Gary's views

PBR (Pre Budget Report)

Two big questions emerge from the budget (for that is what it turned out to be) that we had on Monday. Will the 2.5% cut in VAT incentivise us to go out and spend money that we would not otherwise have spent? If not, we are adding to our national debt for nothing. Secondly will the economy start to grow again next summer/autumn as the chancellor predicts? If not, we are in deep do-dos as the borrowing figures will then zoom off the chart.

As I mentioned in a previous article, we are each as well placed to understand the economy as anybody, because in the end it is simply the accumulation of all of our choices. So do you now feel motivated to spend a little more, to buy the TV or the car or even the kettle you have been eyeing for a long time? There will probably never be a better time. I confess I still struggle with an analysis that says: the problem is irresponsible borrowing and reckless spending, so the solution is…er…even more borrowing and even more spending. Anyway, instead of digging for victory this time, we are invited to spend for victory, a much more pleasant task. But are you going to do it? Please let me know.

Will our economy turn around next year, bearing in mind the recession has not actually started yet? At a time when the USA is talking about a brutal downturn and the Euro zone economies are all contracting, it seems a tad optimistic. At a posh dinner last Friday night I had two conversations with grey haired gentlemen who know a thing or two about financial matters and they were both certain that the malaise that had entered our own economy is far worse than anything else in their lifetimes. They were both born before WW2.

So what can we do? We have to keep public finances in order and not succumb to reckless borrowing. We must not wreck the prospects for the next generation just because we have been foolish. Banks must come out of their dark caves and start lending sensibly once more. We have to pay special attention to the vulnerable in our midst. Our systems for helping the unemployed must become much slicker. We have all got to become better neighbours. We need a bit of bulldog spirit. It is going to be tough but we will get through it.

CREDIT CRUNCH 2

Over the next few days the answer to the economic challenges we now face will become clearer. Next Monday afternoon the Chancellor will stand at the despatch box and tell us the master plan.

But already the framework is clear: they will encourage the independent Bank of England to continue to slash interest rates; they will not cut government spending but will allow borrowing to soar to fund the growing black hole between tax revenues and government spending, and possibly even bring forward public sector projects; and they will reduce taxes, especially for those on modest incomes.

All of this has only one purpose: to stimulate economic activity. To encourage us all to spend, spend, spend, to increase demand so that the economy grows.

I recognise it is a legitimate policy option, but I worry about it.

We got into this mess by irresponsible lending in the private sector fuelling reckless personal spending. I fail to see how we can escape it in the long term by irresponsible borrowing in the public sector to do the same thing.

The British government intends to borrow its way out of the recession. But who will pay that money back and how long will it take? (You may also ask who will lend the money to the government in the first place, but that is another matter!)

This gentle medicine may well help the forthcoming recession to be shallower than it would otherwise be. Obviously it is a good thing to minimise job losses and house repossessions. But it must mean that the following period, the recovery whenever it comes, will be much more tentative and protracted as taxes must rise, government spending must be pruned and borrowing will have to be repaid over many, many years.

It will also mean that we might not learn the crucial lesson we all need to learn from recent years, including myself, that we should not spend more than we can afford and we should not over borrow against assets that can go down as well as up.

When I was growing up, I was sometimes given a choice of punishment: a smack now or two weeks with no pocket money. I would always take the smack and get it over with. I worry that the country may be choosing the soft option just to avoid short term pain, and that we might live to regret it. What do you think?

NEW WORLD ORDER

Not much of a month really; a few banks nationalised, global economic meltdown, first black President of the world’s only superpower, interest rates slashed by 1.5%, a few overpaid BBC louts sacked. That’s the trouble with politics, nothing much ever happens! If I had written this column at the beginning of the year and predicted any of these things you would have sent for the men in the white coats.

I wonder if you share my view that things will never be quite the same again. The tumultuous events of the past few months seem to pave the way for 2009 to be a year of blistering change. There is scarcely an institution, scarcely an established notion that cannot now be challenged. Banking will ever be the same again, so low has the reputation of our major banks now plummeted. Surely there is a gap in the market now for a new kind of bank? The reaction to the Jonathan Ross event actually encourages me – people are signalling loud and clear that they do not want to put up with the foul-mouthed garbage on our TV screens any more. Even the Bank of England has sensed the new mood – so often dragging its heels behind the curve, it has now shown a dramatic boldness (thank goodness). As it seems to be a time when fortune favours the brave, I sense we may hear news of tax cuts and major spending splurges from government in the next few weeks.

Perhaps this is a good time to list the other seemingly intractable things that also need to be tackled. What about the rampant political correctness and risk aversion that has reached epidemic proportions; can we now, in this season of boldness, send it packing and re-embrace traditional common sense values once more? What about the now desperate imbalance between private sector pensions and index-linked public sector pensions (including my own) can this disparity be allowed to continue much longer? What about looking again at ways to underpin strong families in our nation, to stop the chaotic lifestyles suffered by so many youngsters.

The list of entrenched challenges facing our society is long; but part of the problem has always been we do not believe anything can be done to change these problems. The dramatic events of recent weeks have demonstrated that there are no paradigms that cannot now be challenged.

What is on your hit-list for change?

BINGE DRINKING

Are you a binge drinker? Recent statistics for Devon suggest that more than 75,000 men, a third of the population, are drinking at hazardous levels.

This means drinking over 22 units per week, remembering that a unit is a small glass of wine (125cl) or a half pint. Even the fairer sex are catching up with us male boozers with 35,000 of them now drinking to excess in our county and for women this means anything over 15 units per week.

Can these statistics be true? On a Friday night in Union Street it would not be hard to believe them. But in Plymstock? On a wet Wednesday in November? As we enter a period of economic gloom, even the pubs are feeling the pinch and heavy drinkers are a rarity.

The enemy is drinking at home, whether getting tanked up for a night on the town or just sipping wine watching Austin Healey strut his stuff on Strictly Come Dancing. With alcohol so cheap in supermarkets it seems that more of us are drinking at home in ever larger quantities. In one sense, so what? At least home drinking does not involve drink driving or street punch-ups. Jan and I enjoy our favourite tipple in front of the TV and an open fire when we get the chance.

The problem is that all of this hidden drinking it is making our population unhealthy. The numbers of patients treated in Derriford hospital for liver complaints is going through the roof placing an increasing burden upon the National Health Budget. 18,000 people in Devon are now alcoholics and many work days are lost every year by drink related illnesses.

So local governmental agencies are compiling a strategy to tackle this. This is laudable, but I hope this does not turn into some attempt to police what people do in their own homes, if they are not breaking the law.

We should make people aware of the amounts we can drink safely. We should have places people can go to for help. If people show up at hospital with a drink related problem they should certainly be referred, robustly if needs be, for help But we must allow people to exercise individual responsibility and not try and live their lives for them.

Perhaps we need to promote our old friend Common Sense a little more. She has many sayings and one of them is: all things in moderation.