There is no such thing as a normal downturn. Each economic circumstance is unique, created by the changes in economic behaviour that have preceded it.
How could the current downturn be anything like previous ones when, in the intervening period, we have undergone structural changes such as the huge increase in on-line shopping impacting the high street retailers, a reduction in the use of cheques and the resulting loss of a three to four day free credit facility, the increase in the availability and access to information resulting in faster reactions and movements in all markets.
This is just the tip of the iceberg, but these three examples serve to show that it is not possible for on economic downturn to be anything like a previous one.
Therefore, the solution will never be the same. This downturn requires a fresh approach. It is time for Plan B. The financial noose of debt is tightening around the throats of every family in the United Kingdom. Our neighbouring countries are in dire straits.
In late September 2008, global financial markets suffered the monetary equivalent of a heart attack. We all know this. And it is now clear that Governments and central banks reacted with unusual speed and an apparent readiness to learn from each other, providing safety nets for their financial systems in the form of loans and by cutting interest rates to energise the money and credit markets.
However, despite the drama, such measures cannot restore a healthy flow of credit to households and businesses overnight and we have been told for over two years that this healing will take time. Lower interest rates can stabilize household spending, stimulate business investment and ease debt-service burdens only if the stimulus can pass freely through the financial system.
In the early phase of a recession, economies face the risk of a downward spiral as households and businesses, concerned about their future amid a mounting avalanche of bad news, reduce their spending. In doing this, they add to the decline in overall demand for goods, services and labour. The knock on effect is that this then translates into falling sales revenues and rising unemployment.
The United Kingdom is in this spiral and needs a way out.
But the system itself is still in intensive care, the money isn’t flowing quickly enough. As a result, it will take longer for the effects of bank rate cuts to fully kick in. This is the first reason for the Coalition Government to consider a fiscal stimulus program in the form of major tax cuts for households and businesses, now.
This would be the shot of adrenalin directly into the heart of the dying patient.
This boost is so vital that it is unthinkable not to do it. This direct injection of money, of energy and oxygen, will lift the ailing economy and has to be done whilst keeping interest rates unchanged.By cutting tax rates money will be put directly into the pockets of the working people. In the first few months the majority of people will use this additional money to pay off debts and thus the money flows back to the banks and businesses and as a society we will begin to get away from the vast debts overhanging us.
In the following months the nation’s spirits will lift and confidence will creep back slowly. Demand and spending will begin to rise.
The Prime Minister knows that lower taxes help ordinary people in their everyday lives
The Prime Minister, David Cameron, has always said that he wants the government to get out of our lives. That he wants to support families and businesses. I agree.
I want the Government out of my life too. I want the Government to stop taxing my insurance premiums. I want the Government to stop forcing me to buy a TV Licence, Road Tax Licence and VAT at 20%. I want the Government to stop threatening me with court action because one of its Departments paid me too much. I want the Government to stop taxing my holiday. I want the Government to stop threatening me with fines if I don’t file the paperwork that one of its Departments is going loose. I want the Government to leave me alone with my wife and children to build my business, pay my bills and have an occasional break from my hard work to enjoy my family and friends.
One way, and some would say it's the best way, is to tax us less and let us spend our own money.
Campaign for Plan B - #CutTax
