Bill Carmichael: Cut our taxes to boost growth

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IN the teeth of the recession and with the economy flatlining, the egg heads who run the Treasury recently came up with a clever new ruse to stimulate much-needed growth – give the banks even more taxpayers’ cash!

The problem, they decided, was a lack of “liquidity” – in other words, there wasn’t sufficient ready money around to enable businesses to invest in new projects and create jobs.

Although stuffed to the gunwales with taxpayer-funded bail-outs, the banks were reluctant to lend because of fears of a repeat of the toxic loan scandal that brought them to their knees.

So last August the Government came up with the Funding for Lending Scheme (FLS) whereby the Bank of England would make available £80bn at cheap rates on the understanding that the banks would in turn lend this money to cash-starved businesses.

So far the idea has proved to be a miserable failure. Figures released by the Bank of England this week show that net lending by the banks actually fell by £2.4bn in the last quarter of 2012 compared to the previous three months.

Instead of trickling down to the real economy where it can actually do some good, the cash is being used to prop up the banks’ balance sheets.

The experience of businessman Mike Benson is typical. For the last 15 years, he has run a highly successful company supplying parts for air compressors to customers all over the world.

But when he applied for a £10,000 loan 
to go towards the cost of a new Ford Transit van, his bank, HBOS, turned 
him down flat, saying he did not have sufficient fixed assets in the company to act as security.

Mr Benson was so furious that he 
wrote a letter to Sir Mervyn King, governor of the Bank of England to complain. In his reply, Sir Mervyn admitted the behaviour of the banks is “maddening” and suggested Mr Benson try a foreign-owned bank instead.

The lesson here is that a complex scheme that relies on the banks to do the decent thing in the interests of the wider economy is pretty much doomed to failure.

If the Chancellor has £80bn burning a hole in his pocket, he should do something far simpler and more effective to stimulate growth – cut taxes.

If we are to get out of the current mess it won’t be because of the meddling of bureaucrats and bankers, but as a result of the hard work of the entrepreneurs, innovators and wealth creators in our small and medium-sized companies.

Just get the state off their backs and watch them inject a bit of oomph into the economy and get us all back on the road to prosperity.

Syria sinkhole

The UK is sucked ever closer to the collapsing sinkhole that is Syria.

Foreign Secretary William Hague announced this week that the UK is to supply millions of pounds worth of “non-lethal” equipment, including armoured vehicles and body armour, to the rebels fighting Basha al-Assad’s regime.

You can only sympathise with what Mr Hague called the “extreme human suffering” of the ordinary Syrian people, but I can’t see how this can turn out well.

Either a murderous dictator who is happy to kill his own people will stay in power, or the rebels, including jihadist nutcases, will take over.

As bad as things are in Syria, we have to accept that our power to improve matters is very limited.

The various sects of Muslims have been slaughtering each other for the thick end of 1,400 years and a few stern words from a British foreign secretary are not suddenly going to make them stop.