Blanchflower: a second recession is around the corner

Bring in the benefit cap, drop VAT to 15%, get rid of 50% tax, reduce stamp duty land tax to 1%, and reintroduce dividend tax credits in pensions and ISAs. Yes, this will cost a few bob, but it will get people working, spending, and buying houses again.

Totally agree with sgihaghsdg, carry on dismantling all the Blair/Brown nonsense of their premiership and we will get back to a sensible economic agenda. I would add that we can re-introduce the 10% rate for the first tranche of income tax that Brown triumphantly disbanded (having previously introduced it) without figuring out the consequences to the low-paid.

I dont know anyone in my area of business that is negative about the economy at the moment. All are as busy as ever right now. They are all SME's but they are supposed to be the bell weather of the economy arent they. Purely anecdotal and one voice in the wilderness you may think but I dont recognise the situation as it is described in this article and neither do many others.

To stimulate real economic growth and make it worth getting out of bed in the morning we need a flat rate of tax 10 or 15% BUT with NO tax breaks. The Benefits Ponzi Scheme has to be reformed so that it doesnt pay to not actively participate in the economic system.

It is no coincidence that the highest rates of economic growth over the past 20 years have been in some of the smaller nations with low taxes. The less governments interfere in the workings of capitalism, the better capitalism is at allocating scarce resources. The so-called great democracy that we have impedes the process of generating wealth, and instead hijacks a lot of the wealth created to fund political promises made to win elections. It is the road to ultimate ruin.

and how exactly will dividend tax credits on pensions and ISA's help spending.?

We need to have more spending - not more saving.

and how exactly could we afford a flat rate of 10%/15% ? The resultant deficit would crucify this country.

Capitalism is the least worst system but is not so good at allocating scarce resources. In recent years its been more about maximising short term returns and has created a widening gap in society

It`s truly amazing how otherwise rational people let their political leanings colour their view of the economy and our prospects. Even Osborne probably realises we are in deep do-do but darn`t admit it, and is too stubborn to go for growth.

The capitalist system has been corrupted by the actions of governments pandering to special interest groups over so many years that people lose the long perspective.

Sgjhaghsdg

Whilst I am in favour of measures which might get the economy moving again, lowering Corporation Tax, R&D credits, getting rid of Employer's NI etc, I don't see how getting people to buy houses again is going to help. The housing Market is still hideously overvalued due to a dumbass credit boom that millions voluntarily lapped up.

What is for sure is that the west isn't going to extricate itself from this mess by borrowing more - Govts and citizens alike. Perhaps Peter Schiff et al are right. The only way back to economic health is for Govts to stop interfering with natural economic forces, bring on the pain, flush out the badness and start anew. At the present time the profligate are being sheltered with artificially low interest rates and the prudent are having to take risks they might not otherwise consider to beat inflation.

PS: Moylando - more spending is always welcome, as long as it is coming from cash on hand and is not being achieved by borrowing more. However saving is also important and shouldn't be shunned. And what we need most of all is an increase in our productive capacity, which has nosedived disasterly over the last fifty years.

Nah, I think you mean 'socialist interest groups' which encompasses just about the whole political spectrum these days ..... oh, and Danny Blanchflower.

Blanchflower seems to think (a lot like Roubini and Soros before them) he can continue to live off being right once - generally they are only right once. A lot of similarities to bankers .... no I don't really mean bankers, I mean spivs who have operated under the term 'banker' to gain a cloak of respectability for over a hundred years.

CURRENCY VALUES play a big part now if the dollar is high the americans buy up british technology and euopean technology only paying nominal prices .the pound and euro needs to climb much higher than it is a the moment to protect what we have. the future for britain and europe rely `s on building from these companies .gorden brown when labour was in goverment let thing run rarher that create interferance .the problem that we have is a worldwide problem and wont be solved in an instant like some people think .

the benefit that unemployed people get and it is not that much is only enough to get by on.

> and how exactly will dividend tax credits on pensions and ISA's help spending.?

> We need to have more spending - not more saving.

If the country isn't imposing a massive annual tax on people's pensions savings, then they wont need to save as much.

> I don't see how getting people to buy houses again is going to help. The

> housing Market is still hideously overvalued due to a dumbass credit boom

> that millions voluntarily lapped up.

It's overvalued in some areas (London, basket case, ignore) but elsewhere there's a "liquidity" problem. Why does HMG feel entitled to 2, 3, 4, or even 5% of the value of a property when it changes hands? 1% is enough and anything more causes silly boundaries.

My business is going ballistic, but sadly our education system isn't delivering the STEM grads that UK business needs. Fortunately we have the PIIGS ...

sgjhaghsdg

Glad to see another SME doing well. For me, sales up 30% last calendar year with a great start in 2012 with a record January.

The problem is indeed the illiteracy/unsuitable education of the UK population who can often barely thread a meaningful sentence together in a language that I recognize as English.

We need a balance in our economy and a savings rate that is the same or more than inflation then people will spend more without the use of capital. I regret that Mr. Blanchflower has always talked doom and gloom. We have a B.O.E that believes in printing money and a government that wants to cut spending. How can you get growth when there is no balance. Anyhow my belief is that this country G.B is one of the safest countries to risk your money and capital.

This goverment has panic on the brain snatching at everthing that look`s suspect .gorden brown showed none of this .he still has a lot to offer this country and he should concider standing as the labour leader again .trufflehunter is this concise enough .

Google "brown bottom" if you don't yet understand why GB must not, and will not, ever have a role in running this country.

Shame about the English Anon 1 !! Where on earth did you learn it?! It was probably in one of the many "failed" government brainwashing establishments that masquerade as education here in the UK.

Anthony, you say that we should increase productive capacity, by which I assume you mean manufacturing. Unfortunately, Thatcher helped see of most of that. I`ve just bought a thermos flask made in china by Thermos (Hong Kong) Ltd. You can still drive past their factory in Thetford, but nothing is made there.

Mrs Thatcher was not the worst enemy of manufacturing. The trade unions in the car industry and elsewhere failed to realise that poor quality workmanship, high wage rates and strikes would incentivise business owners to go to places where it is easier to do business. Devoting 6 hours of every working day to industrial relations problems is not attractive. The irony is that the British prefer foreign bosses eg Germans and Japanese, the very nations that we fought a war against.

"The problem Dear Brutus is not within the stars, but within ourselves"

from anon .THE SOLAR PANEL INDUSTRY .

is expanding fast every day that goes by more and more households are going the solar way .the imports from china come into britain by containers it is china`s fastest growing export and getting bigger by the month .the cheap cost of manpower in china gives them a big edge in solar cell production .just about everthing in briton lags behind including making these solar cells .get of your but briton and lets get into this and produce jobs .the cost of a half killowatt panel of solar cells with a controller and diodes plus a couple of other items can vary from two hundred pounds plus .these people but up to thirty thousand solar cells at a time so their inital investment is high .companies that build and then sell on ready made panels with installation are going great in britain but alas must create imports to do this .

Anon 1. The MOCVD reactors that are critical in making solar panels and LED lighting cost £1m plus per unit. In the past 3.5 years Chinese companies have purchased 4000 + of these bits of kit. I know this because I did own the MOCVD reactor makers for a couple of years. The problem is that the does not have enough highly trained technicians to operate these reactors. China produces a lot of graduates withe the right disciplines. Here in the UK there is a surplus of weak liberal arts experts.

I agree with your sentiment though about us missing two gigantic markets - LEDlighting and solar. There is only one publicly listed company that I know in the UK that owns some MOCVD reactors and they make the wafers using epitaxy.

There are only two makers of MOCVD reactors in the world. One is German and the other in the USA. Reflecting over investment by China in the reactor machines, their shares have fallen back a large amount. The German company is ona PE of about 8 now. The growth is not over as the owners of MOCVD reactors have to continue investing in various tools that need replacing as technology changes.

It was Thatchers confrontational approach to try and get rid of the unions forever that was the problem. Certainly Scargill and his ilk were nasty people, and the Trade Union movements worst enemies, but Thatchers `devil take the hindmost` and `weakest to the wall` approach to industry, was its death.

The union members had plenty of chance to try and start their owns businesses as the workplace changed. That is what I had to do, and I have never been richer or happier. Mrs Thatcher encouraged small businesses to expand by offering loan guarantees. This was very helpful to me and was available to others.

Having a unionised workforce was like inviting the mob to help run your business. The unions were a corrosive force in the late 1960's and their unbelievably beligerent attitudes sowed the seeds of what we are reaping today.

Red Robo of the car industry fame was one of the most culpable. There were other rabble rousers too who, if memory serves me correct, all got gongs of sorts for their services in destroying the willingness of business to invest in manufacturing.

anon statistics taken from ninteenth century briton by anthony wood

my comments in the next line

without unions having livable wages would be hard to come by

facts from 1892 to 1914 anthony wood

1892 unions 1-233 members in thousands 1-576

1893 1-279 1-559

1894 1-314 1-530

1906 1-282 2-210

1911 1-200 3-139

1914 1-260 4-145

from around 1906 unions stayed very much the same but the membership grew people that have passed on wealth nearly always are able to live a lifestyle that poor people can only dream about .their minds are different as well .dont let the poor and workers on to the second rung of the ladder

as for having opportunity to to form small buisnesses many people get so use to having to earn wages that they are unable to risk capital that they dont have to get on many have worked for years within their own wage structure that the change that is suggested can only be attempted by the few .

As a libertarian anarchist I symphasise with the plight of being wage slaves. The problem is our education system produces brainwashed wage slaves for the system that we live in. I rebelled against this. and always wanted to run my own show. The mentality of most graduates is to get a job! The education system today stifles real creative drive and the government red tape stifles any incentive to break free. Something has got to change. An education system that is focused on producing what commerce and industry actually need might be a good start.

Reforming our decrepit democratic system might also be a good idea. Reforms to prevent Chancellors of the Exchequer with Phd's in the life and times of a Scottish communist from getting behind the economic power levers and doing dumbass things like selling two thirds of the country's gold reserves at rock bottom prices, meddling with the role of the Bank of England, causing the closure of defined benefit final salary pensions schemes..... the list is huge. Of course, this individual was funded by the trade unions who haven't a clue how to do anything apart from demand money with menaces from the people and organisations that create wealth.

I am not suggesting that people shouldnt be paid fairly for what they do, but ultimately we are all now competing with lower wage countries with much lower cost structures. We all need to be worried because highly trained skilled workers are now cheaper to employ in the Growth Economies - witness yesterday's announcement from AstraZeneca.

Truffle Hunter

It wasn't just the unions that did for the car industry it was equally the management. If you are old enough you may remember BMC, later British Leyland, selling Minis at below cost because they didn't actually know how much they cost to make and so they took a guess. Great management! It's a truism that management gets the unions it deserves.

What is there remaining to say, I suppose a country that spends some £200bn on welfare, ie people to sit on their backside, and then promotes envy of people who make a few bob. This says more of our sheep like qualities in following politicians who can promise the world at others expense.

Mr Blanchflower is just another noise, a talking head, an oxygen stealer. Not unlike the politicians he castigates. On Monday as on most days, millions of British people will roll out of bed and commence the economic cycle and generate hopefully prosperity.

What I believe will help our recovery is to maintain the cuts and reduce NI 3% for both employer and employee. The pressure need to be maintained on Councils to reduce the Council tax.

What this country needs most of all is a root and branch change to education and attitudes. Until the will to win is reintroduced as a positive attribute and whinging sent to room 101 there will be little chance of re creating a great nation, None of our political parties have a hope of achieving this level of change.

Quite agree, Keith. The organisation responsible for promulgating a lot of the whingeing is the BBC. Root and branch reform there is a must. He who controls the TV and Radio media controls the actions and thoughts of the sheeple. The key positions in news aggregation are dominated by people with good solid left wing histories. The whole organisation needs to be trimmed by 50% and some balance brought back into their propaganda.

This country's problems have a lot to do with the high level of toleration of freeloaders. By that I mean those who expect from a young age to get the most financial reward for the least possible effort, or even no effort. I'm sure most of the contributors to this site will know of at least one person in this category.

When I started working for a living over 50 years ago, it was rare indeed to know anyone whose sole aim was to freeload off the backs of others. Now, thanks to an absurdly generous benefits system, and ridiculously high pay for incompetent management at all levels, freeloading is what large sections of the population aspire to, be it in or out of work.

Until that culture is changed, nothing else will change much either.

M Brooks

More manufacturing jobs were lost under GB than Thatcher. They were replaced with public sector jobs.

The article is from an economist/academic who uses so many assumption for his analysis you cannot believe it. He also got his position on the BOE because he his chums with GB and his left wing views.

He says we should spend more but does not explain who will lend us the money. He does not tell you that counties with the lowest debt levels have far, far better growth rates and this has can be shown for the past 50 years. He does not tell you about Japan’s lost two decades. Japan has spent billions and billions over the last 2 decades and now they have the highest debt level in the developed world. They still cannot grow. Italy has had a huge debt for a decade and has not grown at all over a decade. He talks of economics but not reality. In fact, we waste money paying for his work. It would be better spent on reducing corporation tax than to some of these left wing socialists. China spends 20% of their GDP on public spending we spend 50% .China has 10% growth we don’t. We spend too much on things that will not create long term growth!

Prof R Borro a Harvard economist ranked 4th most influential in the world I doubt if DB is in the top 1000 showed that not only would plan B not work that we are all paying for the stimulus of 2008.

It is quite simple the extra debt that we have acquired needs to be paid back at some stage and the higher interest associated with this means we have to pay more taxes down the line.

The spending cuts have to be enforced. I would love to cut corporation tax and have the pension fund taxes refunded they all help the good investment we need but only at the expense of far more public sector cuts.

The VAT tax should not be reduced in fact it would be better to raise it and use it to cut supply side taxes which encourage investment. When you encourage spending and do not have the goods to supply you import more goods and that will not help. Since 1997 we have imported more than we have exported in every month. We need to reduce imports.

The Coalition is doing a brilliant job of the economy, they were left a terrible mess but at last if Europe does not implode we might get through it.

It is high time some of these so-called economists such as Blanchflower read Rogoff and Rheinherts book "This Time it is Different - 8 centuries of financial folly." Also, it might help educate some of the socialists that drop in to this site. More social spending (Labour's Plan B) is needed like a hole in the head unless we wish to hyperinflate the debts away.