Wednesday, 14 December 2011

Labour's Five-Point Plan

Labour keep on banging on about jobs and growth, and how we'll never get out of the mire if the economy doesn't start growing.

And, of course, on that aspect, they're right. The economy is stagnating, largely because of the ongoing confidence shortfall because of the Eurozone mess.

They have laid out their plan for economic growth here:

  1. A £2billion tax on bank bonuses to fund 100,000 jobs
  2. Bringing forward long term investment projects
  3. Reversing January's damaging VAT rise
  4. A one-year cut in VAT on home improvements
  5. A one-year break in National Insurance.

Okay, point one. Taxing the most productive aspects of our economy (in terms of revenue) to fund more people on the public payroll does not stimulate economic growth. It's just shuffling the pack. If you want to genuinely stimulate economic growth, get people doing real jobs in the private sector, not pushing bits of paper around for the Government.

Point two. Building infrastructure is all well and good - it has a positive effect on private sector growth. How do you plan to pay for it? If you say 'borrow more money', I'll be sorely tempted to hit you in the face. Repeatedly. With a cricket bat.

Point three. I didn't agree with a VAT rise in the first place - it artificially raises prices, and stifles consumer demand, which is generally bad for the economy. However, cutting it now will make no difference - struggling companies will not pass the cost onto consumers and simply absorb it into their own profit margins. A little more creative thinking is required.

Point four. Your stated aim is to help home-owners and small businesses. That's nice, but I think they'd be better served by actually having the money to afford the things in the first place, don't you? Plus, how are you going to fund it? The aforementioned cricket bat is now being hafted, and test-swung.

Point five. The only point I agree with so far. Employer National Insurance is effectively a Payroll Tax - it should be cut as soon as possible, but on a permanent basis, with a view to abolishing it in the next 10 years. I'd fund it through much deeper spending cuts, especially in benefits, healthcare and education, where huge amounts of money are wasted on bureaucracy rather than public services.

Identifying the symptoms, not the cause.

My plan:
  1. Cut spending. And I mean deeply. Ministers should go into their departments, roll up their sleeves and start cutting out vast swathes of middle management and bureaucracy that do absolutely fuck-all. The current spending cuts don't go far enough, and are just being passed down the line until the front-line workers lose their jobs. This is not the way a business would do it;
  2. Rather than direct capital spending on infrastructure projects, open it up to the private sector. Invite offers on installing super-fast broadband at no cost to the taxpayer, in exchange for exclusive contract rights for 10 years. You will have telecoms companies queuing out the door then. Extend the same for roads and rail. But for God's sake, apply a bit of common sense - not every private sector involvement has to end like Brown's PFI fiasco;
  3. Merge National Insurance with Income Tax, and increase the Income Tax threshold to £15,000, delivering big tax cuts to the lowest-paid. Match this with big reductions in the rump Employer National Insurance (Payroll Tax) to make it a lot cheaper to employ people. Limit benefits payments to 80% of the net minimum wage - no one out of work should ever be paid more than someone in work full time;
  4. Cut burdensome and ineffective regulations which tie business's hands, and stop new entrants to the market. Break up the big banking cartels by forcing organisations with more than 15% market share to divest their assets, putting more banks on the High Street. Competition will increase, and they'll start lending again. If they continue to act as a cartel, threaten negative interest rates and prosecutions.

Interesting to note that the Government aren't doing much of this either. The jackasses.