Cut interest rates to 5 per cent straight away
Push ahead with major road and rail building projects
Take immediate measures to revive the housing market
Tell the banks to stop foreclosing on sound businesses
Establish an independent Bank of England
Balance budget over the course of an economic cycle
Replace Treasury forecasters with an independent body
Set up a new Department of the Economy
Eventually restore pound's link with EC currencies
Save the Gatt free trade talks from French veto
THE RESPONSE from readers to the Independent's manifesto for national recovery has not only exceeded our expectations, it has exceeded by far the response to anything we have ever done. The great majority of letters agree with the basic thrust of our 10-point plan - although nearly everyone has at least one criticism and one addition of their own.
But what stands out from the hundreds of letters we have received is that virtually all of you share our sense of urgency. We did not hear a single voice saying that everything would come right on its own, that all that was needed was patience. It is clear that what is required is action dramatic enough to have a substantial impact on confidence. Confidence is the key.
The danger is that the Government will think it politic to disguise the extent of its change of heart by using the tactic of gradualism. That would be a monumental mistake.
The beneficial effects of the last two cuts in interest rates have been minimised by the circumstances in which they were made and by poor presentation. This week's CBI survey showed that it is the very psychology of slump which must be reversed. To that end we repeat our call for an immediate 3 per cent cut in base rates - cautious hops to 6 per cent by early in the new year will, crudely, result in the least possible bang for the buck.
What is needed is the bold use of fiscal policy to demonstrate that for a period of time - perhaps two years - no capital project which is cost-effective, properly evaluated and has a reasonably short lead- time will be spurned.
A vital aspect of our manifesto which quite a few respondents ignored or accorded limited importance was our proposal that short-term policy action be accompanied by long-term reform of our institutions. Some readers cynically suggested that calling for reflation today and a rigorously anti-inflationary framework tomorrow was an example of Augustinian hypocrisy: 'Give me chastity and continency - but not yet]'
Many readers were in favour of an independent Bank of England as the sole executor of monetary policy and, unsurprisingly, the Treasury and its forecasters appeared to have few friends. On the other hand, there was some scepticism about the role of a Department of the Economy, which many people associated with the defunct Department of Economic Affairs and Sixties-style indicative planning.
We believe that the economic dislocations of the past, in particular the asset price inflation and borrowing binge of the Eighties which are now so miserably being paid for in bankruptcies and unemployment, are in part due to policy errors which derived from flawed institutional arrangements. The greater the commitment to overhauling those arrangements to ensure greater stability in the future conduct of monetary and fiscal policy, the bolder the Government can be in dealing with the essentially short-term work-out of the debt overhang with measures to kick-start the economy and strengthen personal finances and corporate balance sheets.
If those are points which we think are worth re-emphasising and which will be expanded below, readers also made a number of suggestions which should be incorporated in any recovery plan. Many of you were rightly critical of our failure to mention environmental issues. One way to square the circle would be to use environment-friendly taxes and charges - increased fuel tax, road pricing and so on - as lucrative sources of revenue to help the Treasury to balance the budget across the economic cycle. Further measures to stamp out late payment by big companies to small businesses was another popular cause, as was the absurdity of upward-only rent reviews at a time of falling property prices.
Finally, an idea which we particularly liked was allowing local authorities to use some of the pounds 5bn of receipts from the sale of council houses to buy repossessed homes from lenders and use them to take families out of the squalor of bed-and-breakfast accommodation.Reuse content