Friday, March 12, 2010
WHAT LABOUR'S BUDGET SHOULD SAY IF THEY WANT TO WIN
This isn't exactly original. I detailed a year & a half ago how to get not merely out of recession but into world class growth a year & a half ago & nobody, least of all no politician, has disputed that it would work. Nor have they done anything. This was & is my 16 point plan:
1 - Cut the size of government spending - I would go for a no new hires rule & price freeze in the government, probably excluding new doctors & a few other proven front line requirements - this should be about a 5% real reduction year on year. Also completely prune particular departments described later. 5% of the budget is £30 billion so including both actions over a couple of years that is probably about £100 billion. Mark Wadsworth comes up with a similar figure from different directions. This doesn't itself increase the economy, indeed cutting the non-productive £100 billion would cut the economy by £100 billion (ie 7%) but gives us money which can be used with a real multiplier effect & long term growth benefits.
2 - Cut corporation tax to Irish levels - cost about £30 billion & this is the main bit of what got Ireland's growth up from 2% to 7%.
3 - Lets go overboard & cut business rates too - about £20 billion at half the effect.
4 - Gut the Health & Safety Exec - if it saves the work of 4 million workers that is 14% of the economy.
5 - Allow the free market to build as many nuclear plants as the market needs, starting tomorrow. There are arguments for & against the government paying for & owning it but lets keep it simple & at zero cost.
6 - Improve transport - better roads, particularly motorway junctions, allowing airports to expand & the road tunnels project. Cost a few billion. Improving transport infrastructure is one of the things where government expenditure actually works.
7 - Adult job training. Hire retiring plumbers, electricians etc etc to do evening classes in some of the schools empty in the evenings. Adult, particularly male, technical education is the part of education which shows real worthwhile payoff in productivity.
8 - Automate the rail system & introduce lightweight vehicles based on road vehicle technology. My guess is this would be about £10 billion annually but once it is done rail costs go way down & capacity way up.
9 - Quit the EU. The Bruges Group have said the EU costs us £55 billion in direct costs. The EU's Enterprise Commissioner says the regulations alone cost £405 billion - ie £67 billion to us.
10 - Allow almost unrestricted housebuilding & encourage modular methods. This should let them cost about 1/4 the present price. Housebuilding is pretty much the biggest industry in any country & that would give us an enormous boost.
11 - End most of the sort of "environmental" regulations which have stopped Trump investing his £1 billion here for 3 years. This alone has cost the Exchequer £360 billion (£12% a year).
12 - This has already been done, albeit accidentally & need not be extended - Letting the £ drop is a major stimulus to the productive sector though exports. It worked in Major's time too - also accidentally.
13 - An X-Prize foundation & a free market regime on Ascension Island as a British Space base. So long as the Foundation is guaranteed an increasing amount of money at approx 5% above the rate of growth & able to offer prizes based on what the fund will be in future it can offer multiples of the current cost & in turn the gain to the economy will be multiples of that figure. Of course if nobody wins such prizes it has zero cost - that being the worst case scenario. I would suggest £1 billion a year as starting payment which would certainly put us at the top of the space & high technology trees attracting many times that level of investment & even more importantly, many of the world's best brains.
14 - I see that though we have saved £155 billion plus we have only spent about £70 billion. Put the rest into cutting taxes (28p off income tax or equivalent!). I would also support raising alcohol taxes since it discourages something socially damaging whereas most tax discourages productive stuff. It wouldn't take many years of excise duty rising faster than a Chinese style growth rate to pay for all the size of government here.
- These are a bit of a flyer not to be done till we know the economy is recovering:
15 - Build some floating islands, probably around Ascension island, probably about £1 billion each.
16 - Make a purchase guarantee for a factory to mass produce turnkey operation nuclear reactors in Britain, for use here & around the world. If it can be done with a new design & much smaller & hence less economic reactors it can be done for normal 1 gw ones. Invite the best designer, probably Ariva or Westinghouse (which used to be British owned but the government forced British nuclear to sell it off). We guarantee that if they can make a production line turning out one, turnkey operation reactor, a day we will purchase the first 2 years supply at cost if they can't sell them abroad. Assuming £350 million (70% of the current minimum price) a shot that puts us on line for a £255 billion liability & I am working on the assumption that, since there is currently a backlog they would actually sell. That is a bet but a reasonable one & if it works we would lead ourselves & the rest of the world to unequalled prosperity & end up with the sort of role in building the world's electrical power that the US has exercised for decades in world aircraft production.
- I think it would be conservative to say that most of the above individually, excluding #1, would increase growth by more than 2%. It would be optimistic to assume they would all work cumulatively but but even so that would be pretty good.
------------------
We live in an era when the policies of all 3 parties are close to indistinguishable, are not motivated by any ideology & are subject to change at any time. With the exception of #9 - quitting the EU - none of them breach the policies of the officially pro-business, pro-nuclear Labour party. Even on that one Labour have been on the quitting side of the policy dance more recently than the Tories & we know Brown refused Blair's offer to let him take over on condition of joining the Euro so clearly Brown is at least dubious of EU membership.
The current Labour position is that they have to keep borrowing £500 million a day to fuel growth. The problems with that are that the money is currently going to finance day to day state spending rather than investment & that so long as it is not actually invested in achieving real growth the time when it simply becomes impossible to persuade anybody to lend to us looms fast.
Using the existing deficit as I suggest would allow Labour to do an end run round the Conservative's fiscal prudence. If we could achieve 10% growth, like China, India etc, we could certainly afford our current deficit of 12.5% of GNP knowing that it could be paid off - people we are borrowing from would know the same.
I think a budget run on this basis would, along with their promise on electoral reform, leave the Conservatives dead in the water, guarantee a Labour win & much more importantly (assuming the promises made were kept since this budget is only a set of promises for after the election) guarantee great prosperity for the British people.
Obviously the Conservatives or LibDems could do the same, though without the platform of holding the Chancellorship, or the record establised doing so.
On the other hand this learned magazine proposes what is currently the official economic policy of the US & UK governments.
1 - Cut the size of government spending - I would go for a no new hires rule & price freeze in the government, probably excluding new doctors & a few other proven front line requirements - this should be about a 5% real reduction year on year. Also completely prune particular departments described later. 5% of the budget is £30 billion so including both actions over a couple of years that is probably about £100 billion. Mark Wadsworth comes up with a similar figure from different directions. This doesn't itself increase the economy, indeed cutting the non-productive £100 billion would cut the economy by £100 billion (ie 7%) but gives us money which can be used with a real multiplier effect & long term growth benefits.
2 - Cut corporation tax to Irish levels - cost about £30 billion & this is the main bit of what got Ireland's growth up from 2% to 7%.
3 - Lets go overboard & cut business rates too - about £20 billion at half the effect.
4 - Gut the Health & Safety Exec - if it saves the work of 4 million workers that is 14% of the economy.
5 - Allow the free market to build as many nuclear plants as the market needs, starting tomorrow. There are arguments for & against the government paying for & owning it but lets keep it simple & at zero cost.
6 - Improve transport - better roads, particularly motorway junctions, allowing airports to expand & the road tunnels project. Cost a few billion. Improving transport infrastructure is one of the things where government expenditure actually works.
7 - Adult job training. Hire retiring plumbers, electricians etc etc to do evening classes in some of the schools empty in the evenings. Adult, particularly male, technical education is the part of education which shows real worthwhile payoff in productivity.
8 - Automate the rail system & introduce lightweight vehicles based on road vehicle technology. My guess is this would be about £10 billion annually but once it is done rail costs go way down & capacity way up.
9 - Quit the EU. The Bruges Group have said the EU costs us £55 billion in direct costs. The EU's Enterprise Commissioner says the regulations alone cost £405 billion - ie £67 billion to us.
10 - Allow almost unrestricted housebuilding & encourage modular methods. This should let them cost about 1/4 the present price. Housebuilding is pretty much the biggest industry in any country & that would give us an enormous boost.
11 - End most of the sort of "environmental" regulations which have stopped Trump investing his £1 billion here for 3 years. This alone has cost the Exchequer £360 billion (£12% a year).
12 - This has already been done, albeit accidentally & need not be extended - Letting the £ drop is a major stimulus to the productive sector though exports. It worked in Major's time too - also accidentally.
13 - An X-Prize foundation & a free market regime on Ascension Island as a British Space base. So long as the Foundation is guaranteed an increasing amount of money at approx 5% above the rate of growth & able to offer prizes based on what the fund will be in future it can offer multiples of the current cost & in turn the gain to the economy will be multiples of that figure. Of course if nobody wins such prizes it has zero cost - that being the worst case scenario. I would suggest £1 billion a year as starting payment which would certainly put us at the top of the space & high technology trees attracting many times that level of investment & even more importantly, many of the world's best brains.
14 - I see that though we have saved £155 billion plus we have only spent about £70 billion. Put the rest into cutting taxes (28p off income tax or equivalent!). I would also support raising alcohol taxes since it discourages something socially damaging whereas most tax discourages productive stuff. It wouldn't take many years of excise duty rising faster than a Chinese style growth rate to pay for all the size of government here.
- These are a bit of a flyer not to be done till we know the economy is recovering:
15 - Build some floating islands, probably around Ascension island, probably about £1 billion each.
16 - Make a purchase guarantee for a factory to mass produce turnkey operation nuclear reactors in Britain, for use here & around the world. If it can be done with a new design & much smaller & hence less economic reactors it can be done for normal 1 gw ones. Invite the best designer, probably Ariva or Westinghouse (which used to be British owned but the government forced British nuclear to sell it off). We guarantee that if they can make a production line turning out one, turnkey operation reactor, a day we will purchase the first 2 years supply at cost if they can't sell them abroad. Assuming £350 million (70% of the current minimum price) a shot that puts us on line for a £255 billion liability & I am working on the assumption that, since there is currently a backlog they would actually sell. That is a bet but a reasonable one & if it works we would lead ourselves & the rest of the world to unequalled prosperity & end up with the sort of role in building the world's electrical power that the US has exercised for decades in world aircraft production.
- I think it would be conservative to say that most of the above individually, excluding #1, would increase growth by more than 2%. It would be optimistic to assume they would all work cumulatively but but even so that would be pretty good.
------------------
We live in an era when the policies of all 3 parties are close to indistinguishable, are not motivated by any ideology & are subject to change at any time. With the exception of #9 - quitting the EU - none of them breach the policies of the officially pro-business, pro-nuclear Labour party. Even on that one Labour have been on the quitting side of the policy dance more recently than the Tories & we know Brown refused Blair's offer to let him take over on condition of joining the Euro so clearly Brown is at least dubious of EU membership.
The current Labour position is that they have to keep borrowing £500 million a day to fuel growth. The problems with that are that the money is currently going to finance day to day state spending rather than investment & that so long as it is not actually invested in achieving real growth the time when it simply becomes impossible to persuade anybody to lend to us looms fast.
Using the existing deficit as I suggest would allow Labour to do an end run round the Conservative's fiscal prudence. If we could achieve 10% growth, like China, India etc, we could certainly afford our current deficit of 12.5% of GNP knowing that it could be paid off - people we are borrowing from would know the same.
I think a budget run on this basis would, along with their promise on electoral reform, leave the Conservatives dead in the water, guarantee a Labour win & much more importantly (assuming the promises made were kept since this budget is only a set of promises for after the election) guarantee great prosperity for the British people.
Obviously the Conservatives or LibDems could do the same, though without the platform of holding the Chancellorship, or the record establised doing so.
On the other hand this learned magazine proposes what is currently the official economic policy of the US & UK governments.
Labels: British politics, ecnomic growth, Fixing the economy
Comments:
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1) fix the tag
2)I think I could steal this post and convert it in a recipe for Italy; i wholeheartedly agree with you.
2)I think I could steal this post and convert it in a recipe for Italy; i wholeheartedly agree with you.
# posted by 
: March 24, 2010
: March 24, 2010
Yes I do think that, with some tweaking, this would work for any developed country In some of the undeveloped ones the lack of rule of law is a greater barrier & they would have trouble building nuclear reactors.
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