First, consumer spending as a proportion of the national economy grew substantially in the 1980s, and is far too high. In contrast, investment is too low. Taxes must be raised on the personal sector, and the resources transferred both to public capital spending on the infrastructure and to reductions in corporation tax to boost business confidence and expectations.
Second, the balance sheets of many financial sector institutions remains very weak, as a result of imprudent decisions taken in the late 1980s. Despite falls in market interest rates, the effective rates of interest at which small businesses can obtain finance remain high, as the banks seek to rebuild their balance sheets through higher margins. The Government should socialise some of this debt by exchanging loans held by the banks with government debt.
Third, unemployment remains extremely high, posing a serious threat to social cohesion. Not just Britain but the European Community as a whole has experienced jobless growth for the past 20 years, as the benefits of growth have been appropriated by those in employment, to the exclusion of the unemployed. Active support needs to be given to encourage the principle of work-sharing if unemployment is to be reduced substantially.
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