carry any gains across to corporate profits or income and tax them as part of total profit/income, but relieve them at 20%pa after 2 years.

Merge Income Tax and NI and set a flat rate of 40% above £10,000 of "free pay". Relieve income from pensions or savings by 50%.

Get Corporation Tax down to 20% across the board and give small businesses an allowance of £50,000 which is not taxed if it is distributed as dividend.

Simon Stephenson.

At the root of our problems is that the mutual respect between leaders and followers has been lost, and we'll get nowhere until the followers become re-acquainted with the fact that successful leadership can never happen in situations where the preponderance of power is with the followers. Leaders will only act socially in situations where the followers respect their power to lead by decision - if instead the followers expect a veto over this decision-making, then the leaders will be driven to act selfishly.

Publius

"Cameron's speeches are great, and show that he understands capitalism"

Yes, he's a good talker.

As for understanding capitalism, since according to Mr Nelson capitalism is whatever FN wants it to mean on any given day and in any given place, who could possibly tell. FN can't even tell the difference between a liberal market economy and capitalism.

As for the wearisome trope "free markets", what are they and where are they? There has never been a free market ever. All markets are regulated. The question is how, and to what end.

and I'll go to bed at noon

It doesn't really matter, as they can and will just keep blaming Gordon Brown, however long they end up being in office.

Hugh

Is this the effect of coalition?
I guess that it probably is, remember Clegg dragged his party into coalition with Cameron when much of his party would have been much more comfortable with another Browne administration.

Stepney

There is still a belief amongst the political elite that the public sector still demands more policy and action than the private sector - is it any wonder growth has stalled?

The private sector generates the taxes, the vast majority of the jobs and the impetus for future economic stability.

It's about time there were some imaginative ideas to boost entrepreneurship, champion innovation and free the wealth creators to do what they do.

So far it's been a policy vacuum.

Hello? Anyone out there? Are we here just to be bled dry to fund other bugger's pensions?

Jon stack

It's high taxation and high public spending which are destroying the UK's economy. The coalition hasn't tackled either, and needs to break the statist consensus to do so. That's where the secret to a resurgent economy, built on private enterprise, lies.

Russell

Really Fraser "On the first sign of trouble, his government gave up on its deficit reduction timetable – it will now halve the deficit over five years, whereas Darling promised to do it in four".

And what would Darlings 'Labour promise' to halve the deficit in 4 years be worth without Darlings reliance of over 3% growth to achieve it.
If labour had won the election, the deficit would not be halved in 50 years, as the interest the UK pays on borrowing would be similar to Italy (or maybe Greece with Balls in office).

Chris lancashire

Good article - as far as it goes. What are your suggestions Mr Nelson other than veiled references to tax cuts?
Secondly, as Hugh points out, we have a Coalition government which requires a consensus between two radically different parties.

Robert Christopher

Under the text field it says 'Your comment will appear automatically.'.

It doesn't!
And the 'POST A COMMENT' popup does not go away after submission.

What a crock!

Robert Christopher

Well it just closed with the last message, so maybe it will appear!!!

Robert Christopher

We could lower our green taxes and let the private sector decide where the 'spare cash' should be used.

It is what used to happen, when we were being successful!

We could eliminate these taxes all together!

"There is no compelling scientific argument for drastic action to "decarbonize" the world's economy. Even if one accepts the inflated climate forecasts of the IPCC, aggressive greenhouse-gas control policies are not justified economically"
http://online.wsj.com/article/SB10001424052970204301404577171531838421366.html

Mark

A tax-cutting budget would of course reduce the tax take and raise the deficit in the short-term, increasing the risk of a deficit downgrade. But that's quite likely anyway with all that's going on across the Channel.

If it's going to happen anyway, take your pick of two scenarios in whcih it could happen

1. 3-4% growth in a low-tax, enterprise-oriented seeking-out-new-markets climate or

2. high-tax stifling growth, deficit slowly sliding out of control (extrapolating the current path).

Trapped

What Mr. Moss said, but I'll go even more radical.

35% flat rate tax, remove NI, remove tax credits, set basic threshold at £15,000. Earnings tax covers literally everything, and replaces CGT, inheritance, stamp duty, the works, tax applies to profits gained on the resale of properties as well (this will cause the house market to deflate, which we desperately need as a precursor to a serious expansion of building affordable housing).

Institute living wage as the minimum so the government are no longer subsidising the low paid and then let the market sort out the rest.

Move corporation tax from profits to revenues derived in the UK only, lower the percentage and recalculate accordingly. This will have the net effect of making it far cheaper for companies to base in the UK than simply do business here and have their HQ elsewhere.

That'll do for a start. Wipe out a lot of loopholes and drastically reduce administration as there'll be only one earning tax per person, one allowance, and one set of figures to work out.

Ed P

As Raspberry Pi ( making a new cheap computer product) found, imported electronic components are taxed, whereas finished goods are not. This idiotic arrangement ensures manufacturing will remain offshore. C'mon Osborne, sort it out!

TrevorsDen

I agree with Russell. It is facile to bring Darling's fantasies into it.

But what are Mr Nelson's solutions? hard to see any except tax giveaways for rich people. The Govt announces policies for growth - ages ago. One of them was to ease planning rules. Guess what? massive campaign against it from The Telegraph. Mr Nelson would be better talking to his employers instead of lecturing the rest of us.

Tiberius

That's all very well, Fraser, and I have to admire the persistence in your arguments. However Osborne's starting position, and the particulars of the politics in Britain, don't allow him to hoof it, long-ball style.

What is certain is that using Darling's plan as a benchmark is ridiculous.

DavidDP

"On the first sign of trouble, his government gave up on its deficit reduction timetable – it will now halve the deficit over five years, whereas Darling promised to do it in four".

So, what you are saying is that, regardless of whether Darling's assumptions came to pass, he would have stuck to his plan come what may?

Could you provide the evidence on which you make this counterfactual statement?

Ian Walker

One solution might be to tax the offshoring of labour as if it were an importation of goods. This would incentivise companies to bring their services back onshore (a process that is already happening, but slowly), which would create jobs and give a boost to the service sector. Not enough in itself, I expect, but in combination with some other measures as a package.

cpt

A very simple measure to get small business going would be to get rid of the requirement to pay half now of next years tax based on this years performance. It would free up a lot of cash for Small Blusiness and the Treasury would be no worse off in the long run as the net take to them would work out the same.

Sean Haffey

AS I wrote 10 months ago sean-haffey.blogspot.com/2011/03/50p-to-set-us-free.html

Tom Pride

Why are people so keen on scrapping National Insurance rather than ending its use as a sham income tax and returning it to a genuine contributory National Insurance scheme where the employee and employers charges bear a relationship to the cost of the benefits – health care, state pension, unemployment benefit etc – with some sort of smoothing to help the lower paid and a sense or actual ownership by contributors?

Take it away from the Treasury to stop the unprincipled fiddling but leave non-contributory benefits with them to be met from general taxation and bear down on these. It’s time to end the something for nothing entitlement culture and a genuine NI scheme with benefits significantly better than those where no contribution is made would be a good start.

oldtimer

The pre-election statements ("share the proceeds of growth"), and the post election strategy of clinging to the hope that a tax giveaway would be possible before the next election giveaway, are but distant dreams for Cameron and Osborne. It also, I believe, meant they failed to act sooner in this Parliament to reform the tax system. They are now in deep trouble. Radical changes are needed in the tax system to simplify it and to provide incentives to earn and save. Unless they do, they will condemn the UK to a long period of stagnation and decline.

Salisbury

"School reform, welfare reform and police reform are all proceeding apace. But where is the economic reform? Right now, economic policy looks like the weakest link in an otherwise radical government."

Could the mystery ingredient possibly be the Liberal Democrats?

The successful reforms you mention have all been pioneered by Conservative ministers, and have largely been left alone by the Lib Dems (until recently with welfare reform at any rate). We could even have added health reform to the list, if David Cameron hadn't organised its castration in order to cheer up Clegg after last year's AV rout.

But responsibility for economic reform is much more evenly-shared between the two coalition parties, with Cable having a significant executive role from the business department and Clegg also closely involved in determining the direction. As a result the sort of radical supply-side reform programme we need - cutting regulation, making it easier for employers to hire etc - has been neutralised. And as for tax cuts.....

Osborne needs to be bolder, but so too does Cameron. He needs to move Cable to somewhere where he can cause less trouble (eg Uzbekhistan) and lay it on the line for Clegg that either he gets behind a radical supply-side reform programme, that includes tax cuts, or he can do the other thing. In any subsequent general election, I'd back the Tories to win.

michael

You can't buy growth (sustainably).
Labour's biggest mistake was not understanding the addictive nature of spending on 'what's next' and its relationship to the 'laws of diminishing returns' ...the more you spend the less, pro-rata you get.
The tax and regulatory environment is key to allowing enterprise to express itself. The 'imagination' IS out there so is the cash.

chinasyndrome

Robert C
I suggest if you want instant gratification, then try the Daily Mail.

Cameron

Agree with Tom Jones - Good Article. This far into their term Osborne apears an absolute schoolboy amateur. No spine, no leadership, no will, just another public servant prepared to mooch off the taxpayer while pretending to serve the country. Something not mentioned enough (outside the US election debate) is the need for serious reform of Central Banks. That falls in Osbornes dept and he is far from up to the task. Whether he likes it or not M King is running the British eceonomy now, as is Bernanke the US . . continued and increasing easy money under Alan Greenspan was the root cause of the credit crisis, and the solution is more of the same. We are in need of radical change to the global monetary system, starting with central banks. they have far more power over the economy than the politicians that we elect and this is a disgrace.

Molly

Clegg lies behind a lot of the timidity. Threaten him with an election; that'll soon get him into line. He's buggered whether we hold one or not. Once he's comes to heel, let's have some real, brave, radical actions and create an enterprise county, not the occasional enterprise zone. There are plenty of good ideas to chose from, not all will succeed, but many will. Noses will be bent and political calculation would be ignored. Hoorah.

Unlike many bloggers here, I'm essentially a fan of Cameron but there's not a doubt that he's talking a far better game about the economy than he's delivering. Osborne is a huge disappointment, not because of the deficit, which would be a problem for anyone, but because he's done nothing brave. He's a spineless child.

And if Clegg doesn't come to heel; call an election. Cameron would do a good job explaining the reasons and convince the country; against Clegg and Milliwhatsit he'd romp home.

roman lee

Mr Nelson why do you keep using Darlings projections as a base for critical diatribes against Osborne, Darling would have been sacked the moment Brown returned from the Palace and Balls would have run wild for as long as we could borrow from anyone, we would now be asking Greece for advice. you really must not let your jealousy of Cameron and Osbournes inherited wealth colour your judgement. Andrew Neil and his fellow travelers at the BBC suffer from this malaise as well. time for you lot to get a grip.

Magnolia

Those boys are weak, weak weak!
Yes Daddy Hectoron is great when he's lecturing the continentals but if it's all talk (and it is) and no action then it's pathetic.
Where is our bonfire of red-tape and regulation?
And then there's the tax cuts that have to be paid for but which don't form a nice neat sum. Cutting taxes brings in more tax! Even if it doesn't, so what, lets get cutting for real, tax and spending, and let people keep their own money for their own needs. We might as well get used to it sooner rather than later.
I was thinking about how government distort the economy when we were talking about abortion. Imagine if abortion had never been legalised. I think we would have had an effective male pill years ago and we would have all been much happier!
Governments can't choose the right economy. They must just let it be.

El Sid

Good piece in the Telegraph on this subject Fraser. I know this is a subject we've disucssed in the past. I suspect part of the problem with Osborne being so out of his depth on economics is that he's dependent on others to suggest policy - and for whatever reason, that's not happening effectively. When it comes to economics, he's not a self-starter like Gove or IDS.

This is where we are really missing Laws - getting rid of him really was penny-wise, pound-foolish. He was the only senior LD who really "got it" and was strong enough to stand up to Vince. Now it seems that Cabinet economic policy has to be signed off by Cable, who just doesn't have a clue. The Business Secretary seems to be more concerned with a few £m of bonuses than with growth in a multi-£trillion economy. Osborne may be out of his depth, but you suspect Cable will be actively opposing a whole raft of measures to get the economy going.

One test - the bonfire of red tape, what's happened to "a net 5% reduction in the regulatory burden" (Clarke, 2009 conference), and the "ticking time bomb" for the thirty least popular regulations?

I suspect another reason why the Submarine's policies resemble McCavity's is that he's relying on the same static Treasury models that don't respond to eg taxes being cut.

As for Estonia, part of our problem is that elephants don't gallop - we have 50x their population and we're starting from more than twice the GDP/capita. A more pressing problem is the institutionalisation of welfare, and the impossibility of changing things because someone will complain - Gordon's short-term fix to the 10p problem, the Winter Fuel allowance has now become a £3bn millstone every year.

Dimoto

To support his argument, Nelson quotes: the Sun and Clegg, he could have quoted those other specialists in populist bull dust, the Mirror, Guardian, Mail, Independent or Telegraph (see the appalling Hester witch-hunt).

If our government was Conservative, not coalition, the 50% would have gone, the cuts would have been deeper, welfare reform would have been more "radical" and quicker.

Would any of that have resulted in a "growth spurt" ?
No !

Business is uncertain and is keeping most of it's powder dry.
It is notable that those who are investing are mostly US, Indian, Japanese or German owned corporations.

The rotten media have certainly been major contributors to the collapse in confidence with their constant alarms and exaggerations (heal yourself Nelson !!)

It is distinctly odd that these people claiming to be "radicals of the right", think that government can "steer the economy".
That is 100% Brownism.

We have to sweat it out for a couple of quarters, and wait for sentiment to turn with improvement in disposable incomes.
(I wouldn't want to be in the trenches with Nelson).

If the Eurozone tips over the edge, premature and gimicky "tax cuts", and slashing and burning public expenditure, will look very foolish indeed.

Personally, I would rather trust Osborne's instincts than Keen Green Cameron.

And the UK as fourth biggest economy ?
Been asleep for the past decade Fraser, or just another inadequate researcher ?

In2minds

"Nor do I buy the rather defeatist argument that Britain lies at the mercy of the eurozone" -

But I think you will find that Osborne does buy into that argument, as does Cameron.

Fatbloke on tour

Trevor

Along with Sniffy it is you that doesn't get it.
DH's cuts were a one year issue.

It involved major cuts to investment.
It involved pay restraint and losing some of the froth.
It involved a growing economy and the first trickles of North Sea oil.
Consequently it was over before you noticed it.

Sniffy on the other hand is cutting too far too fast.
He has scared the plebs fartless.
They are not spending and neither are the corporates.

He has made the neo classical mistake of believing you can thrift your way to economic growth. As was found out in the 30's this you cannot do when the rest of the world is in the same boat and they are cutting back.

Dave needs to go.
Sniffy needs to go.
They are completely out of their depth.
And it shows.

Robert Christopher

chinasyndrome: "I suggest if you want instant gratification, then try the Daily Mail."

I had expected this blog software to accept text at the first or second attempt, not wait until the sixth!

El Sid

Heh - I've just come across the BIS performance indicators, one of which claims £3bn in regulatory savings so far, although it's not clear what that is based on and it specifically excludes the implementation of international agreements and EU directives, so you may wonder why they bother.

I'm sure there's some stuff in there that deserves wider publicity - good and bad.

http://www.bis.gov.uk/about/performance-reports/performance-indicators

Robert Christopher

chinasyndrome: "I suggest if you want instant gratification, then try the Daily Mail"

I would expect my comment to be accepted at the first or second attempt, not the sixth! (this is the 2nd attempt!)

daniel maris

I felt literally nauseated hearing about the one million pound bonus for Hester of RBS on top of his £1.2 million salary (and his chauffeur driven car? his free phone calls? his free home computer? his free newspapers? his use of company residences? - perhaps we should be told). All that after he managed to cut the share price by 40%.

Watershed moment. People have had enough.

Fatbloke on tour

Trevor

Enough of being negative, here are a few ideas.

NI and Hypothecation - If the Treasury hates it then it must be the right thing to do.

Turn it into what it was, social insurance and not what it has turned out to be a pseudo tax. Main thing is transparency so all the exotic non payment strategies are now binned.

Every company has to publish what it and it's employees have paid.

Robert Christopher

chinasyndrome: "I suggest if you want instant gratification, then try the Daily Mail"

I would expect my comment to be accepted at the first or second attempt, not the sixth! (this is the 3rd attempt!)

Fatbloke on tour

Trevor

Enough of being negative, here are a few ideas.

NI and Hypothecation - If the Treasury hates it then it must be the right thing to do.

Turn it into what it was, social insurance and not what it has turned out to be a pseudo tax. Main thing is transparency so all the exotic non payment strategies are now binned.

Every company has to publish what it and it's employees have paid.

Peregrine Greece Moffat

Osborne out of his comfort zone. Cameron talks the talk but not following up with actions. The economy in a mess, with a double dip certain, it looks like the wrong economic policy after all and the experiment has failed. Cameron and Osborne should be brave and admit they cocked it and stimulate the economy. OK Ed Balls might have been right all along, don't drag the economy down on a principal.

DZ

I've been away for a while. How was the "Bonfire of the Quangos"? Any news on that?

Fatbloke on tour

Apologies for the double post.

Regarding ideas for growth - 1

Have the unis research budget.
Use the money to teach / practice Development.
Establish Development Houses to increase the numbers of people who can solve problems and produce solutions.

Do less life sciences and do more Mechanical Engineering.
The main thing is to increase and improve the number of "doers" in society. You never know they might develop something useful.

David Price

Slash the overseas aid budget, and spend the thirty or so billion that would yield on a combination of tax cuts for the lower paid and military spending (to create UK jobs).

RocketDog

This is a public sector/ private sector thing. Read Dr Tim Morgan's paper on Eurogeddon

If 'Scratchy and Sniffy' cut they really will scare the 'plebs' (2 income families, wife a nurse) into the hands of charlatans like Balls

As Dr Tim Morgan points out in his paper, growth is the key. DH had N Sea oil to fall back on, but at that time the critical mass of UK industry was such that it could fire up and contribute. It is more difficult today

If you look at the some of the language used by the political commentariat it is truly terrifying. 'Growth' is retail spending, public sector generated 'earnings' (construction/services, etc funded on borrowing or QE) gets factored into the fake numbers that they use to try to present to us 'plebs' how funds swill around in our economy

We will be a Japanese Zombie state until the red tape is cut and incentives are produced for big business to want to open its wallet again in the UK

Which means that all this PC rubbish has to go, because capitalism and the free market is neither 'comfortable' nor 'appropriate'

Nick Kaplan

What qualifications does our PART TIME chancellor actually have to sort out this economic mess?

As I understand it he, like Brown, studied history at university and had never so much as read an economics text-book before being so ludicrously over-promoted to shadow chancellor. Why would anyone have any faith in his having any idea what to do? This, after all, is the man who promised to match Labour's spending plans pound for pound in the months leading up to the crisis, so what credibility does he have?

And, as if his manifest lack of qualifications and almost total inability to do anything useful were not sufficient condemnation, he doesn't even seem to take the job seriously enough to do it full time. Instead he would seem have a preference for divining his time between ruining the economy and screwing up tory party strategy, which gives you some idea of his priorities.

Jack of all trades and master of none would seem to be an overly generous description. Is it still seriously being suggested that it is between him and Boris for next tory party leader? God help us....

Fatbloke on tour

R-Dog @ 12.47.

Mixed bag from you.

Agree on the QE.
Works as an emergency "transfusion".
However not the way to keep the economy going.
Looks more and more like a fancy way to print money.

Seems to be the acceptable way to generate money out of thin air.

Treasury sell debt.
Corporates buy it.
Then the Central bank swaps it for more liquidity.

Where I do disagree with you is that you think that de-regulation and increased incentives are what is needed to get the economy moving.

You couldn't be further from the truth.
Demand is the key, everybody is scared.
Nobody wants to spend money as they have no confidence in the future.

Sniffy has spent the last 18 months scaring the plebs fartless.
It was all an act but nobody told the truth on this.
Everything was political not economic.
No we reap what he has sown.

You can cut regulations to the point that it is legal to stick children up chimneys, it is legal to move the unemployed into indentured servitude and it is legal to put lead into petrol / lag pipes with blue asbestos but it will not generate growth.

As for incentives will SH at RBS do a better job if we were to double his wages and bonus? No chance the only thing that will increase performance is a more active hiring strategy. HS should get the bullet, he has failed consequently someone else should get the chance.

We have two issues -

We need to re-balance the economy.
More building and less spending.
More exports and fewer imports.

We need to increase demand / generate confidence.
We need to take fear out of the daily discourse.
Sniffy's "Slashathon" is the reason we are failing.

AD / GB got the recovery started.
The Dangerous Brothers have totally derailed it.
The worst part of the problem is that they have no idea how to turn things around. They are political schemers not leaders or statesmen.

Currently we have reduced spending by too much and we have not done enough to rebalance / rebuild the economy.