Monday, 31 December 2012

Let us build our way to prosperity

Let us build our way to prosperity

In my opinion like most other members of my party the government needs to cut the deficit and national debt, however the job will be easier if the cuts are made when the economy is growing and more people are in work particularly welfare cuts.  A  credible financial plan needs to be drawn up so as the economy grows and more people get into work the government can shrink expenditure, so we can show bond market we are still doing something about are deficit and we can still pay our debts but we are also growing the economy so this is easier to do.  This will make Britain’s books look healthier but also mean next time a recession hits we are financially healthy enough the combat it with stimulus packages to blunt the recession and get the economy going again.

The main thrust of the plan is two parts government investment, one part private investment and one part tax relief.  The first part of the government investment is the building of council houses which Labour have talked about and which the Conservatives will likely implement closer to election time.  Building council houses it a good idea because it is a classic case of spending money to save money and it also shows a commitment the Compassionate Conservatism which Cameron originally preached as it will help house the poorest while cutting the housing benefit bill.  The saving the government would make by transferring people claiming housing benefit in private accommodation into the local authority owned council houses would be £206 per household per month on average.  Currently 2,586,115 social houses are provided by the private sector so it would be a large saving to the government. 

The second part of government investment would come from the proposed government investment bank designed to help fund small businesses.  I am not sure of the details of the proposed bank so I may say something’s it already intends to do.  It should be decentralized to local councils, giving each one a pot of money to invest in new businesses to get them off the ground but as well as investment it should also be an advisory body used to tell entrepreneur exactly what type of businesses would help the local economy.  This investment bank would be combined with tax relief, specifically tax relief for manufacturing start-ups. The idea would be that manufacturing start-ups pay no corporation tax for say their first three years and when they do start paying it is lower rate of corporation tax, which gradually rises, as the company becomes more established year on year until they pay the full rate of corporation tax.  The idea is that with the local funding combined with tax relief for manufacturing start-ups is a British version on the German Mittlestand will be created. This will further encourage large companies like Nissan in Sunderland to make more cars here, as they can save money by purchasing parts from local manufacturing companies.  We can also get companies like Dyson to return home from china as the reason they gave for leaving is that they got all their parts made abroad.  This clearly would not be an overnight thing but it would be the seed that helps to continue the growth of Britain’s manufacturing sector and also help re-balance the economy.

The private investment which probably would probably only come as the economy started growing due to the nature of the investment, is an idea proposed by Blair to redevelop Britain’s sea side towns but could also be used to help redevelop areas of some of our ailing northern cities.  The idea is the old idea of super casinos although they are just a small part of the plan they were the part the press concentrated on and attacked to bring the idea down at the time at the time.  According to Mr Blair large American leisure companies regally contacted the government and the towns themselves wanting to build vast leisure outlets that included the controversial casinos as well as cinemas, sporting facilities and other outlets.  Due to the current state of the world economy there is a good chance the investors will no longer be interested, but when the economy gets growing again it would be a great way to redevelop the cities that get the leisure outlets.  It would also be a great employer, initially in the building of the outlets and then staffing the various facilities and even better, it won’t cost the government a Penney.  In my view, it was a real shame Brown scrapped the idea, as it is one of the best ways to redevelop a city without pumping in taxpayer’s money.

That's just my view on some of the things the government should be doing first to get us out of our current slump and then to continue growth, obviously as mentioned at the start once the economy is growing again we need to cut government expenditure.  Particularly things like welfare and looking at making the NHS more economical, also as more people start working and start spending government tax receipts will increase so cuts will not need to be as severe as the deficit will naturally decrease with greater government income.  

Sunday, 16 December 2012

Would Minimum Alcohol Price Stop Binge Drinking?

Would Minimum Alcohol Price Stop Binge Drinking?

Although this policy seems dead in the water after senior cabinet ministers have opposed it claiming it a tax on the poor would it have solved the England’s binge drinking problem?  The basic plan was to impose a 45p per unit minimum price in alcohol to prevent binge drinking and even possible make the pubs competitive again. Nevertheless, would it work?

Well it will mean that supermarket will have to charge a few extra pounds on their multipack deals.  Currently at Morrison’s you can get 30 cans of 1.7 unit John Smiths for £19, with the minimum unit price of 45p per unit this would cost £22.95 for the same deal, meaning this will cost people an extra £3.95. This is not that much for middle and higher income families, but it is a substantial rise for those who are already struggling.  Away from the multipack deals, the price of cheap spirits and ciders would be massively affected, with the price of a bottle of Asda’s own 70cl bottle of vodka rising by £3.21 from £8.49 to £11.70.  The question is whether a rise of just over £3 will dissuade binge drinkers who have an unhealthy lust for alcohol.  It is likely you will need to raise the price of drink in nightclubs as well to solve the problem of binge drinking.  Although the University has done research that says a minimum alcohol price would reduce alcohol consumption by 4.3%, leading to 2000 fewer deaths and 66,000 hospital admissions after 10 years.  The research also suggests crimes would drop by 24,000 over the same period.

However, binge drinking is only an epidemic among young people. In any case a minimum alcohol price is going to disproportionately affect the poor, this makes the policy unfair as those with money can still binge drink while those without cannot drink at all.  In addition, binge drinking is just as bad amongst the middle class as the working class except the policy does not affect them in such a severe way as it does the working class.  A better policy would be to have harsher penalties for drunk and disorderly behaviour you could also ban drinks offers in nightclubs, as this is where most of the binge drinking is done, so it will mainly affect binge drinkers rather than poor people who want a drink.  People who end up in hospital or in the cells overnight through binge drinking could pay a fee to contribute to their care a bit like a binge drinkers tax, this policy is probably the best way to combat binge drinking as it only  affects binge drinkers rather than those who drink responsibly.  At the end of the day you can’t put through legislation which will affect the masses when only a small group of people are causing the problem, it is also a problem most people grow out of anyway and if they don’t legislate in a way that only affects the trouble causing minority rather than the majority.

In conclusion I don't believe a minimum alcohol price would even come close to stopping binge drinking. I believe it would probably lower it but it would also make alcohol to expensive for the working poor and it would not solve the problem while having a drastic affect on moderate drinkers wallets.  If the government want to combat binge drinking they need to look at policies like the ones above which target binge drinkers more than moderate drinkers which a minimum alcohol price just doesn't do.

Tuesday, 11 December 2012

Reforming benefits is not just fair it is essential

Reforming benefits is not just fair it is essential

Around 6.1 million people who have at least one family member in work are counted as in poverty, now compare that to the 5.1 million families in poverty were no one works this shows a broken benefits system in which it pays for some not to work.  There was a time when Labour stood up for the working man but that time seems long gone, Labour stand by while public sector workers get pay cuts but pipe up when they hear benefits will be cut. The statistic above illustrates a broken benefits system in no circumstances should someone out of work earn more than those in work.

By raising the threshold of the basic rate of income tax the Conservatives are starting to make work pay, this alongside the universal credit and the fact that they won't allow benefits to rise more than 1% shows a commitment to rebalance the benefits system towards those who want to work. I am well aware many of those in work also draw some sort of benefit but the proposals which this Conservative government have laid out will rebalance the system in favour of those workers making sure the person in work is always paid more than those out of work. In the current benefits system it costs the government £4 for every £1 given in benefit due to the amount of bureaucracy needed, the new universal credit will cut down the cost of bureaucracy by simplifying the system. Work and Pensions Secretary Ian Duncan Smith has said this will mean that the government will have more money to spend on developing those on benefits so they are more able to compete for jobs.  Our current benefits system is totally different from the original cradle to grave concept in which those who put something into the system got something out, today many people now take more from the system than they put in to the system due to work not paying and also the break down in traditional family structures while not having adequate affordable child care to help single parent families.

There is a strong argument that capping benefits and cutting benefits through introducing a lower than inflation 1% rise will lower public spending because those who need benefits nearly always spend all of what they receive which is good for the economy. However the government has introduced a number of measures which could counteract this negative effect on the economy.  One of these policies is the rise in the tax threshold for basic rate tax payers which will give them an extra £267, this extra money is likely to be spent increasing the amount spent by this group as just like those who draw benefits this group spends most of their income. Also the cut to the top rate of tax (from 50p to 45p) is likely to increase the spending of those with the most to spend not just on goods, but also on business and on charity.  The top rate tax cut is also likely to bring more money into the exchequer as more people are paying it than the old 50p tax. Also there will be a rise of 1% in the threshold for the 40% tax meaning there will be another 400,000 workers are expected to pay the tax as the threshold will be raised lower than the rate of inflation this measure is expected to bring in an extra £1billion a year. The tax cuts will hopefully get the economy growing and counteract the benefit cut; I also added the increase in the number of people paying the 40% tax to show that everyone has to cut back. 

A final point on why reforming benefits is not only fair but essential, public spending is far too much the deficit is lurking around 7.7% of GDP this country is spending much more than it makes and public spending needs to be cut.  It is not easy but it is essential, why should those on welfare continue to see their income increase while teachers, Fire-fighters, Police officers and NHS workers face pay-freezes and cuts.  It is true the country needs a safety net for those who lose their job but for to many people it is like a spiders web. At the moment people leave school with no qualifications or people with are forced to leave work because they have a child and with the additional cost of child care suddenly they are better off on benefits, the current system does not help these people it traps them in a culture of dependency.  The Conservative changes to the system are good but they could be better, such as they must pledge some of the money saved through benefit reform into education programs for the unemployed.  They must also look at creating affordable child care places so single parents can return to work, and finally they need to look at a social housing program, either through physically building new houses or renovating old derelict ones so that there are affordable council houses which will save the government bucket loads in housing benefit in the long run.