The 'Independent' manifesto for national recovery: Keep the government out of things

Share
Related Topics
THE Independent's programme for recovery correctly identifies some of the measures that could boost Britain out of recession and into recovery. It also includes a few policies which would do the opposite. By my reckoning it scores 6 1/2 out of 10.

The first proposal, to cut interest rates to 5 per cent, is risky. It would encourage foreigners to desert the pound. Our exchange rate would fall and foreign goods would cost more, fuelling inflation. On the other hand, exports would be cheaper in foreign markets and British businesses impaled on the interest-rate hook would be released. On balance, therefore, a dramatic move such as this is worth the risk. Inflation is less of a threat than depression.

No points for the suggestion of pushing ahead with major road and rail projects. Government has no money of its own. If it spends on public works, it takes cash from private citizens to finance them - or, by borrowing, pre- empts the cash that private businesses could have raised. Either way, it starves the private sector of capital which could be creating real jobs more efficiently than the state can create bogus jobs.

The idea of reviving the housing market is good, but not by tax concessions, which selectively channel funds into housing by making it more attractive than other investments. Why not reform conveyancing instead, thus speeding up and cheapening house purchases and sales? This would cost money to no one except lawyers.

The destruction of small businesses by withdrawal of bank credit is rightly fingered as a major contributor to recession. Full marks for proposals to curb it by a firm lead from the Bank of England. But do not forget that the majority of bankruptcies are triggered by the Government itself, with either the Inland Revenue or Customs and Excise pushing for liquidation. As preferred creditors, they have an interest in doing this. That position should cease.

Of course, the Bank of England should be independent. More than that, it should be able to behave like a real bank, with high- street branches and merchant banking services.

That the Treasury should seek a balanced budget over the course of an economic cycle makes obvious sense; indeed, it is virtually government policy already. Certainly the Treasury's Economic Forecasting Unit should be independent: it should make its projections and economic model available to private business on a commercial basis.

No marks at all for a Department of the Economy. We have been there before. The Department of Economic Affairs under George Brown was a laughing stock even before it produced its laughable National Plan. Centralised planning is not the way, as Eastern Europe has shown. The spontaneous outcome of the plans made by thousands of individuals and businesses doing it for themselves will achieve a better result than blinkered bureaucrats can put together.

It is remarkable that the Independent should propose linking our currency once more to those of our European partners. Wasn't that part of the trouble? It is all very well saying, 'when the economy has regained its strength' - if it does, we won't need fixed exchange rates.

The commitment to free trade is fine rhetoric, and of course we should support it. But we have no control over the ability of the French to torpedo the Gatt talks. They have overpriced food throughout Europe and pauperised the Third World to support their inefficient farmers. There is little reason to suppose British 'leadership' can change their minds. Half a point for sentiment; no points for practicality.

The overall score of 6 1/2 is creditable, but it overlooks one key element in any recovery. We desperately need more private investment, for with private investment come economic growth and expansion. We can boost this only by increasing the returns on capital, which means lowering the marginal taxes on investment income. Government has to cut capital gains tax, and probably upper-rate income tax and corporation tax as well. But these highly necessary tax cuts would have to be paid for by corresponding cuts in spending. Over to you, Mr Lamont . . .

The author is president of the Adam Smith Institute.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Ashdown Group: Senior VMware Platform Engineer - VMware / SAN / Tier3 DC

£45000 - £55000 per annum + benefits: Ashdown Group: Senior VMware Platform En...

Recruitment Genius: Purchasing Assistant

£10000 - £16000 per annum: Recruitment Genius: A distributor of specialist ele...

Recruitment Genius: Sales Ledger Assistant

£17000 - £19000 per annum: Recruitment Genius: A distributor of specialist ele...

Ashdown Group: Automated Tester / Test Analyst - .Net / SQL - Cheshire

£32000 per annum + pension, healthcare & 23 days holiday: Ashdown Group: A gro...

Day In a Page

Read Next
Labour and the Liberal Democrats would both end winter fuel allowances for pensioners with enough income to pay the 40p tax rate  

Politicians court the grey vote because pensioners, unlike the young, vote

Andrew Grice
US President Barack Obama and Chinese President Xi Jinping have a drink after agreeing a deal on carbon emissions  

Beijing must face down the perils of being big and powerful – or boom may turn to bust

Peter Popham
Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life