Dec 31 2008
New Year message 2009
I am a natural optimist. I like to see the opportunity and the possibilities in life. The background as we travel through the end of the old year and into the new is not auspicious. The news background threatens worse to come on jobs, company failures, house prices and much else. Just to make it all worse, violent war breaks out in the Middle East.
Last year I urged the authorities to try to stave off recession. I explained how “If the authorities cut interest rates and make more cash available to the banks we can avoid too sharp a downturn.”
This year I am forced to write about how they could limit the damage of what is likely to be a severe downturn in the UK.
It took them nine months to recognise the dangers of the high interest rates and tight money they were offering in 2008. All too late in the day they started to shower the banks with cash and bring the interest rates clattering down. These changes will have an impact, but not in the early months of 2009. The authorities seem to have forgotten that it takes a year or more for changes in interest rates and changes to money market liquidity to work through the system. In the meantime there is the remaining problem that the banks themselves are still weak, need to write off more from their assets, and are under regulatory orders to strengthen their balance sheets at the moment of greatest difficulty.
So how can I cheer people up? There is the outside chance that Mr Obama meant it when he said he would bring change. If only he would change the US approach to the Middle East that would help. If he would seek to spend the cash the US government is borrowing to good effect that would be a miracle.
The UK authorities could start to get a grip on their banks, and start to make better decisions about helping nurse them back to health so the wheels of borrowing can move the vehicles of commerce again. We need a government to understand that their regulatory and monetary policies need to reinforce each other, not struggle against each other, a government which finds a way for banks to pass on some of the cash it is now tipping into the system, and then controls the amount of that cash, before we start up another damaging inflationary cycle.
Last year at this time I went hoarse asking them to cut interest rates immediately. This year I say the rates are low enough. The problem now rests elsewhere. Indeed it is savers now who need the better deal, and I would like the government to help them.
They could afford to do so, and to lower taxes on income and jobs, if only they would forgo their foolish cut in VAT. We need now intelligent and affordable tax cuts, rather than clumsy and expensive ones which are not going to lift us out of recession.
I wish you all a happy and prosperous New Year. You will need the agility of a gazelle and the solidity of the ox to survive in business in 2009. It’s the year when savers are asked to share the misery of the borrowers, as we continue to sift our way through the debris of the Credit Crunch. I just hope you and yours have jobs that survive and enough cash to see you through.
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College...
From one ‘Gaz-ox’ to another, happy new year.
If there is one tiny bright spot in the middle east, if I know the Israelis, they will be through before Mr Obama takes the oath of office. At least that round will be over.
You were pretty much spot-on with your economic prognosis and set of recommendations all year.
May I finish with a quote from a man, I almost never quote, Mr Anthony Blair
“It is true that we had ten years of record growth when I was prime minister. I have, unfortunately, come to the conclusion that it was luck” (in a lecture to Yale University: source the ASI blog)
Tony, the rest of us worked that out years ago….
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Well, lets look on the bright side. Motoring for instance. Due to the rise in the price of petrol, motorists are driving less. Of course, any fule could have forecast this - but not the ones in government. Not only will this reduce pollution, but it will mean we don’t need a vastly expensive system of space-based tracking of everyone’s car. Good for civil liberties. Nor do we need higher VED taxes. Just adjust the fuel tax to stabilize the prices at a level that reduces petrol consumption.
Housing. As the price of houses drops, first-time buyers will be able to afford the damn things. And people with mortgages are using the reduction in interest rates to generate a more rapid pay off of their mortgage debt.
The banks are ignoring the clots in Whitehall and are tightening up their loan requirements, stopping people going into unsustainable debt.
Our oversupply of foreigners will solve itself as they go home.
My garden is looking OK and my shoulder is nearly better.
Happy New Year!
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APL Reply:
January 1st, 2009 at 10:49 am
backofanenvelopt: “ut it will mean we don’t need a vastly expensive system of space-based tracking of everyone’s car ..”
Sorry, we already have one. It’s called Galileo and we already have satellites in orbit (at great expense ) which are really looking for something to do, and someone to pay for them.
That thing will be vehicle tracking, that someone will be European motorists.
Typical Socialists, duplicate a project someone else has already created, then make people pay for a service that they don’t want and is already provided free by another service provider.
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Best of luck to you Mr Redwood, and to all Redwoodian’s.
Morgan the women’s clothing chain has just gone into administration.
The FTSE 100 has lost 30% of its value this year.
Woolworths failed to keep its head above the pond it lay in for nearly 100 years. The auto industry was knackered by recoiling customers, vilified by government for adding waste to our environment and taxed up to their eyeballs. Half the pubs have been shut as much by government as if Brown had gone round himself and done it. Fags are up, wines and spirits and beers are up, holiday operators next year will likely topple like ten pins, their building a runway we don’t need, not building nuclear power plants we do need, not cutting tax which we do need yet putting tax on stuff we don’t need. Meanwhile, we’re all off to the European Federation to have our eyes taken out and to hang draw and quarter our democracy, the president of America would like to hold a meeting sometime in April on the economic crisis, The UK, Europe, Russia, China and America are throwing people out of work twenty to the dozen, all our homes are going to be as good as a pig in a poke without buyers, the non-elected Prime Minister won’t call an election because he prefers salmon sandwiches as opposed to dog meat like the rest of us, and the leader of the opposition says “People are looking to us for hope in these dark days and we must be ready to offer it but fails ( nay refuses ), to say HOW, and then there’s YOU Mr Redwood, who shines a torchlight and points a way forward, which many would like to follow as it is a sensible path we can see ahead of us.
Now the BBC incidentally is plugging the Euro and catigating British shopkeepers for not taking foreign currency ! ( Watch that space ).
But apart from all that, I am a natural optimist too so I’m hoping there’s no escalation of war in the middle east to effect the oil price.
Happy New Year !
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happy new year
reading the medical blogs it looks like the bed shortage in the nhs is going to be a much more immediate life threatening crisis this winter, managers ringing round individual GP’s beginning them not to admit patients to hospital, we really have reaching the point when somebody should be saying the emporer has no clothes and we need decent health provision for the british people not this sub 3rd world nonsense
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I really don’t have a New Year message other than to wish John and everyone that makes this blog a good place to visit all the best for 2009.
Bottoms up!
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I want to thank our host for telling the truth, for actually bothering to read the rubbish that we all seem to write and, finally, to be so easy to understand.
I am personally convinced that this will be the last few months of that monstrous fraud Mr Brown and that, behind the good manners of the Tory front bench, there lurks some true talent which, in this vital year, will steer our battered ship of state through the icebergs.
Happy New Year!
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Perhaps a Swedish style disclosure law in some form or another for the banks will be passed by HM Government in 2009 to calm market fears although this could make things a lot worse!
Well with the pound set to go below the Euro this should lead to an increase in invisible earnings from all the Euro zone tourists that we should have. (Trouble is the downturn I suspect will be more catastrophic in Euroland than here and so I doubt we will see the visitors in any great numbers)
Also the strength of the Euro should hopefully lead to the currencies collapse perhaps not in 2009 but with any luck a lot sooner than later?
I hope too that we get though 2009 and look forward to reading your blog in the New Year, John
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I favor the old Howe -Thatcher remedy of raising VAT & cutting income tax ! Putting VAT up to 20% and cutting income tax by 3p to 17p while freezing public expenditure in real terms for two or three years would help a lot. For every £100 paid in basic rate tax a person would pay £15 less. By shifting taxation from direct to indirect and by restraining the size of government in the early 1980’s the way was paved for an economic upswing. How about a rehash of successful policies from the 1980’s rather than failed 1970’s ideas that we are getting from Gordon Brown ?
A dramatic 10% in all QUANGO budgets to fund deficit reduction of £10 billion coupled with an end to costly RDA’s , ID Cards , New Deal and wasteful IT schemes coupled with a civil service recruitment freeze & a greater use of market forces to cut procurement costs would make sense. Also not giving tax credits to the wealthy , with-holding EU contributions until their accounts are signed off and replacing Job Seekers Allowance & Incapacity Benefit with one sort of payment designed to slash economic inactivity . Surely as John Redwood has proved you can cut public transport funding by using more private monies as an alternative ?
The eventual aim should be over three years to slash the public money spent on QUANGO’s by 30% by just ending many , merging a few and hiving some off so that they are not taxpayer funded and they just survive on the fees that they charge service users.
The plan would be to save a huge amount of money so that you could stop public expenditure growing by more than inflation ( i.e. a real terms freeze ) to fund cutting the budget deficit while redirecting some monies towards the armed forces & pensioners. Pledging extra cash for defense and to lift more of the over 60’s out of poverty and a balanced budget on the back of undoing Gordon Brown’s failed public spending binge would in the present climate be morally right and politically popular.
These are the policies we need to stop Big Government causing yet more economic ruin - by giving the taxpayer value for money by properly financing our brave armed services and taking pensioners out of poverty you would give people strong reasons for voting Conservative.
Happy New Year John ! Thanks for the superb blog - it has been a joy to read !
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Happy New Year!
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”
Charles Dickens, A Tale of Two Cities, 1859
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Happy New Year, John, and everyone else.
I recommend 2009 happiness is not dependent on what happens in the Middle East, at least as far as Israel/Palestine is concerned. The “problem” goes back 3,000 years, and there are plenty of Israelis who cite from that long history in justification of contemporary activities, and plenty of Jews around the world who give sympathetic support.
I can not see how a two-state solution will ever work as the more viable and credible a Palestinian state the less appeal it will have to the Israelis.
So I think the best we can hope for is another year of containment and the hope that some genius will come up with an answer that will work.
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