Samuel Brittan has written in the FT today, saying:
The shock rise in UK unemployment in October cannot be dismissed by the usual warnings about not going by one month's figures. The size of the jump may be exceptionally large, but it marks an accentuation of a trend that has been evident since April. Previously surprise had been expressed at how modest an effect the sluggishness of the economy had had on unemployment. That surprise is rapidly disappearing.
He's right. And this is his suggested economic policy:
Five simple steps could be taken to facilitate such an increase. First, the Bank of England should announce immediately the extra quantitative easing at which it is already hinting, but widen its asset purchases beyond the conventional gilts. Second, having sold off Northern Rock, the Treasury should retain its other bank holdings as a basis for a state lending bank for small and medium- sized enterprises. Third, the government should give in to political pressure and postpone indefinitely the increase in petrol duties due in 2012. Fourth, it could introduce a temporary cut in value added tax. Fifth, and most heretically, there should be an anti-savings drive.
I agree we need more QE. I'd prefer it was Green QE, but we need it.
I agree we need a state lending bank.
I'm not sure on petrol duties: I'm green. I think there are better taxes to cut, but that moves me straight to VAT cuts, where 15% makes sense right now - as Alistair Darling did.
And let's look at the fifth idea, because that is fascinating.
What Brittan is saying is that the paradox of thrift is in play - people are saving far too much, and companies too. Since exports are also affected we're ending up with recession. I agree we need to spend more, but not on consumption for the sake of it.
The Green New Deal suggests we create a 'carbon army' to insulate Britain and install solar and other alternative energy. This is spending now to deliver a long term difference. That's what we really need. And yes, I do have solar panels on my roof and even today they're generating nicely (plenty enough to power the house where I'm working and be sending into the grid right now).
Ed Balls also had this idea in suggesting cuts in VAT on house improvements. That's also completely logical.
So let's not have it said there is no alternative to what Osborne is condemning us to and on false premises. As Brittan also says:
Of course, Britain's problems are aggravated by the world, and particularly the European situation. But the UK is part of the world and its government has worsened matters by throwing its weight behind a restrictionist approach. Now it is urging on the eurozone a fiscal union of which it wishes to form no part. No wonder French and German leaders occasionally allow their irritation to emerge.
Quite so. The UK's problems right now were made by Osborne and the solution has to start here too. No excuses. Just get on with it George - or accept the consequences.
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I agree up to a point of putting less into savings and spending more in order to boost the economy, but we really need to expand our manufacuring base and create a productive economy.
Spending more will undoubtedly help the economy, but where will most of that money be spent? On foreign goods as we now only have a small manufacuring sector. much of the money spent will simply leave the country.
Social housing, public transport and infrastructure and manufacturing. That’s where the money needs to go.
But insulation etc now goes the immediate push before social housing etc come into play
Extra excess consumption, I entirely agree, is not what we need
A real example of the paradox of thrift for you, Richard, and how current government policies are having a chilling effect (nothing to do with the Eurozone, note) on personal behaviour.
A couple of weeks ago I found out from a colleague now in senior managment at my university that all Faculties have been asked to draw up plans for emergency cuts if, as is expected (and current statistics suggest), the new higher education funding regime leads to a significant fall in student numbers from next year.
Given the large number of people at said university who have been encouraged to take early retirment over recent years (and a two year recruitment freeze) I’d assumed, as had many of my colleagues, that the jobs of those that remain were safe. Clearly they aren’t. Consequently I for one will be saving my salary from now on, as I expect will many of my colleagues, just in case this threat becomes a reality.
With some exceptions, this situation applies across the university sector in England, which amounts to a fair amount of cash ‘frozen’ in savings.
average cost of solar panel install is 7-10k from what I have seen, not the sort of cash your average family has to spend on this sort of thing. are you saying the subsidy should be bigger?
The payback on such schemes more than covers financing costs – even when the tariff is cut
The rror is cutting the tariff
The need is state funded loans via local authorities collected with council tax to pay for this
An anti-savings drive is so wrong! Thrift and saving for a rainy day are things to be encouraged, not discouraged.
People are also choosing to act rationally and pay down their debts. More sensible behaviour.
Are there any reliable figures for both personal savings and personal debt levels, over say a 40 year period?
He’s sounding like another mouthpiece for the ‘let’s turn everyone into debt-serfs’ banksters.
One big problem with his analysis is that he starts with the assumption that contraction is unthinkable. Sorry to disappoint him, but it’s inevitable.
Let’s find another way of dealing with the consequences of people doing the right thing, please.
Hint: when the cake’s shrinking, we have to share it out more equitably.
I argue for more state borrowing right now, and for those savings people make almost compulsorily via pensions to be directed into funding the investment we need
This would work to provide at least £20 billion a year to fund investment we need
I should have added that proviso – all that savings be used for responsible investment in real enterprises, and not used for gambling in derivatives and other fake money-diverting schemes.
One other thing I’d add on the savings front – bring back real building societies, as mutuals, whose sole purpose is to manage people’s savings and fund homes for people. Turning them into banks was one of the biggest mistakes we’ve made.
Agreed!
Phil, I agree with you that we need to share the shrinking cake more equitably. Unfortunately how can this be achieved? We have witnessed greed on such a colossal scale by the already wealthy in our society and I doubt very much that many of them in the UK will voluntarily relinquish some of that. There have already been calls for the 50per cent tax rate to be reduced, so are we really to believe that these people have the less affluent in their thoughts? I do not think so.
There’s not a hope they will acquiesce easily
This requires a political fight
The cut to 15% in VAT was widely regarded to have been a complete waste of money. People don’t suddenly go out and buy a big TV that was previously priced at £850 now that it only costs £832. A cut in VAT will not boost consumer demand by any appreciable amount yet it will lead to a 25% reduction in VAT revenue which has to be plugged from somewhere else.
Foods, clothes, books all attract no VAT, electricty is severely reduced so it’s not as if people are struggling on VAT on necessities.
The fundamental problem is that we have a debt overhang which was not corrected by the 2008 downturn. A state-sponsored bank to lend money to small businesses is just trying to rectify a problem caused by too much borrowing by introducing more borrowing.
Darling delivered growth n the face of recession.
The VAT cut was part of that
I would agree he should have done much more and his commitment to cuts was wrong – as we had no debt overhang, just a deficit caused by the banks
But your recipe has only one guaranteed outcome as the evidence of history shows – and that d more debt and recession
“Darling delivered growth n the face of recession.”
What growth he did deliver was minimal and unsustainable. It was based on borrowed, printed money. It appears you follow the Brown line of being able to “abolish boom and bust”.
I find it incredible that you cannot link the banking crisis to the fact that there was too much borrowing in the boom. But you still maintain that the two were separate.
it’s not incredible
It is sound economic reasoning
Most of the growth caused by the VAT cut was prompted by people buying stuff before the rate rose again (which everyone knew that it would). It may have pulled forward some discretionary spending, but it didn’t increase absolute demand, because everyone knew that the recession wasn’t going to pass quickly.
Your argument is that a cut in VAT will encourage private sector spending, which will encourage growth, which will requires less state spending to support those who are unemployed because of a lack of private sector spending. But if that is the case, why cut VAT to 15% for a few months? Why not cut it to zero permanently?
What absolute nonsense written by someone so cushioned from reality in Jersey that he does not realise most households only just about make ends mean and have no cushion for discretionary spending
When will you join the real world?
“so it’s not as if people are struggling on VAT on necessities.”
Tell that to the pensionern the parent, the unfortunate unemployed who have to choose between skipping meals or turning on the heating.
savers are being hit hard already, they should organize and ask for rates to go up. rates are negative already.
I assume Sam Brittan is another of these economists who did not see the trouble brewing in the banks and housing market and also the problems of being in the European union? Dear Richard Murray perhaps you could dig up an economist who diagnosed the problem in the economy and the banks before everything collapsed and ask their opinion since they seem to know what is going on.
Ann Pettifor?
I work with her often
Me to lesser degree
Fred Harrison published Boom Bust: house prices, banking and the depression of 2010 in 2005.
Why not shut down the tax havens and repatriate all that lovely drug, organised crime and tax dodger money back to the UK?
Maybe swap some of it for Crisis Bonds. Just until we get back on our feet, of course.
Agreed entirely
The Green New Deal suggests we create a ‘carbon army’ to insulate Britain and install solar and other alternative energy. This is spending now to deliver a long term difference. That’s what we really need. And yes, I do have solar panels on my roof and even today they’re generating nicely (plenty enough to power the house where I’m working and be sending into the grid right now).
The best thing I have seen you write on here! Create job and reduce imports. A much better use of funds than giving people £5,000 for an electric car that is barely any better for the environment
I found this article it has a chart of “US Corporate Taxes As a Percent of Corporate Profits”
http://jessescrossroadscafe.blogspot.com/2011/11/us-corporate-taxes-as-percent-of.html
Your solar generating only feeds into the grid on the consumer side of the local substation.
If everyone had the same installation it would feed nowhere since each would be attempting to supply the other.
Nice idea as long as only a few have the installations.
And as long as the government provides the feed-in tariff. But I note that they are cutting the subsidy to renewable generation.
Still, at least you won’t suffer from power cuts too much. I noted that Norfolk has a lot more than my county…..
We have loads!
And what us wrong with partial solutions?
An interesting read in the Independent today:
http://www.independent.co.uk/news/business/analysis-and-features/what-price-the-new-democracy-goldman-sachs-conquers-europe-6264091.html
Game: Set: Match ?
Disturbing
Tge fight goes on against such oppression
A good and timely (and frightening) article – with a fair number of supportive comments.
But how telling of what we are up against: on the very same page of the Independent is an obscene advertisement proclaiming ” The Euro is about to implode but that doesn’t mean you can’t profit” and announcing a “new report” which “which will explain – in plain English – how to protect your investments while enjoying potentially astronomical gains.”
It seems we have a very long way to go.
This talk of home generation is a privileged delusion which the majority of consumers will pay for with increased fuel costs .Much better to support community generation schemes which at least attempt to spread the benefit of subsidies maybe even to those in the community suffering real fuel poverty. Richard I’m basically a great supporter of your opinions, but this one is just middle class kicks
I agree righ now it does not theoretically pay
Few technologies do without support
That’s the logic of the tariff – as technology develops it will improve
And sure I could be wrong
It doesn’t also stop me being a big fan o f other technologies too
Richard
I’m with you on the green new deal but George Monbiot no less has a coherent argument that the feed-in tarrifs for domestic solar panels in the UK are economically inefficient at best and actually environmentally damaging at worst. http://www.monbiot.com/2010/03/01/a-great-green-rip-off/. George knows his stuff, maybe he’s worth talking to regarding these proposals?
I like and respect George
We know each other
It doesn’t mean we agree on everything
Fine. Can I ask why it is you don’t you agree with him on this subject? Not that I’m trying to start an argument you understand, but this seems to be a reasoned and meticulously sourced article.
The one thing we need, and you constantly argue for, is for policy to follow the evidence. If the evidence George quotes is wrong then point us to the counter evidence to support your position. If you don’t have any then in order to be consistent I think you need to change your mind.
Sorry if this seems like knitpicking Richard, I know this is a minor diversion to the central theme of your work, but we should hold to the same standards we demand of others. Our side must also have proper evidence for our claims, otherwise we go down alternative but similarly dogmatic routes to the ones that created this mess in the first place.
The counter arguments com from someone much more experienced than me – Jeremy Leggett – search him in the subject
he and George have form
I assume governments have a choice where to ‘inject’ the QE money into the economy.
May I suggest we should try POOR QE where we double state benefits and pensions for six months or a year instead of just handing our money it to rich bankers to use it to make a fast buck abroad and then doubling the obscene bonuses they pay themselves for being so clever.
Thanks Richard. My initial response after a quick Google of Jeremy was to dismiss him as merely a solar panel salesman with a vested interest who could not therefore be impartial on this matter. Having taken my time and looked into him more closely that reaction was wrong and does him a disservice. His heart is clearly in the right place and I’ll read more of what he has to say. His debate with George is a good one though it’s amazing how rabid it gets in the comments.
However from the relatively little reading I’ve done I still cannot find him offering a refutation of George’s central point that solar is not the right thing for the UK climate. Sure it’s a fabulous solution for the tropics and its development is important and environmentally beneficial for the world as a whole. However in this country we simply do not have the climate for it, wind and wave power seems like the right way to go for us. Furthermore the feed in tariff scheme is wasteful as it diverts finite resources away from solutions where you get much more bang for your green buck. Jeremy admits that much himself.
I believe solar is part of the portfolio
Personally I agree though – wave looks to me like the real future
Now we are getting somewhere, horses for courses, support the development of a pan european grid where the appropriate regional technologies compliment each other exploiting optimal regional conditions. A perfect project for green QE
Solar definitely has a part to play, especially in countries with an excess of sun.
However, the part people neglect is that all pv units use increasingly “rare” materials.
Unfortunately these are also shared in semiconductor manufacture.
And in manufacture of magnetic materials used in wind generators.
90% of these come from China, which is restricting exports of them:
http://www.bbc.co.uk/news/business-11633929
They could be mined in the USA, unfortunately the environmentalists don’t like mining too much, so that looks a big no.
And, of course, green here means problems elsewhere:
http://tinyurl.com/4u2xjst
I suppose I’ll put this here.
Part of the “Game, Set and Match series, but a deeper analysis of the Big Takeover:
“Incidentally, is it really that surprising that Goldman is now doing its best to precipitate a bank run of Europe’s major financial institutions by “suddenly” exposing the truth that was there all along? During the great financial crisis of 2008, the one biggest winner from the collapse of Bear and Lehman was none other than the squid. This time around, Goldman has set its sights on Europe and has already made sure that its tentacles will be in firmly in control at all the right places when the collapse comes, as the Independent shows”
http://www.zerohedge.com/news/complete-and-annotated-guide-european-bank-run
An interesting family tree !!
“What absolute nonsense written by someone so cushioned from reality in Jersey that he does not realise most households only just about make ends mean and have no cushion for discretionary spending
When will you join the real world?”
Ignoring the ad hominem, then what is the purpose of the VAT cut if, as you say, most people have no cushion for discretionary spending, given that necessities have very little or no VAT? You haven’t answered this point. The VAT cut did nothing for the economy other than drain Treasury coffers.
It promoted economic activity
That avoided recession
Raised tax
Protected jobs
Kept companies going
None of that is of worth? Why not?
It didn’t do any of those things.