Sunday, May 03, 2009

HOW WE CAN GET OUT OF RECESSION - What politicians who say they will "do whatever it takes" would do if they meant it

FOR SCOTLAND while remaining part of the UK:

1: Cut government spending by £3 billion (10%). Since we spend about 20% more than the UK average per head this is clearly practical.

2: Endorse nuclear electricity. We could still persuade the French to invest heavily here if we were sufficiently enthusiastic about letting them build.

3: End business rates. This is a pretty extreme step, in principle business should pay something, but we are in a drastic situation. This is a fairly close analogy to cutting corporation tax to 12.5%, like Ireland's for which we need Westminster support & though the SNP are committed to doing so they don't seem to have been putting on enough pressure. In theory cutting CT is marginally more effective because it rewards the most profitable best whereas rates rewards the most property intensive but it is a relatively marginal difference. This would cost about £2 billion.

4: Cut the laws on Health & safety & other regulations & the enormous bureaucracies that enforce them which do so much to push up the cost of projects here.

5: Tell Donald Trump he can start investing his £1 billion tomorrow morning. Apart from his own investment how many billions have we lost by convincing other potential investors they would not be welcome?

6: Cut the regulations that prevent people building houses.

7: Provide an interest free bridging loan of 20,000 pounds to any off site manufactured home for the period from completion of manufacture until installation & a grant of 5,000 pounds to direct purchasers of such homes, so long as they are for their personal use as first homes. This system to last only until we are building 30,000 a year. This would encourage the establishment here of a modular housing industry which, in due course, the English would be clamoring to buy.

8: Scottish Tunnel project - start cutting tunnels to the Cowal peninsula & the Scottish islands. Cost £7 m per km

9: Forth Tunnel instead of bridge & start digging tomorrow. Since the official cost of the bridge has been reduced to two & a half billion massive savings could be made this way & it would be ready far earlier.

10: Privatise Scottish Water thus saving the over £200 m it gets annually.

11: Schools vouchers. It should be a matter of shame & is instead a matter of complete disinterest in our media that our schools, for the first time ever, are underperforming southern ones. The long term future of the nation depends heavily on education.

12: Fully automate the Glasgow-Edinburgh train system.

13: Stop subsidising bloody windmills. Apart from the total waste of money we have as beautiful a countryside as anywhere in the world & should stop desecrating it. This would save between £500 m & £1 billion depending on whether we are allowed to end the subsidy to the production of electricity as well as to building the windmills.

14: Scottish X-Prize Foundation. £50 million a year would give us an even chance of gaving a Scottish built orbital plane in 5 years & would certainly attract a significant part of the world's satellite industry (£1 billion a year & growing)

15: Spend the extra money we have saved on improving roads with the exception of

16: £1 billion to cut Scottish income tax by 3p, the full amount allowed. If that doesn't get people wanting to move here nothing will.


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 in each set, 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.

Alternately doing only a small amount of this would still have us matching the most successful economies in the world.

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