The ONS figures released yesterday revealing that our economy shrank 0.7% in the last quarter are hugely disappointing. But Chancellor George Osborne is absolutely right in his steadfast determination to reduce the deficit. For all the talk of unprecedented austerity and savage public sector cuts, the government is still borrowing £1 in every £5 we collectively spend. We are in the midst of a crisis not of capitalism but of welfarism. The expansion of the European welfare model has for years served to make our continent less economically competitive. It is the sheer size and cost of the state that is smothering this nation’s wealth creators, both from historic debts racked up, current spending and future liabilities.
If there is one good thing for the government to spend its money on, it is infrastructure that improves the environment in which business operates. It is very good news that the Chancellor has given the green light to further infrastructure investment. Such projects need to be shovel ready so that we can get moving quickly and increase investor confidence in the government’s determination and ability to push critical schemes through.
But we now also require urgent supply side reform. How about we allow SMEs to take on any extra employees over the next two tax years without paying National Insurance? This might help stimulate growth without costing the Treasury too much. In fact better still an NI holiday might even be extended to all employees aged under 25. Let’s not forget that the UK’s SMEs account for over 13 million jobs in Britain and by most calculation two-thirds of all new employment creation. Their needs must be the government’s top priority.
The government took on a huge task when it took the reins two years ago. We are not even at the end of the beginning of this financial and economic crisis. I fear its impact on the fortunes of us all will be felt for many years to come.