Opinion: Is Vince writing for the Economist?

A leader in the latest Economist offers the UK a growth plan that involves structural reforms, infrastructure spending and monetary policy changes while maintaining fiscal discipline. Particular highlights include a more welcoming attitude to talented immigrants, and Land Value Taxation.

The tax system could also be changed to promote growth. One reason why companies sit on development land is because they do not pay taxes until the offices and warehouses are built. It would be much better to tax the land value: that would make hoarding expensive and force owners to sell to someone who can use the site. Once in use, the site value and the tax would rise—creating a virtuous circle, as the revenues pay for better infrastructure, making land more valuable.

There are some easy wins in this article but there are bitter pills too:

Many of these reforms—a nominal GDP target, bankruptcy laws, immigration—are free. Others, notably the extra £28 billion of infrastructure, need cash. Mr Osborne can find most of this in his budget on March 20th by shifting resources from less productive parts of Leviathan: for all the austere talk, state spending in 2011-12 was £300 billion more than in 2001-02. Health spending, which rose from £59.8 billion to £121.4 billion in that spell, is specifically protected. That is wrong: what private-sector boss would allow costs to rise so fast? And money could be saved by targeting now-universal welfare benefits, like fuel subsidies for pensioners, at the poor.

Overall, we have a refreshing contribution to the economic policy debate. Why refreshing? Because any contribution that isn’t reduced to the question of whether to borrow more seems refreshing. I thought the same of Vince Cable’s piece in the New Statesman, which was widely reported on as calling for or hinting at more borrowing.

It seems to me that both articles agree that the deficit reduction target is correct, but that the debt target (which will be missed anyway) might be relaxed a little to allow an extra one-off investment in infrastructure.

Both make the same noises on monetary policy, and there is a sense of agreement even when we dig down into detail, for example where Vince offers

Any reliable escape route from the crisis has to have a plausible mechanism for boosting credit to business, especially SMEs. That is why I am working in the government to launch a state-backed business bank and promote non-bank finance.

the Economist suggests

Britain’s dividend-obsessed financial markets fail the small, research-intensive firms the country needs for future growth. The government could give innovation a boost by setting up a public-private investment bank focusing on them.

With two towering authorities such as these in accord, what government could possibly resist?

* Joe Otten was the candidate for Sheffield Heeley in June 2017 and Doncaster North in December 2019 and is a councillor in Sheffield.

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One Comment

  • Richard Dean 14th Mar '13 - 6:35am

    Another reason why companies sit on development land is because they used all their cash to buy the land before the financial crisis. Now, they have no cash left. They can’t develop the land because they cannot get credit because their business plan cannot realistically assume a level of demand that will allow them to pay back the loan. And they can’t sell the land because everyone else has the same problem.

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