George Osborne and the Tory Economic disaster

We've had two years of the coalition Government and George Osborne as chancellor. How has he done so far? I doubt that anyone beyond the face grinning back in the mirror thinks he's been anything other than a complete disaster. Earlier this week a Tory backbencher gave an interview to the Sunday Times saying Osborne was lazy and useless. For those of us trying to run small businesses, his policies could not have been worse. Despite countless billions being supposedly pumped into the economy, it is virtually impossible to get credit from the bank. Having recently undergone a massive redevelopment of my studios I can vouch for this first hand. Despite having a rock solid business case, no debt and an existing cash flow which would support the loan, even if we failed to generate any new cash from the development, RBS spent a year mucking us around before saying "No". Their grounds "If you had a tenant like Tesco's moving into the site, we'd lend you the money, small businesses are risky".

I'm not the only person who has suffered this fate, people up and down the country tell a similar story. The only people the banks seem happy to lend to are businesses that don't actually need any capital. It wouldn't be so bad, but the government bailed these banks out with our cash. The bosses of these organisations are still raking it in. Osborne has been doing the job for two years and he's done nothing about any of this.

Even worse, for many small businesses is the effect of the VAT hike Osborne imposed in his first budget. VAT was increased from 15% to 20%. That effectively means that for may companies, especially in the services sector, you have to hand over 5% extra of your turnover to the Government. This means that you either put your prices up and scare off customers or you absorb the cost and get hit in the pocket. Take my business. We run a music studio. Typically a session in one of our rooms will cost approx £50 on a weekday evening in a larger room. George Osborne gave us the choice of putting up the cost by £2.50 - well above the rate of inflation or absorbing the cost and taking a hit in the pocket. A fifth of the cost to our customer is now VAT. As a business large enough to have to register for VAT, we give George a fifth of our turnover. We are competing with many studios who are one man band studios in single lock up garages, so we are in effect 20% more expensive. Many other businesses tell the same story. I was picking up a takeaway in Mill Hill on Wednesday and the boss of our local Indian restaurant was bemoaning the VAT hike and George Osborne. He pointed out that petrol costs are virtually all made up of tax. In short, anyone running a business gives 20% of their turnover to George Osborne in VAT, they give 4/5ths of the cost of their petrol to George Osborne, they pay corporation tax, employers NI and Business rates. We have a virtually incomprehensible tax regime. My company also has to deduct money from employees for the CSA, in effect doing the governments job for them, even though my employee's offspring are nothing to do with me. We have a plethora of rules and regulations to satisfy. When we opened our new building, we spent hundreds of pounds on signage, telling people such things as that they are about to enter a room with loud noises in.

And what has happened to the economy under George Osborne? It has sunk into recession. In the past, governments would spend years blaming the previous administration for such disasters. George Osborne can't because everyone knows that it is his fault. Yesterday I got a call from the Liberal Democrat Party. They were doing a survey as to why members had let their membership lapse. I said "The policies of the coalition government, do you want me to elaborate". The bloke on the other end of the phone said "No thanks".

Having run a business for 33 years, I can offer George Osborne (who has never run anything successfully) a little bit of advice. If you have any money at all for quantative easing, tax cuts or anything else, spend it on measures that will get the economy going and generate wealth. The ridiculous cut to the top rate of tax hasn't done this. The billions spent on quantative easing won't do this. Do things which generate economic activity at source. There are two things which will instantly help.

1) Cut VAT as much as possible. This will benefit businesses and consumers. It will ease families weekly shopping bilss and help the cashflow of ailing businesses.

2) Cut fuel excise duty. This will cut the transport costs of businesses, make commuting cheaper, reduce the costs for bus and train companies and give us all a few quid in our pockets. A 10p a litre cut in excise duty would give the economy a massive boost.

Both these measures would put cash in peoples pockets and boost businesses. Companies will be less likely to cut staff and more likely to hire them. That will reduce the burden of social security costs and further improve the state of the economy. It would also be nice to see a lessening of red tape, although I personally won't be campaigning for this, for the simple reason that every time the government (of both parties) say they will do this, they actually generate more red tape.

What I would do is remove the requirement for companies to collect money for CSA and other such things. I don't believe that this is in any way fair. I actually think it violates the rights and privacy of my staff. I've had three occasions where I've had to explain to staff that I am legally required to deduct money from their wages to support their offspring. As we are a small company and I know the staff well, they are completely humiliated by having to explain to me that they have been unable to agree child support arrangements with former partners. I don't think that it is the role of a company to have to pry into the lives of their employees.

Sadly there is no indication whatsoever that George Osborne gets any of this. What is George Osbornes recipe for economic recovery? Extra tax on cornish pasties. Has there ever been a more useless chancellor. I must confess that I was under the mistaken impression that having Vince Cable in the cabinet may inject a degree of sanity into the more bonkers realms of the Tory party. The sad truth is that the whole bunch have shown themselves to be inept. In the grim dark days of Gordon Brown's premiership, the then Chancellor Alisdair Darling cut VAT from 17.5% to 15%. That single measure prevented me from laying off one of my part time staff. Of all the many billions spent by the government on quantative easing and other "measures", that was the only one which actually benefitted my business and the businesses of anyone I know. I have come to the conclusion that, whether by accident or design, Labour is actually better for small business than the Lib Dem/Tory government we are currently lumbered with.

And if you are minded to disagree with my analysis, please preface your comment with how this government has been good for the company which you are running and what George Osborne has actually done for your business.

Lets face it, George Osborne hasn't got a clue

Normally I steer clear of national politics on this blog. Once in a while, it all gets too much and I have to say something. It's just that sometimes, it becomes so abundantly clear that the government has not got a clue about the real economy that something has to be said. Last week the Government and the Bank of England decided to commit another £75,000,000,000 to quantitative easing. This is being sold as "pumping money into the economy". It is nothing of the sort. If the government really wanted to pump money into the economy, they would simply cut fuel duty. Everything we do in the UK would be positively affected by this. It would be cheaper for people to get to and from work. It would be cheaper for companies to move their goods around the country, allowing a reduction in prices, which would stimulate sales. It would mean that every household in the country would have more money in their hard pressed budget to spend on goods, or paying their debts or paying the hidden taxes, those of us in Barnet are being clobbered with, or simply pay their winter fuel bills and keep warm.

You may be shocked that someone who supports a green agenda would suggest such a move? Surely high fuel taxes protect the environment? When times are good this argument can be made, but unless we take drastic action, we'll have a double dip recession and many ordinary families will be forced into poverty.

If all of the money being wasted on quantitative easing was spent on a simple cut in fuel duty, every part of the economy would be improved. At the moment this cash is simply going into bank coffers. As the vast majority of us keep our money in banks and spend it via various electronic methods (cards, net payments, ATM withdrawals), the banks would still get their hands on the vast majority of the cash, but we would be in control of how it was dished out, not them.

Sadly the Chancellor of the Exchequer, George Osborne has never had a real job in the real world (to quote Councillor Brian Coleman). He's only ever worked in a series of political non jobs. As such he doesn't seem to understand that transportation is what makes the economy work. If freight companies profits improve, they can reinvest in new fleets, which are leaner and greener, using modern technology. This country needs to completely overhaul it's energy policies, but this can only happen with a healthy economy. With the idiotic policies of Osborne, chucking good money after bad, this will never happen.

I would personally like to see a Royal Commission set up to ensure that over the next 15-20 years Great Britain becomes the most energy efficient, eco friendly and clean country on the planet. I would like to see us lead the way in clean energy technology, effective mass transport systems and energy efficient homes. None of this will happen with an economy in stagflation, which is where Osbornes policies will take us. We've spent a small fortune on the Libyan war. When Libyan oil comes back on line, there will be a drop in the world oil price. Will we see it at the pumps? No chance, because the stealthy Tories see it as a good source of revenue. It is beyond their wit to see that they could kickstart the economy and then pay for all manner of environmental initiatives out of the proceeds of economic growth.  By my maths £75 billion of quantitative easing is worth approx £2,500 per household in this country. Why is it beyond the wit of a Tory Chancellor to let us decide how that cash is spent, rather than the banks and bankers. I would guess that a fuel tax cut that put £500 in every families pocket would create infinitely more wealth than this bonkers scheme and would generate far more economic activity, at a fifth of the cost to the taxpayer.

Is there any chance that George Osborne will actually wake up to the fact he's driving the economy over a precipice? Is there any chance that he'll realise that he's chucking good money after bad with his policies? No chance. It is a well documented fact that certain Tory ministers are partial to this blog. Is there any chance that they could possibly have a word with dopey George and get him to actually do something sensible for the economy for a change?