Platform: Dithering pair must take action now to help the UK's economy

Published on Monday 8 September 2008 22:17

WITH the Chancellor Alistair Darling's assessment that economic conditions are "arguably the worst they've been for 60 years", one might wonder why Labour spent the whole summer in denial about economic outlook and why – to be blunt – it hasn't done anything about it.

Food and fuel price inflation is sky-high, mortgages are more difficult to get and thousands of mortgage products have been withdrawn; builders are mothballing sites, workers are being laid off and the knock-on impact is now hitting estate agents.

Anyone speaking to accountants, developers and builders months ago could see this coming – the question is why didn't the UK government?

So what should Mr Darling and Gordon Brown do? First, they need to accept that their self-imposed borrowing restrictions are well past their sell-by date, and then implement a range of measures to stimulate the economy, encourage growth and lift some of the burden off hard-pressed families.

Interestingly, in the US, where growth is forecast this year at 3.3 per cent, there is support for a $150 billion tax cut to stimulate the economy. Here in the UK, Mr Brown and Mr Darling are merely dithering and growth at 0 per cent has the economy heading for recession.

So, here are some suggestions for the Treasury.

Use some of the North Sea windfall to introduce a fuel duty regulator and cut the price of fuel at the pump. Introduce a windfall tax on the excessive profits of the energy supply companies to help hard-pressed families with gas and electricity bills, which have doubled in the last few years.

Cut corporation tax and allow businesses to compete with lower tax economies elsewhere – and continue to provide the jobs we need.

Re-examine the damage its capital gains tax proposals will have to small growing businesses trying to raise money in difficult economic conditions, and remove stamp duty from share trades, which it is estimated would boost GDP growth by between a 0.25 per cent and 0.75 per cent.

Scrap the proposals for massive hikes in vehicle excise duty on old cars (and for that matter key working vehicles). Not least because it will hit many of the same people hammered by Labour's abolition of the 10p tax rate.

Recognise that energy costs are a critical component of the problems we face and immediately remove the discriminatory charges for connecting to the National Grid to encourage investment in renewables.

Tackle the tax regime in the North Sea and look again at removing the supplementary charge from tariff contracts, look again at the way in which unrelieved allowances are reimbursed, extend R&D tax credits to the North Sea, encourage investment in heavy oil extraction and introduce a floor below which the supplementary charge will not apply.

And finally, the government needs a strategic focus on manufacturing. We know that our overdependence on imports has resulted in a million lost manufacturing jobs, a balance of payments deficit in goods of 87 billion and suppresses GDP growth by between a quarter point and half a point.

Despite currently having responsibility for only 15 per cent of the Scottish economy, the SNP Government has taken action responding to the global downturn.

It has frozen the council tax this year and provided funding to freeze it for the next two years, cut and removed the burden of small business rates for 150,000 businesses and brought forward 100 million capital investment for affordable housing.

Mr Brown's remarkable U-turn at Thursday's CBI dinner, where he set out the case for increasing the financial powers of Holyrood, is to be welcomed.

However, these improvements will not happen immediately, so the Prime Minister and Mr Darling, who have developed reputations for dithering, need to take action now.