This week there has been more nervous financial news coming out of the Southern European members of the Euro. And whilst everybody is saying drop the currency the head of the IMF, managing director Christine Lagarde and her colleagues decided to offer some dangerous advice to the UK:
1) Drop the interest rate below 0.5%,
2) make it easier to borrow money,
3) and follow the on-going advice of Labour (the Masters of mismanagement) and drop the level of VAT.(More information can be found in this BBC article: http://www.bbc.co.uk/news/business-18158226)
Have these people lost the plot!?
By dropping interest rates, the economy will punish the savers even further. The Pension Funds are going to be encouraged to make bigger gambles in order to make up for the shortfall of an ageing population, and in the end they might lose all of the money due to the instability of those hazardous investments – we have just been here recently.
By putting British businesses into a debt, that will undoubtedly have high interest payments attached to it, the UK economy will never recover.
And by lowering the VAT rate, the consumer will get back to the Labour fuelled bonanza of overvaluing the private housing market and spending all the new found riches on foreign holidays and imported luxury goods.
Quite frankly: This is a state sponsored financial recipe for destroying a country, keeping unemployment high and ensuring that the United Kingdom will not even have the muscle to be represented in the G100 (Last bit is a joke, but if our GDP falls to that of Honduras, it won’t be a laughing matter for the residents of the UK)
One cannot criticise or chastise without offering a suggested solution, so here is mine:
1) Raise VAT to 25%. Some of Europe’s richest countries have VAT income above 20% and since the UK are charging no or reduced VAT on food and no VAT on books, it is fair to say that the poor and rich income house-holds will be equally hit. This will also help put a stop on the import of unnecessary luxury goods, by reducing the money spent.
2) This one parliament will not be able to legislate for, because it would create a riot + trouble in the EU courts. However, there is economist who has suggested that if a country’s population were to invest a substantial part of their own savings in their government bonds, that this would be one of the fastest ways to bring down a trade deficit and government borrowing.
And to top this up, if UK pension funds were to invest in UK only companies and jobs, then that would bring unemployment down, give the government course for raising the interest rates and become a real good long term strategy for anyone wanting to have a pension in the UK. All around, it would help turn the financial wheels faster and hopefully also finance the re-establishment of this country as a leading manufacturing powerbase. With the low value of the Pound and the high unemployment, now would be the time to seize that opportunity.
Just look at this Bloomberg Report: http://www.bloomberg.com/news/2012-05-23/pfa-pension-ekf-boost-export-finance-to-help-vestas-renewables.html where the Danish PFA Pension fund is helping companies like Vestas to win contracts through offering to invest/lend money to the buyer of the turbines. (Yes, I am Danish of origin, but we still have to look at the concept)
3) Drop all VAT on building/converting homes to a Passive House (http://en.wikipedia.org/wiki/Passive_house). The UK has a real chance to become the leader in Clean Technologies, and the huge side bonus is to be less reliant on overseas supply of energy, all whilst potentially generating a million new jobs. Since laws have already been passed in the UK on building Carbon Neutral residential and commercial properties, this is not something that will need a lot of effort.
To make it work; one of the stipulations could be that in order for the owner/investor to claim the VAT back, all resources for the build has to be sourced within a 25-50 mile radius of the site. And a full account has to be produced for all expenditure. This is a smart way to reduce imported goods and services, whilst also hopefully stamping out the “cash in hand” economy. A Win-Win-Win for the employee (of which there should be many more generated, who will be paying NI & PAYE), the investor and the government.
4) Most governments are afraid of letting businesses enjoy themselves, so much that it has nearly become a crime to sit down for lunch or a coffee. The world has moved on from the beer fuelled legless lunches to sensible meetings where you can actually remember what was discussed and agreed. However, it is clear that when business people get to meet, this is where magic is potentially created.
My challenge to the UK government is: Allow SME’s to make a £1,000-£5,000/month tax deductible UK entertainment for the purpose of business. This will help create and save many jobs in the catering sector, whilst also positively encourage business expansion through development of direct sales and strategic relationships. And for the naysayers, do remember this: A business can only make a tax deduction on money they’ve actually earned.Please, Please do comment on this article below. And yes, if you have a good idea, this is the time to share it!