Margareta Pagano: Help small firms. Tax cuts won't even be a short-term fix
The Government must boost the real economy
Sunday 23 November 2008
Sir John Rose, chief executive of Rolls-Royce, is one of Gordon Brown's closest industrial advisers, so let's hope the aerospace boss has whispered a few wise words to him about creating wealth, rather than just spending it, ahead of tomorrow's day of reckoning. As Sir John says, there are only three ways to make wealth: you dig it up, grow it or convert something in order to add value. Anything else is merely moving it about.
We can assume that the Treasury hasn't discovered new gold reserves, having sold the nation's stock at rock-bottom prices. Nor does No 11 have any plans to go into farming. So that leaves converting something to add value, which means creating the best conditions in which enterprise can flourish. That's the real test for Brown and his Chancellor, Alistair Darling, in tomorrow's pre-Budget report – or indeed Budget, as it is de facto becoming. If they are prepared to be radical, then jumpstarting the economy is not impossible.
But the signs are that the plans are not far-reaching enough. If fiscal stimuli and higher borrowing are the PBR's main planks, ministers will have wasted a chance to get us out of this mess, leaving a greater debt mountain to be paid off by our children's children.
First, the £15bn tax cuts and credits for the lower paid are the right thing to do but not efficient; even the hardest up are more likely to save than spend. And should the measure somehow get people shopping again, much will be spent on imports rather than private-sector recovery.
Higher public spending is equally flawed. The Treasury's plans for billions to be spent on ID cards and the NHS database project, and to bring forward other projects, may well create public-sector jobs but will do nothing for the long-term economy.
Darling can address this by boosting the real economy – and particularly small businesses, which employ 60 per cent of people in the private sector. He must force the banks to lend again and lower the penal interest rates. His shadow, George Osborne, may not have distinguished himself in the past few months but his idea that the Government should act like a bank, offering direct loans to business, was a blinder. It's an idea Darling could borrow – not something that's without precedent.
Darling should cut VAT and slash small business corporation tax to at least 20 per cent, and reintroduce the Enterprise Incentive Scheme. Companies should be encouraged to keep employees rather than make them redundant. I'm not suggesting adopting the French 35-hour week but there are alternatives – look at how JCB management and workers got together to take wage cuts and save jobs. It must be better by far to keep the old jobs going, as well as helping to create new ones by rebuilding our industrial base. With this in mind, the Treasury needs to signal its commitment to an industrial renaissance. To do this it needs to reprioritise research and spending for universities and get the nuclear building programme going, which will bring thousands of jobs for decades and reskill the workforce.
While Rolls-Royce had to cut 2,000 jobs last week, it is still recruiting graduates, apprentices and other highly skilled workers at the rate of knots.
Let's hope Brown has listened attentively to Sir John, and doesn't just move bits of the economy around.
Celebrities gather in Dubai to hear Kylie's swansong for an age of opulence
Kylie's $3m (£2m) singing extravaganza at the Atlantis Palm hotel opening in Dubai was one of those moments that archaeologists may come to use to date the end of an era. Digging down into the Gulf sands, they'll find the fragments of more than 1.7 tons of lobster, just one of the many delicacies consumed by the celebrities flown in from around the world for Sol Kerzner's $20m banquet, and wonder at the opulence of our society.
Janet Jackson and Robert de Niro joined the UK's Sir Philip Green and Sir Richard Branson for the opening of one of the world's most sumptuous hotels, complete with its magnificent sunken aquatic chambers and enormous waterfalls. Kerzner hopes his hotel will get 80 per cent occupancy rates but that looks pretty optimistic.
Dubai's growth has been staggering but this latest spectacular building may just prove a "folie de grandeur" too far. For even in the Gulf, falling oil prices and a crashing property market are putting the sovereign wealth funds at risk. Some estimates put Dubai's own debt at $47bn, while many of the big US banks that have invested in Gulf property are unwinding their own real estate investments.
Away from the feast, the financiers who helped put together these deals are still in a bloodbath. In New York the Citigroup board was locked in talks this weekend looking at options from a sale to a break-up to a bailout from the US government. Even buying by Saudi Prince Alwaleed bin Talal last week failed to support the shares, which are now down to $4.70. Citibank, which is chopping 50,000 jobs, is not the only one still suffering. JP Morgan is looking at cutting 3,000 jobs and Bank of New York Mellon 1,800. At least another 365,000 jobs are expected to go from the financial sector alone; a bloody finale to the Kylie Atlantis Period circa 1991-2008.
Question of ethics Panel debates banking behaviour
Why is the UK such a wimp when it comes to prosecuting financial crime? It's a good question, and just what you would expect the combatative Jon Snow, Channel 4's broadcaster, to ask at a global ethics debate hosted by the Chartered Institute of Management Accountants and watched by 200-plus members.
With him in the den was James Caan, of the Dragon variety; fellow broadcaster Andrew Neil; Dr Noreena Hertz, political economist; Nina Barakzai, Cima's ethics expert; and myself. Neil says we are so soft because the establishment is reluctant to take on its own, while I suggested that, quite apart from our spineless authorities, it's perhaps because we have a sneaking admiration for our financial miscreants – whether it's the Great Train Robbers or the Great Bank Robbers of today.
What all the panel agreed on was that ethical behaviour will be pushed even higher up the business agenda because of the current crisis. The debate was such a success that it will be held again next year when, hopefully, we will have better answers to Snow's question.
And why are 'southern' ways of speaking spreading north?
life + styleClarissa Baldwin is the brains behind the slogan 'A Dog is for Life not just for Christmas'
Autumn Statement 2013: Work until you’re 70 - George Osborne accused of ‘living in fantasy land’ over pension reforms
Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
Paul Walker autopsy: Results reveal Fast and Furious star's cause of death
Scientists sequence oldest human DNA from fossilised leg bone found in Spain
UK weather: Two dead and 100,000 homes without power as 100mph storm batters Scotland – now biggest tidal surge in 60 years threatens east coast
- 1 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 2 How black gold was hijacked: North sea oil and the betrayal of Scotland
- 3 A forgotten episode in Russian history leaves links with the Philippines
- 4 Scientists sequence oldest human DNA from fossilised leg bone found in Spain
- 5 ‘Put it in my mouth’: Viewers outraged by apparent reference to oral sex in VIP e-cig advert
iJobs Money & Business
£90000 - £120000 per annum: Harrington Starr: Global Director of Infrastructur...
£50000 - £70000 per annum + Bonus + Benefits: Harrington Starr: Associate Dire...
£Negotiable: Citifocus: High calibre individual with a strong understanding o...
£50000 per annum: Morgan Hunt: Whilst the Real Estate sector was suffering thi...