From what we’re hearing so far, don’t expect anything that will solve our economic woes in the Chancellor’s upcoming Autumn Statement.
The measures that most people are anticipating will do nothing whatsoever to achieve what we all want from the economy – growth. Without growth, Osborne’s plan to eliminate the structural deficit will fail, and likely cost the Conservatives the election or at best another dreaded 5 years of a weak and ineffective coalition continually failing to deliver to Lib Dem and Tory voters as well as to the country. Here are some of the measures we’re expecting from the Autumn Statement next week:
-Â Â Â Â Â Â Â Â Changes to the funding formula for rail prices, leading to only a 6.2% rise in prices, instead of a planned 8% rise. But a rise is still a rise for the thousands of commuters who continue to suffer an uncompetitive and highly regulated railway system that most agree is not working. This change though will cost the Treasury around Â£130million. Where from? Probably our children’s taxes.
-Â Â Â Â Â Â Â Â A possible freeze on fuel duty, thus scrapping the 3p rise originally planned. Don’t get me wrong, we motorists more than welcome this, but surely a significant reduction in fuel duty would get the economy moving again – literally. Be warned though, according to Treasury sources, this measure has not yet been signed off.
-Â Â Â Â Â Â Â Â A Â£40billion ‘credit lifeline’, a scheme aimed to increase lending to small business. This is essentially the Government giving retail banks the power to underwrite loans at the taxpayers’ expense. Wasn’t it this kind of lending that got us into the debt ridden situation in the first place? Not only is this a free ticket for banks to lend to whoever they like, but yet more spending in a supposed effort to reduce spending. If you want banks to lend again, how about getting out of their way, creating the right kind of regulations and reducing taxes to both banks and small business.
Other measures include the usual green initiatives, Â£200 million for insulating homes, Â£1 billion to force more green technology on Africa and of course the Â£1 billion to bribe employers to give young people some work. All of this sounds very similar to the dying years of the Brown government…….
So what measures should he be implementing? For starters, definitely not more spending, especially not more government spending. The type of spending we do need however is consumer spending. When you and I go out and spend, that’s money going directly into the private sector (and, sadly, the government coffers). If you want real consumer driven growth, the Chancellor should be doing everything he possibly can to increase our spending power. And quite simply, we need lower taxes which of course necessitates less government spending. Sadly though, the plethora of schemes that the government has so far initiated has resulted in the complete opposite of what we truly need. This is the perfect time for the government to come to the realisation that it can’t micro manage the economy (Labour failed to realise this too) and magically bring growth as a result of more spending. And don’t be fooled by parts of the media that talk of the “age of austerity”, government spending is rising, soon to reach over 50% of GDP – the sort of figure you would find in the former Soviet Union. Either Osborne and Co really think they can use top-down government to get the economy going, or they just don’t have the political courage to do what they know is right.
Oddly though, the Conservatives have made it quite clear to us over the years that they want “to create the most competitive tax system in the G20”. Mostly through “having the lowest corporate tax rate in the G7 and among the lowest in the G20, making the UK the best location for corporate headquarters in Europe and delivering a simpler, more certain tax system.” In theory, this could be quite simple; lower and simplify taxes as well as reining in the current 11,500 page tax code (which took the world’s fastest speaker over 5 days to get through). As per usual, the Westminster machine gets in the way. So far, I’m not seeing a great deal of difference between Labour and Conservatives, and both parties will likely be punished for this. Smaller parties are already gaining significant ground, such as UKIP who are creeping ahead of the Lib Dems in national polls.
The public realises we’re in an economic mess, and the ordinary working taxpayer is craving for a bold solution from the political elite. We are far more open to bold proposals, such as actual cuts in spending (instead of cutting future increases) and slashing taxes, in these times of crises. Because the British public knows that the economic situation is genuinely dire, a bold proposal would be welcomed with open arms by more people than Osborne can imagine. Surely as Chancellor and as Cameron’s campaign strategist he knows this to be true?