British Politics’s Blog

The ravings of an individual, UK voter frustrated with our politicians

Posts Tagged ‘boom and bust

Cameron sets up Economic Recovery Group

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The latest announcement from the Tory Party machine is that David Cameron is to invite “leading businessmen” to join his ‘Economic Recovery Group’. now, don’t get me wrong, this is a laudable initiative, but it lacks a certain something, specifically its failure to appoint people from the SME sector, even though they are undoubtedly the backbone of our economy.

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.

The people Cameron has invited include Next’s Simon Wolfson, Lloyds TSB chairman Sir Brian Pitman, Google chief executive Eric Schmidt and ex-Vodafone boss Sir Chrisopher Gent.  Quality people, but what do these guys know about small and medium sized enterprises. Granted, they may have once worked within one or two, but you can be certain that it was a very long time ago. If Cameron wants to come up with sensible initiatives that have a positive impact on the vast majority of businesses in this country, then he needs to stop trying to hit the headlines with industry ‘names’ and start talking to real business people within the SME sector. It may not give him the same headlines, but it will provide him with a better insight into the real issues and there is a chance that the people of this country will start to think he is a man of substance rather than glitz. We have all, I am sure, had enough of glitz, polish and rhetoric to last a lifetime.

Don’t get me wrong, I don’t doubt the credentials and standing of these men, but I do question the logic of inviting these ‘wise men’ to offer advice on how to deliver real solutions to the SME sector. Unless, of course, Cameron doesn’t realise what contribution the SME sector makes towards UK Plc turnover and how many the sector employs. Don’t go for an industry spokesman Mr Cameron, invite a couple of SME businessmen. If Mr Cameron doesn’t know where to look, as a SME businessman myself, I will gladly give my two-penneth and my time, at no charge.

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1929 stock market is history repeating itself

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I read an interesting article over at the political blog Power to the People, about the similarities between the 1929 stock market crash and our current economic situation and I am finding it difficult to fault the parallels. Clearly many of the problems we are experiencing today are similar to those during the 1929 crash, except, as the author points out, back then it was shares and today it is property.

As the author makes clear there were some people in power in 1929 that were rightly concerned about the possibility of the whole pack of cards falling down, but elected to do nothing.

The people of America felt rich, lifestyles improved after the austerity of the first world war and few people raised any doubts, those that did, such as President Hoover, tended to keep it to themselves, rather than be see as the Cassandra.

Surely Gordon Brown knew there were real risks that the property bubble could burst, particularly given the property crash of the 1990’s, he must have been aware that the economy was being fueled by cheap and easy credit and above all, that the massive profits being reported by the banks were not from their high street activities alone. Yet, he chose to do nothing, now he is puffing his chest out and telling us how he is going to save the world. Personally I think that there is something morbid about allowing the same person who threw us in at the deep end to then jump in, ignoring his own culpability and receive backslaps for his vain attempt to save us.

During the 1929 crash, millions of people were destitute, having lost all their saving. Today, with millions of people investing in pensions, the fall in key stocks means that their pensions are worth considerably less than they were 18 months ago. Perhaps by as much as 50%! Those that have saved for their retirement, will be punished with low or non-existent interest rates, resulting in a reduction in their standard of living, even though they may not have been benificiaries of the largesse that caused these problems. Of course, most civil servants do not have to worry about such anomolies, because their final salary schemes are paid out of future income and as such, are guaranteed.

But the lessons of history havent been learnt, as the article goes on to state;

After the 1929 stock market crash, Hoover introduced the Securities & Exchange commision to regulate US markets, this had the desired affect. However, over the past 20 years or so, the rules and regulations have been relaxed, seen as no longer necessary and much of what we witness in the United States today can be attributed to the easing of those regulations. Similarly, the much vaunted deregulation of the City was also a pre-cursor to the problems we all face today. Light regulation and a hand-off approach by government and the regulators has allowed the banks to enter very high risk transactions which many people struggle to understand.

This government has a lot to answer for. Mr Brown promised an end to boom and bust yet, in spite of his promise, we are actually in one of the most dire economic positions ever experienced by this country, even though the warning signs were there all along. They were just conveniently ignored for political expediency and no doubt, because Gordon Brown, whilst basking in the glory of being described as the ‘iron chancellor’ didn’t want to be a party pooper. Shame on him, he was in the best position to know the risks and to do something about them, but he did nothing. In my view he is either incompetent, inept or reckless.

And…I couldn’t agree more with the statement made on this posting…

In my view, government ministers and bankers must be called to account because they have demonstrated what appears to be a reckless disregard for the interests, respectively of the people of this country and the interests of their shareholders.

We must all demand that all those in position of power or responsibility that have played an active part in this economic mess be made to accept responsibility. Further, anyone that has been reckless, irrespective of whether they are in government or commerce, must be brought to book. We, the people will automatically have to pay for any mistakes we have made (as well as those we haven’t), why should politicians and senior business executives get away scott free?

Stop banks from carrying forward losses to offset future profits

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Most analysts forecast that most, if not all of our high street banks will shortly announce record breaking losses, as many re-value their assets and take the write-off’s on the chin. In fact, informed pundits are suggesting that this will continue for another 2-3 years. Well, there is little or nothing we can do about that.

However, any bank that has been in receipt of state aid, support or taxpayer sponsored insurance schemes must not be allowed to benefit from a double whammy. That is to say that, whilst the taxpayers of this country take on much of the risks associated with their recklessness, the banks carry forward these massive losses, to allow them to offset past losses against future profits. That would most certainly rub salt into the wound. Under current taxation rules, business can carry forward past losses, to set against future profits. This concession made sense for most businesses that have a difficult year or two, or those that are in a start-up phase. It should not be used to reward banks and their shareholders, when they have had to rely on a state bailout or support programme to allow them to survive intact.

Government ministers and opposition parties must provide the assurances, here and now, that the banks will not be permitted to carry forward past losses, to offset against future profits where these banks have been in receipt of any state aid. A failure to do this will allow banks and more specifically their shareholders to receive handsome ‘tax free’ rewards at the very time that the taxpayers will being having to accept higher taxes as a direct conseqeunce of the banking crisis and the largesse, or indifference of our government and ministers. This would be completely unacceptable. If the banks were not so integral to our economic well being, they would not have been treated as a ‘special’ case and received such massive state aid. But they are and they have been. MP’s must now undertake to identify the banks as a special case in the future, given the racing certainty that they would, under existing rules, be rewarded with future tax breaks/concessions.

Once we come out of the other end of this recession, taxes will rise and if the past is anything to go by, the public will be expected to pay the lions share through direct and indirect taxation. This country will need banks and industry to pay their fair share. We cannot afford any bank or any business to use 2 or 3 years of losses to offset against the following 2 or 3 years profits. Everyone needs to make a contribution. If business, such as the car industry are in receipt of state aid, then they must also be prevented from offset past losses against future profits, similarly, if these businesses are not registered in the UK for tax purposes, then they must undertake to do so before any taxpayers funds are advanced and for a period beyond, to make sure that taxpayers benefit in the future. Now is the time to be negotiating tough terms and looking ahead in terms of these banks and businesses making a real and tangible contribution in the future. A failure to do so will result in a massive public backlash in the future.

UK Economy, can the future be so bright?

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It doesn’t really matter who you listen to, everyone seems to believe that we will come out of the recession leaner and stronger, with most arguments centering on how deep and how long the recession will be. There are also varying estimates as to the level of debt UK Plc will have and also how long it will take to reduce this debt mountain via increased tax revenues. Maybe I am cynical, naive or just plain stupid, but I can’t for the life of me see what we are going to be left with when the recession does actually end.

We know that after the last recession, our manufacturing industry was virtually decimated, not only did many people lose their jobs, but an industry dating back to the Victorian times disappeared virtually over night. Therefore, even if the pound is weak, surely we cannot rely on manufacturing to provide jobs and tax revenues.

So what of the financial services and banking industries? As we all know, this particular recession has been brought about, for the most part, by poor lending decisions of the banks. In addition, much of the profit derived from The City was via ‘manufactured’ trades of bundled mortgages, securities and so on. The financial services and banking sector have now had their fingers burned. In addition, one of the main attractions of the UK was light regulation, and there is every indication that the UK authorities will now start to tighten the rules. Taking all these things together, it is most unlikely that the UK banking and financial services sector will ever look the same again, nor will it offer the same levels of GDP contribution, jobs or tax revenues. Added to which, with many financial institutions and banks harbouring massive losses, it is quite likely that they will not have to pay any corporation tax for a good few years to come.

As our manufacturing base declined, our GDP was propped by the banking and financial services sector, given the above, do we really have any hope of a strong recovery from any of these sectors? I think not. On top of everything else, before the recession, the government were steadily increasing corporation tax as well as red tape. As a direct consequence, the UK was no longer the land of milk and honey from a tax perspective. So in recent years we have seen more and more companies registering their businesses abroad for tax purposes. Southern Ireland is a case in point, where their tax regime is considerable more attractive than our own. This will lead to a further loss of jobs and more importantly in the current debt climate, a loss of tax revenues.

Then their is our carbon emissions targets. Our government has committed to a reduction of 80%, this is not empty rhetoric, they intend to make it legally binding. Similarly, a reduction in carbon emissions is not incentive driven, instead is uses a stick rather than carrot approach, meaning higher ‘green taxes’. These taxes will hit not just business, but individuals as well and of course the price will have to be paid both at the tills and in the way of fewer jobs. What this means is that is that any UK business will be subject to higher direct taxes and higher indirect taxes via ‘green’ initiatives. Now, because the UK is one of the few countries taking carbon reductions seriously, it means that companies operating in the UK will be subjected to a competitive disadvantage when compared to other countries.

Then look at what has been driving sales over the past 10 years, the so called “credit bubble”. The economy has grown as a direct result of easier credit, low interest rates and rising house prices. The latter has made people feel more wealthy, leading to a release of equity through remortgages or secured loans, the ‘easy’ money has than been spent in th High Street, on consumables, cars and nice holidays. In a harsher climate, with less money available to consumers, a stagnant housing market, higher taxes and fewer people in work, it is difficult to see how or when we can expect a return to ‘business as usual’.

So, whilst I know the politicians hate to paint a picture that is considered too negative or gloomy, I would like to witness them share their thoughts on just how everything is going to be fixed and over what timescale. Becuase, in all honesty, unless I am missing something, the future does not look too bright.

British Public will not accept higher taxes

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David Cameron has made much about the fact that he cannot make any commitments in terms of tax cuts and he has also said that he cannot rule out tax increases. The reality is he probably thinks this makes him look tough, honest or maybe even sincere. But there is another harsh reality that he ignores at his peril. That is, the current Labour administration has constantly hammered the taxpayer to fund new initiatives, to invest in health, education and to deal with child poverty. We will no longer tolerate another attack on our finances, particularly given the current state of the economy and the failures of the current administration to get value for our taxes.

The Labour administration has used stealth taxes to increase the tax take, this is equivalent to 3% of GDP, or if you prefer, the equivalent of a further 10p in the pound on direct taxes. David Cameron’s government would benefit from this situation. Yes, I fully accept that as a result in the slow down in the economy and the high level of borrowings, that tax cuts may not be a short, or even medium term reality, but tax cuts must remain a long term commitment.

If we work hard, we are entitled to retain more of our hard earned money. The conservatives must, instead, look to address the public sector, which is so bloated, that it now employs one in 5 of our working population. They must look to ensure that we get more ‘bang for our buck’ the current Labour administration has spent £billions on consultants, spin, marketing and failed projects. Some estimates put their waste at over £100bn in 11 years. Any future government that does not accept that savings can be made in how taxpayers money is being spent, does not deserve the opportunity to lead this country.

The ‘something for nothing’ society needs to be addressed. There are 2.5m people claiming invalidity benefits, up by 1.5m during Labour’s reign, this must be addressed. Those with genuine needs must be supported, the rest must be forced to accept work. The taxpayer does not want to pay someone to sit at home on their backsides if they have a bad back, instead they can get an office job and make a contribution to society.

Any government, current, or future, would do well to consider the fact that the British public, or more specifically, the taxpayers, contributing to this society, are fed up with being made to pay more and more of our money in taxes. It is accepted, that it is far easier to introduce more stealth taxes or increase existing ones, than it is to deal with our bloated public service sector, our something for nothing society or our government waste, but deal with it is what they must do.

As a people, we have a moral responsibility to help those that are not able to help themselves, but we should not be encouraging people to simply help themselves to our tax money. Grand initiatives are okay, but only if we can afford them, we should for example, slash our overseas aid budget, which is currently costing the UK taxpayer some £5bn per annum. We should call a halt to the policy of cancelling third world debt without pre-conditions, which serves only to allow the rich elite of these countries to further prosper at our expense and the expense of their own people.

If Cameron, or anyone else for that matter wants my vote, they do not have to promise tax cuts, but they must promise not to increase taxes. Instead, they must get on with the job of reducing their overheads, getting rid of waste, exactly the same as every working family in the country is required to do in these difficult times.

Government must lead by example, and David Cameron should take note, that the last thing the taxpayers of this country needs is another government that is pilfering our money and then frittering it away. Arguably, taxes are a privilege, not a right.

Tories vow to address the health and safety culture

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Not before time, a UK political party has committed to address the almost farcical health & safety culture that has built up in the UK, not least its affect on the ability of the emergency services to do their jobs.

I remember discussing the case of Jordan Lyon who drowned last year with an ex-fireman. This young boy drowned even though two Community Safety Officers were on the scene, because these ‘officers’ did not have the appropriate training. The ex-fireman told me that the fire service is also tied up with Health & Safety red tape, to the extent, that if a fireman was to enter the water to save someones life, without the requisite support, then he could have faced losing his job and pension. I was appalled. If you take on the job of a police office or a fireman, you know that at times, you will have to risk your life to save others, very often, it is a judgement call, to have that decision made by health & safety officials is deplorable.

Imagine the situation if all our armed forces were forced to consider the health & safety risks before they went into battle. When you join the army, you know that you may be called upon to fight for your country and lay your life down in that service. You are entitled to expect senior officers to complete a risk assessment and not waste young lives, but not a health & safety officer! Yet here we are, with health & safety officers placing a raft of conditions on police officers and fireman. The public are entitled to expect the emergency services to help us when we are in need, they have chosen that vocation, are paid to do the job and they know the risks. They should not be prevented from doing their jobs through red tape.

Clearly this government does not understand the implications of all this, although that is not particularly surprising, given they are so out of touch with the people of this country. I normally have a lot of time for Home Office Minister Tony McNulty, but here is what he had to say about the conservative proposals. “The lives of police officers and Police Community Support Officers are as important as those of the people they serve, and this government will back the police service in the day to-day operational decisions they make in protecting the public against crime and terrorism. “And we will ensure that the criminal justice system is firmly weighted in favour of the victim, not the criminal.” Yes, but these officers know the risks and they are paid to do a job, they should be allowed to get on with it.

I would suggest he ask the rank and file members of our emergency services as to whether or not they are in favour of all of these health & safety rules, whether they see it as the government protecting them, or unnecessary interference, in as much as it prevents an officer from making a safety assessment on the spot. There are 167,000 police officers in this country, yet we feel less safe than we did 20 years ago, why is that, could it be something to do with the fact that in many cases, police officers are prevented to go into a dangerous situation, unless they have back up?

We are constantly told that the emergency services deserve good salaries and pension schemes, because of the risks they take to protect the public, yet more and more, they are required to take less risk. Our police officers and firemen should not be risk averse, they must be brave, they are charged with protecting the public and they must be allowed to do so. With this health & safety culture of ours, we will never know whether lives are lost because officers don’t have the backbone to go in, or if they are simply following health & safety rules. I would hope that these officers are not hiding behind these rules, I am sure they are not, but unless they also make it clear that they do not want these restrictions, what is the public to think?

On top of all this, I believe there needs to be a very clear definition of ‘reasonable force’, it is currently very vague. There is a need for the public to act in cases when their are no police officers around, or the police are not allowed to act for fear of losing their jobs. Where the public do act, they must be protected by law, they should not live in fear of prosecution. In my view, reasonable force is any act necessary to prevent the threat and the benefit of doubt should always be given to the member of public that has intervened where a police officer couldn’t or wouldn’t.

But the conservatives should also deal with health and safety regulations in the workplace, this has gone so far, that it is simply killing small business who must either employ and health & safety officer or use the services of a consultant. Yes there must be rules because the public and employees are entitled to be protected, but health and safety has now turned into a massive industry and it is costing every single one of us. There needs to be balance. Once again, I hope the conservatives will be bold in their policies, there is no point in meddling, Health & Safety Regulations need wholesale reform.

Bankers must accept their own responsibility

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It is difficult to argue with the suggestion put forward by Power to the People, suggesting as it does, that the bankers should be held to account for their poor decision making that has, for the most part, brought about the current crisis.

When the dust settles, governments around the world need to reflect on precisely how a situation arose, where taxpayers were required to bail out struggling banks and insurers. This should be wide ranging and lead to both regulation and prosecution.

Power to the People

There is much talk about government responsibility through the poor enforcement of existing regulation and the need for more regulation and legislation. However, the bottom line is that the whole ethos of the city is that it thrives on being a free market. So yes, by all means include further regulation to avoid a repeat of the current fiasco, but don’t throw the baby out with the bath water. Instead, remind city execurtives, whether they are from the banking, insurance or any other sector, that they are trustees of the shareholders, they are expected to increase wealth, not take massive gambles, which expose the very assets they are supposed to protect and grow.

There is a very good argument for prosecuting those executives that were involved in the decision making process that brought about this calamity, no matter where they are based. Their assets should be frozen and if they are found guilty, they should be siezed, only then can we be sure that they will have learned their lesson.

 

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