May 082014
 

protectionism

This week saw Pfizer launch a new bid for AstraZeneca, and along with it a scramble of politicians from all sides airing their protestations over the ignominy of having a cheeky foreigner interested in our assets.

Here are 8 reasons why the protectionism of our senior politicians is wrong:

  1. Both AstraZeneca and Pfizer are privately owned, by you, me and our pension funds.  Why should a politician decide whether or not we can sell our company to another, any more than they can stop you selling your car and buying  a new one.
  2. Government intervention in business transactions is often disastrous.  Politicians are interested in being re-elected above all else.  Is that a sensible basis for a fair and independent assessment of the merits of a takeover.
  3. Governments, quangos and the press all may have their views on a takeover, but they don’t own the company, and nor should they.  I may not like the house you are buying but it doesn’t give me the right to stop it.
  4. Capitalism is about creative destruction.  The market and the performance of companies dictates who wins, and therefore grows, and who loses, and therefore fails.  Companies often make mistakes, but the government makes far more.  When a company makes a mistake it suffers the consequences and shrinks, exactly as it should be.
  5. Britain has many great, world-beating companies, from oil and gas, to financial services, to consumer goods.  Whether those companies are foreign owned or British owned matters not a jot.  They employ people here, pay taxes here and create intellectual capital here.  Would you rather a British owned British Leyland or a Indian owned Jaguar Land-Rover.
  6. Companies exist to make a profit.  In doing so they create jobs and improve the lives of their employees and customers.  Politicians exist to get re-elected.  Never mind the long-term consequences.
  7. There is no consistent evidence that foreign owned companies reduce employment in the UK.  In fact many studies have shown that the most aggressive offshorers of jobs are British owned companies
  8. Protectionism doesn’t work.  Do we really want to go the way of France, or maybe Zimbabwe or Cuba.

The Conservative party have tried again to out-labour the Labour party. When Milliband cried foul over Pfizer it was the perfect chance for Cameron and Osborne to highlight Labour’s hypocracy and to stand up for free trade.

Instead George Osborne  engages in talk of “public interest” and Cameron discusses “getting assurances”, and even of setting up a new quango to evaluate takeovers.  Why should a quango be any better at deciding which takeovers have merit – and more importantly what gives them the right to interfere between a seller and a buyer.

Osborne remains as disconnected from traditional conservative values as ever. His socialist roots spread deep, and for the sake of Great Britain he must go.

Comments

What do you think of the Conservative’s stance?  Should government play any role in determining who owns companies? Leave your comments below.

Apr 082013
 
RIP Baroness Thatcher

RIP Baroness Thatcher

Baroness Margaret Thatcher, RIP.

Today marks a sad day.  An incredible lady has passed away.  A lady who rescued the UK from the brink of social meltdown, who saved the economy, stood up to Europe, rescued the ideals of capitalism, and drew millions back from poverty.

Who will pick up the mantle now? George Osborne and David Cameron have more in common with Brown and Callaghan than they do with the free market economics of Baroness Thatcher quotes.

Here are a few of our favourite Margaret Thatcher quotes.  Do you have any more?

  • “What is success? I think it is a mixture of having a flair for the thing that you are doing; knowing that it is not enough, that you have got to have hard work and a certain sense of purpose.”
  • “You may have to fight a battle more than once to win it.”
  • “To those waiting with bated breath for that favourite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The lady’s not for turning.”

and perhaps the most relevant of all:

  • “Pennies don’t fall from heaven — they have to be earned here on Earth.”

 

What did you think of Thatcher?

Please add your thoughts or memories of Margaret Thatcher below.

Mar 212013
 

Maggie 003Generations will look back at yesterday’s budget disaster as the tipping point. A Conservative party that ostensibly believes in fairness, capitalism and libertarian values has all but abandoned those principles in favour of state-sponsored redistribution and socialism.

Debt targets have been all but abandoned. Debt to GDP ratios will not start to decrease until 2015 and total debt will continue to grow until 2017 / 2018 at the earliest. Even these dire forecasts are based on the unrealistic assumption of growth returning to trend and inflation staying in the sweet spot of 2-3%.

There was no supply-side reform, none of the much needed cuts to current spending, including the vast welfare budget, foreign aid or the NHS. Public sector workers will continue to receive pay of up to 20% higher than the private sector, along with gold-plated, guaranteed pensions.

Osborne’s scheme to prop up the housing bubble by providing taxpayer funded interest free loans of 20% to house buyers anything the Socialist Workers party could have dreamed up.

Has he learned nothing from the sub prime crash. He’s going against everything that the conservatives used to stand for. Instead of reducing people’s dependency on the state he’s now nationalising mortgages too.

The pain of these decisions in this budget disaster will haunt the UK for many many years to come. Osborne has taken a further step to mortgaging the future of the country and committing a further generation to borrow and spend what they don’t have.

To make housing more accessible requires a massive house-building programme, something the private sector would leap to without a single penny of government money if only planning rules were relaxed and land made available. But nothing was done on this front. Instead more people will chase the same number of houses, propping up the housing bubble and further haunting those who are awaiting housing prices to drop so they can buy their first home.

Before yesterday it was hard to see how Osborne could get worse, but he’s managed it. Osborne, Ed Balls and Gordon Brown are all the same person I think.

Sep 102012
 

writers wantedDo you care about the future of this country?  Are you a believer in free markets, trade and transparency, and do you regret the deadly debt that this and previous governments are building up.

If so, come and join us. I am looking for up to 2 writers and 2 further guest bloggers to write and post to the site. If you are interested and would like to share your views with others then email me at writers@cutthedebt.co.uk.  You will be doing your bit and making a difference.

Writers wanted to cover newsworthy content related to debt, government spending plans, benefits, and supply-side reform.

You can write as often or as little as you like.  Even a short article per month will make a difference to spreading the word and rebalancing against the “stop the cuts” lobby.

To contact me please email me now.

Do it now!

Jul 272012
 

Yet again this week Ed Balls and Milliband have been criticising the Government for the atrocious GDP figures, which has shown the UK is back in recession for a 3rd consecutive quarter.

They are right to criticize.  That is what the opposition does, and Cameron and Osborne deserve it.  But not for the reasons that Balls claims.  Ed Balls and his thuggish friends and Union leaders would spend even more money to drag the UK out of recession.  The problem is one of too much debt, not too little.  Real GDP is bound to fall in this great deleveraging, and nothing can stop it.

This Tory government is a disaster.  They have talked a hard game but have steadfastly refused to make a break from Brown-era spending plans and Keynesian monetarism.  It is a disaster and is not working.

We now need to move rapidly to Plan B.  But not the plan B of Ed Balls and Red Ed.  No, we need to start cutting hard.  There is no money in the pot.  As well as cuts we need true supply-side liberalism and opening of labour laws.

For a start, cut the wages of all public sector workers by 30% and eliminate the final salary pension scheme immediately, to be replaced with a defined benefit scheme paid for by the employee, not the state.

Secondly, implement the Beecroft report on employment law in full.  Thirdly, release hundreds of hectares of farmland, especially in the South East to allow for a massive housebuilding programme.

While those measures are taking effect, work to massively simplify and liberalise the tax system.

If Cameron and Osborne truly want to save the country from a spiral into bankruptcy and default, then they need to stop tinkering and allow the recession to work its way through the system.  It won’t be pleasant, but the alternative is unimaginably worse.

Apr 212012
 

With the charity tax relief row, George Osborne has not had a good budget.

Most years the budget is quickly forgotten and swiftly overtaken by newer news.  But this year we’ve had catchily-named accusations on the Granny Tax, the Conservatory Tax, and the pasty Tax.  The fact that these tax increases are minor and as a whole were sensible simplifications, hasn’t stopped the press jumping on them as major news stories.

Probably the most controversial of all has been the announcement that the Inland Revenue is to clamp down on excessive charitable donations.  Osborne declared that in future no-one would be able to reclaim more than £50 000, or 25% of their gross income, against charitable contributions.

Seems sensible?  Yes, there has been mass outcry against the government.

The clampdown is absolutely right.  Nobody is stopping people from giving to charity.  Charity donations fund an enormous amount of important work for good causes.  However, most of us give our money to charity without expecting something in return.  Why should the rich be different.

If I choose to sponsor someone at work running the marathon, or set up a direct debit to my old school, or local good cause, I do it out of my own money.  My post-tax income.

If instead, as richer donors have long been doing quite legitimately, you give £1000 to charity and expect to get 40% tax relief, then in effect you are taking money from other taxpayers for your own cause.  That is wrong.  I don’t see why I should be forced to give my money to your cause simply because you are entitled to get a tax refund.

Everyone should pay their tax.  Charity comes after.  The tax relief clampdown is right and George Osborne should not back down.

Mar 132012
 

NewBuy housing scheme is a wasteful shamThe more I hear about this government’s NewBuy housing scheme to subsidise housebuying the more clear it is just how far this Conservative government has strayed from its core values.

On the one hand the conservatives have legislated and used the FSA to stop banks lending at high loan-to-value, the prime cause of the subprime boom. Meanwhile, on the other they then replace that with a cashpayer handout to achieve the same high leverage.  It would be comical if it wasn’t so depressing.

There is a good reason for demanding a 10% deposit. It acts as a cushion should house prices fall – which is more than possible given the amount of uncertainty in the world economy.

Repossession and negative equity favour neither the owner or the lender, which in this case includes you and I, whether you like it or not.

Most important of all, the media plays along with the official line that this is somehow designed to help housebuyers get on the housing ladder. Clearly that is nonsense. Allowing house prices to fall naturally would help new buyers far more than these handouts.

The Newbuy housing scheme is another desperate scheme designed to put taxpayer money in the hands of the house-builders, and to prop up the house value of existing house-owners.

True liberal, free market-conservatives continue to be betrayed by this government. What will they dream up next?

Dec 272011
 

If you’re anything like me you have spent the best part of the last 4 days in a vortex of family visits, games, huge dinners, turkey soup and over-indulgence.

Enjoy the festive spirit while it lasts, because the slow hangover is likely to make 2012 another tough year.  At the risk of these looking fainlty ridicilous in a year’s time, here are my personal predictions for the next twelve months.

1.  The Year of the Dollar – 2012 will be the year that the US dollar makes a comeback.  The vast American debt burden, presidential elections, and even the downgrade of its triple A credit status will be overlooked as there is a renewed flight to the world’s reserve currency.  America entered recession early and it will leave recession early.  In 2012 house prices will finally start a slow recovery in the US, domestic demand will stop falling, and US business will begin to restock.  The S&P500 will end the year lower than it started, but the dollar will be higher.

2.  The slow demise of Apple.  Apple has had another stellar year in 2011.  In fact in the last three years alone Apple shares have gone from $90 each to over $400.  In the same time Blackberry / RIM (who I also predict will decline even further in 2012) have seen their shares collapse from $100 to under $14.  However, I think Apple is at their peak and 2012 will be the start of the descent.   Android will continue to take market share, driven by new phones such as the Nexus and the Galaxy S3.  The iPhone 5 is certain to be a huge success – Apple’s cult-like following will make sure of that.  But in the mainstream I foresee a backlash against the high prices and restrictive all-controlling environment of Apple phones.

3.  Gold.  For the first year since 1999 Gold will end 2012 at a lower price than it started.  The threat of deflation, a slowdown in developing countries and a highly volatile world economy will not favour Gold.  Towards the end of the year Gold will recover, and looking further ahead I certainly expect Gold to surpass its previous highs of just under $2000 and ounce.  But for that I think we will need to wait until 2013.  Will I be selling?  No way.  Gold is still in the best insurance against profligate and incompetent governments.  If you don’t hold any yet then 2012 could offer you a great chance to get in before it goes stellar.

4.  Ed Milliband.  Poor poll ratings in 2012 will put huge pressure on Ed Miliband to step down as leader of the Labour party.  However, deepening recession will keep the left strong and will drive the search for an alternative to the perceived pro-bank, pro-US, capitalist slant of the Cameron government.  Ed Milliband will survive and will end the year on a higher approval rating than the current dismal minus 23 points.

5.  The London Olympics will pass off without any major incident.  No terrorism, no catastrophe, and no major embarrassment.  There will be plenty of huffing and discontent around the traffic chaos, the excessive privileges offered to some foreign governments and to the IOC members, as they are whisked from 5* hotel to Olympics to opulent after-party.  However, once it’s all over it will be looked back on as a success, despite our perceived disappointing medal haul.  Now, what to do with a few spare stadiums?  Another Millennium dome anyone?

6.  Recession.  Britain will re-enter recession in 2012. We enter the New Year with an anaemic growth rate of less than 0.2%.  That will fall and we will enter recession early in 2012, and probably stay there for most of the year.  Its going to be a painful year, with little or no growth, no prospect of tax cuts, and a renewed round of austerity.

7.  The British pound will weaken significantly against the dollar in 2012, making shopping trips to New York more expensive.  From the current level of 1.56 dollars to the pound, it will fall to around 1.4, a drop of over 10%, on top of the 20% drop since 2008.

8.  Inflation vs. Deflation.  The battle of the flations will be won by deflation in 2012.   Prices will fall as demand tails off in the Far East, oil and commodities drop and families reduce their spending.  However we will not see outright deflation in 2012.  The falling pound and more quantitative easing will keep inflation higher than it would otherwise be, but it will end up lower than the current 5.5%.

9.  The Deficit and the Cuts.  The deficit will remain stubbornly high, showing that the OBS predictions are no more reliable than when economic projections were still provided by the government itself.  Unfortunately the fragile coalition and an impotent chancellor will mean that the much-needed cuts to pensions and the public sector will remain as feeble as they are now.  There will be more of the same.  It will take much more suffering before there is any appetite for real swingeing cuts to the public sector and to the bloated state machine.   That will come, but not in 2012.

10.  The Euro.  How could any predictions finish without a view on the Euro?  I think the Euro will survive 2012.  The huge €450 M of cheap loans provided by the ECB will keep banks afloat long enough to raise some new financing.  Throughout 2012 there will continue to be treaty negotiations, a frequent recurrence of the crises and many more “last-chance, make or break” summits.  The Euro will continue to weaken, but some periphery countries including Ireland will do better than expected.  Overall recession in Europe will be deep.  For UK holidaymakers the falling Euro will help, though it will be offset and may even be overtaken by the weakening pound as the sickest currency.

 

Well that’s it.  Of course any predictions can look comical in hindsight, but above is what I think is most likely to happen.   Do you have any thoughts on the above, or predictions of your own?  Please leave them in the comments box on the website, below.

Dec 082011
 

Hard evidence emerged today of plans to take away significant powers from the UK.

The plans are outlined in a letter from Merkel and Sarkozy to Herman von Rumpuy, the European Council President, on the eve of a European summit which, not for the first time, has been called make-or-break for the Euro,

Amongst other demands Merkozy set out a plan for Corporation tax to be harmonised and paid directly to the EC. Also planned for inclusion in the treaty is the Financial Transaction tax, which would decimate London’s Financial Services Industry.

All this has nothing to do with the Euro crisis.

Greece’s vast debt problems were not caused by not collecting enough corporation tax. And do we really believe that somehow the EU will be more effective at taxing Italians than the Italians themselves.  The proposed changes are nothing to do with saving the Euro and everything to do with the EU extending its antidemocratic powers.

Cameron must stand firm against any demands for further powers to be repatriated.

This is an undemocratic, anti-capitalist, anti free-market plan by a group of leaders of a failed vanity scheme.

Certainly Euro breakup would be complex and likely to cause short term pain on all countries in including Britain. However, free of debt obligations that can never be repaid, the exiting countries would be free to reform, devalue and grow.

The consequences on Britain if Cameron agrees to the European demands would be long-standing and would push the UK into long term decline.

The UK already has the highest debt to GDP ratio in the EU, when private as well as public sector debt is included. Without the relatively business-friendly environment and freedom to set tax rates the UK would have the worst of both worlds.

Cameron must be clear what he is requesting at this summit.   Instead of preparing UK “safeguards” he must push for a wholehearted repatriation of powers to the UK.

If countries in the Euro want to go ahead with this failed scheme then we want nothing to do with it. Instead Cameron should push for a simple trade-agreement and to exit all political institutions.

If Cameron seizes it this will be a turning point for the UK.

Comments?

Which powers should Cameron repatriate from Europe?

Leave your comment below, and check the box to be notified to new comments on this.

Nov 292011
 

We’ve launched our shiny new comments wall on “Cut the Debt”.

Please come along and leave a comment on anything at all to do with the debt, the government’s response, or your feelings on what needs to be done.

You don’t need to register to leave a comment. You don’t even need to use your own name if you prefer not to.

The wall allows others to post replies on the wall to your comments, and you can see these by checking the “Notify me of followup comments via e-mail” checkbox.

Anything goes. No moderation.

Cut the Debt comment wall. Comment now.