Letter: Hints from the reconstruction of eastern Germany: A selection of readers' letters from the overwhelming response to our 10-point plan for recovery

Sir: One of the major problems of a simple cut in interest rates to 5 per cent and of immediate measures to revive the housing market, is that historically this has always sucked in imports, damaging our manufacturing base.

A revival of manufacturing has to be the only way for Britain to move forward. This will only happen if small manufacturing and development companies are nurtured and fed. Large companies feed off smaller innovative ones so may I suggest two simple measures to help.

1. Differential VAT rates of 14 per cent for companies of up to pounds 1m turnover and of 16 per cent for up to pounds 5m turnover. This would help small firms collect the tax and be simple to implement.

2. Direct payment to 'the banks' by the Government of up to 5 per cent of the interest of genuine business loans to companies in manufacturing industry.

Simple restoration of manufacturing industry confidence would lead to stable businesses, secure jobs and the development of Britain's industrial base. With job security, people will start to buy and sell their houses. It might also avoid the problem that straight reductions in interest rates always draw in more imports.

Yours faithfully,

ANTHONY SMALLHORN

Hitchin, Hertfordshire

23 October