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)
HELLO!
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!
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