Saturday, January 03, 2009
More grief for the economy
If the government have not yet realised that their approach to alleviating the recession is not working then this morning's news will have given them cause to pause for thought. Their reliance on macro-economic measures such as cutting interest rates and stimulating demand through cuts in VAT is proving to be ineffective, a sledge hammer to crack a nut.
The £12.5 billion spent on cutting VAT in particular is looking to be poor value for money in the light of the latest Retail Insight Report, which suggests that retail footfall was down 3.1% in December from a year earlier, whilst the the stamp duty holiday for homes under £175,000 has failed to arrest the decline in mortgage approvals. They fell to 27,000 in November, the lowest for nine years.
The Guardian tells us that the banks are defying the government by starving businesses and households of loans and warning that credit will become even scarcer in the first three months of this year. Banks and building societies are being deterred from lending by the worsening economic outlook and the fall in house prices and other assets against which loans are secured.
First time buyers and those struggling to cope with negative equity and falling incomes need targeted help whilst small businesses need access to credit currently being denied them by the banks. Like other politicians I have encountered small businesses faced with the withdrawal of long established and sustainable lines of credit by their bank. Solid businesses have been plunged into crisis by such actions and desperately need assistance from Government to get through this recession.
If the Government is to intervene then it must do so in a more precise way, guaranteeing credit for small businesses and helping home owners. The recession we are facing looks to be deeper and longer than the government is predicting. They need to adjust their response accordingly.
The £12.5 billion spent on cutting VAT in particular is looking to be poor value for money in the light of the latest Retail Insight Report, which suggests that retail footfall was down 3.1% in December from a year earlier, whilst the the stamp duty holiday for homes under £175,000 has failed to arrest the decline in mortgage approvals. They fell to 27,000 in November, the lowest for nine years.
The Guardian tells us that the banks are defying the government by starving businesses and households of loans and warning that credit will become even scarcer in the first three months of this year. Banks and building societies are being deterred from lending by the worsening economic outlook and the fall in house prices and other assets against which loans are secured.
First time buyers and those struggling to cope with negative equity and falling incomes need targeted help whilst small businesses need access to credit currently being denied them by the banks. Like other politicians I have encountered small businesses faced with the withdrawal of long established and sustainable lines of credit by their bank. Solid businesses have been plunged into crisis by such actions and desperately need assistance from Government to get through this recession.
If the Government is to intervene then it must do so in a more precise way, guaranteeing credit for small businesses and helping home owners. The recession we are facing looks to be deeper and longer than the government is predicting. They need to adjust their response accordingly.
Comments:
<< Home
I don't understand, why everybody believes something "should be done" to save the day. The truth is that most western economies have been running on debt in recent years, no matter if it was "real" debt or inflationary money. GDP growth wasn't reflected by the productivity growth. Much spending, no saving. Now is the time to fill in the savings gap. so it means we will have to lower our spending standards for some time and start saving a bit. Simple.
Take care
Elli
Post a Comment
Take care
Elli
# posted by 
: 8:57 PM
: 8:57 PM<< Home
