The whole world is not in “financial meltdown”.

http://web.worldbank.org/external/default/main?theSitePK=659149&pagePK=2470434&contentMDK=20370107&menuPK=659160&piPK=2470429

And, like it or not, there is international tax competition for large companies.

Of course small companies need to be encouraged, but for goodness sake if they can’t find premises by themselves – you may have spotted there is no shortage – I don’t hold out much hope for their chances of success.

Why you think he’ll fail or why you hope he’ll fail?

Personally I’ve always thought a double dip was inevitable regardless of who was in power.

It would help if you defined “work” as in “the cuts won’t work”

Do you mean the cuts won’t reduce the deficit? Do you mean the cuts won’t help GDP grow faster than it would otherwise? Do you mean the cuts won’t help employment rise faster than it would otherwise? Which of these does Cameron claim the cuts will achieve?

You are right of course that thinking of the macroeconomy as if it’s a company is a big mistake, because as you say, companies can fire workers and cut their costs without cutting their own revenue. As for the rest of the article …

Where have you pulled that prediction of 15% or 16% corp tax from? What are these tax allowances provided for large companies? (that’s not a rhetorical question, I wasn’t aware of allowances linked to size)

And yet it’s the small business sector that Cameron needs to encourage. This is where our future, our jobs and our business prosperity are to be found

Evidence please. Large companies tend to fire earlier in recessions and hire (a lot) more workers later in recoveries. pdf.

country which faces little or no prospect of export-led growth because the whole world, like the UK, is in financial meltdown

What? German imports rise 32%. IMF raises growth forecasts thanks to robust growth in Asia. Honestly, what do you base your pronouncements on? I suggest you look at data before putting fingers to keyboard. You have thought about the whole we have our own currency angle, haven’t you? And you’re not at all worried about the need to rebalance the global economy, import and borrow less from overseas etc.?

It requires an economic policy that focuses on promoting growth in the UK economy through promotion of small, home owned business.

erm, I thought you started by saying “it requires” the government not to make cuts … now where on earth do you get this idea that home-owned businesses are the key from? For this to be true, we need to know that out of all available ways the govt has to spend money, the “return” to trying to help tiny businesses is the highest available. So, what’s policy do you have in mind? How do you know policies aimed at medium and large businesses won’t have more bang for buck, or maybe just expanding/protecting govt. employment?

[small businesses] needs to know it has government support – backed up by things like development agencies that ensure it has the advice, help and premises it needs as it grows, in the area where its employees are

what, there’s a shortage of business premises is there? Are you really so sure that what’s holding small businesses back is a lack of advice from government agencies?

It requires local jobs for local people.

you are teasing us now. what do you have in mind, a maximum commute distance?

(oh, and your first problem with the company analogy isn’t a problem – that’s what makes it an analogy. ffs.)

n.b. there are some very interesting recent articles about how – in the US at least – the form of this recession, as in the nature of unemployment and the state of the job market – differs from previous recessions. See here. And for some thoughts on what that might mean for policy, here. Oh, and employers who can’t fill vacancies should trying raising the f-ing wages they offer.

Cameron does seem to be acting like a clueless rank amateur. Take for example GP commissioning. This requires abolishing PCTs which will mean lots of redundancies and a huge cost to the NHS which is money that should be going into healthcare. But the NHS cannot function without the commissioning that the PCTs do, so what will happen is the commissioners (who have expertise about the local healthcare needs and providers) will simply take their redundancy and get a job with a GP commissioning consortium, or more likely, with one of the private sector companies that expect to benefit from a £1bn commissioning market windfall.

Someone with their head screwed on right, but still wants to get commissioning closer to GPs (that is not necessarily the right thing to do, as we will see in 5 years time when we move back to a PCT-like model) would say “let’s split each PCT into four, make each mini-PCT accountable to the GPs they cover but keep the employees in the NHS so we don’t have to pay them redundancy“. Lansley’s ideology has a screw loose.

It’s gonna be hilarious in 2014 when the left are gonna have to somehow explain that we were hypnotised into thinking the economy is doing well, or that Dave erased our memory of that “double dip recession” using Evil Tory Mindrubbers.

Or something.

Political strategy never was the Left’s strongpoint.

you might also be interested to know that larger firms tend to payer higher wages for comparable jobs.

@Martin Coxall: If the economy is going well in 2014 (big if) then yes, Labour and the broader left are going to be in a difficult situation – not least because governments presiding over rosy economic circumstances are generally re-elected.

But what you’re saying amounts to: “If the left are wrong about the government’s economic policy then the government will profit from that at the next election”. Well, yeah. I think we realised that.

That will still leave the question of “going right for whom?” If we’re in a 1980s situation of economic growth for some (*cough* the southern, Tory-voting middle classes *cough*) with unemployment, cuts and economic stagnation for others (*cough* northerners and povs *cough*) – a “rich man’s boom” – then the left should have plenty to say about that.

Though of course we all know who won at the ballot box during the 1980s…

So, yes, a large part of the left’s electoral recovery depends on the government getting the economy wrong. It’s called “being in opposition”.

@5 Your exactly right.

There is one small fact missing from your analysis. That already exists. It’s called practise-based commissioning which gives GPs who want it, representing a number of practises, input into the commissioning of services. Bristol PCT is a good example – it’s GPs are divided into three groups who have the input into practise-based commissioning. I would bet a lot of money that if the White paper goes ahead (I’m praying it doesn’t) then these three groups will become the new consortia in Bristol.

Apart from the cost of implementing the changes, the other big cost will be for the hospital trusts who currently negotiate with PCTs (3-4 usually in a catchment area) will then have to form contracts with each consortia. Tripling the work. Given that the money the trusts get paid for services won’t increase* the only way to make this work is to make efficiencies in order to pay for the extra bureaucracy. I wonder where those efficiencies will be found?

AFZ

*Hospitals get their income by a system called “payment by results” PCTs ‘buy’ services from hospitals. So if you have an operation then based on a fixed pricing system the hospital charge the PCT for it. Their responsibility is to make sure that they can provide that service for that price.

“On average when the UK corporate tax rate was 30% large companies paid at about 22%. Now it’s going to be 24%, which means even after reduced tax allowances are provided for large companies are only going to pay tax at 15% or 16%.”

Err, why?

As we’re all aware, your estimate of the actual tax rate that was being paid included the effect of all those allowances which companies were rightly able to take. You know, capital allowances, R&D allowances, all that sort of stuff.

So, if those allowances are to be cut the difference between the headline rate and the actual rate will shrink, not remain the same.

In fact, given the way you calculated the tax gap (including those righteously taken allowances) a reduction in allowances would reduce that very tax gap.

Which is what you keep saying you want, isn’t it?

So, if those allowances are to be cut the difference between the headline rate and the actual rate will shrink, not remain the same.

worse, he hasn’t even got the ‘gap’ remaining the same:

(30-22)/30=0.26 so actual tax rate is 26% below headline rate
(24-16)/24=0.33 so he predicts the proportionate difference between headline and actual rate will increase. He’s just subtracted 8 from the new rate because that’s what the old difference in rates with.

Well of course Cameron and co should stop using business analogies. Going on about “UK PLC” or similar always makes you sound like the deputy chairman of the Chamber of Commerce in a small, declining market town. The only place where the analogy holds is that the PM seems to have the same inability to think through consequences as the leadership of far too much of British business.

Oh, and he should change his article- and speech-writers – or get some if he produces this stuff himself. Am I the only person who’s already sick of being lectured as if I was a slightly thick twelve year old?

He’s also stupid if he thinks that bribing big businesses to move their nominal company headquarters to the UK will work. Brass plates don’t employ many people and a number of smaller jurisdictions have in any case got the market sewn up. He’d be wiser trying to reform EU regulation to stop the UK being affected (yeah, fat chance).

But, like it or not, the Government have managed to convince the public that there is a lot of waste in public services. Opposing all cuts and decrying every job loss isn’t going to work – especially if it’s the only strategy you’ve got. Particularly if you ignore the facts that a lot of the spending was badly done and that Labour would also be cutting hard if they had got in Government.

There is plenty to criticise about the ConDem economic strategy which seems to consist of turning the Foreign Office into a global super salesman. As the FT said:

‘ Meanwhile, David Cameron, the UK prime minister, evidently hankering for the days of the East India Company, seems to want to refashion the British diplomatic corps into a commercial salesforce. ‘

However, cutting corporation tax is not one of them. They should be going much further and completely abolishing corporation tax. Most people agree that corporate leverage is too high in the UK Interest on capital being deductible but not dividends which face double taxation means firms are incentivised towards debt financing rather than through equity. That is all fine and dandy until the economy is hit with a shock and the debt financing disappears. Quite literally overnight. If we think the current economy is fine then there is no problem with debt financing. On the other hand, if we think the current economy is operating below potential and workers are needlessly out of work then debt financing is largely to blame.

Firms must pay corporation tax before they can pay dividends. Therefore, the tax is an uncontrollable expense that they must meet either through higher prices or lower costs. All firms in the same sector face this expense and their principal cost is wages. Even in a competitive market the corporation tax must raise prices and lower wages or a combination of both.

Reducing or abolishing CT for a firm operating in a highly competitive market i.e. retailers will result in lower prices and a higher yield for shareholders with labour getting higher nominal wages but less of an effect on labour compared to the other two variables. However, lower prices raises the real wage. Moreover. the nasty capitalists getting higher dividends is not a problem because the dividends are still taxed but do not face double taxation. Therefore, equity investing is more attractive and moves firms away from leveraging up their balance sheet with debt.

If the firm operates in an industry where labour is organised such as utilities. The result will be a higher nominal and real wage and less of an effect on prices.

In an industry which is neither competitive, organised nor regulated i.e. none. The reduction in expense will go to shareholders.

An added indirect benefit would be a reduction in advertising where firms telling us how great they are just burn money to reduce profits.

As I said there is much to be sceptical about the coalition strategy. However, lowering corporation tax is not one of them.

Isn’t the biggest difference between a country and a company is that a country is not run for profit? The purpose of an economy is not to present a tidy looking balance sheet, but to deliver the maximum amount of economic wellbeing and the minimum amount of deprivation to all the people who participate in it.

That’s diametraically opposed to how a company works: both employees and customers are in an essentially adverserial relationship with the shareholders, with shareholders having an interest in getting as much money as possible from customers while paying as little as possible to employees (and suppliers).

It’s not clear from all this UK PLC talk who the citizens and residents of the UK are supposed to be in this triangle, but one gets the feeling that Cameron sees himself as the chairman of the board, which hints at the fact that he sees himself as representing primarily those who have historically made the big profits from the capitalist arrangement.

Whether or not he is successful by 2014, or any other artificial benchmark, going on current evidence we can already say with a degree of confidence that this success, while presenting a tidy looking balanec sheet, will not prevent large numbers people from falling into greater hardship. In that sense the technical point of a double dip recenssion or not is completely immaterial: if there is more deprivation and misery in the UK, whatever the GDP rate, he will have been a successful CEO but a rubbish Prime Minister. Which is, like, the job he was hired to do and all.

Reading the comments on the thread about think tanks.
There is vein of right wing thought about the purity of the market. In someways it has a leftish feel about the ideology. Unfortunately like Utopian communism, it will evole into the opposite of it’s aims.
Cameron is being honest in this particular mode of thinking. Privately he thinks , big society what a load of cobblers but it does keep the ex liberal cum conservatives happy. Guardian and Observer columnists such as Bennett and Cohen can now send their kids to private, open or academy schools knowing there doing the right liberal thing. The fact that in 10 years time they will be owned by a corporation is of no importance.
He knows the only two logical games in town are corporations and the state.

And yet it’s the small business sector that Cameron needs to encourage. This is where our future, our jobs and our business prosperity are to be found. But the small business sector does not need hiring (as Cameron seems to think), it needs nurturing. It does not need a big stick, it needs carrots.

I wonder if dumping a million ex-public sector workers on the labour market will make it easier for those small businesses to keep their labour costs low. As you said, everyone needs to eat, and so people no longer being paid by the government will need to persuade someone else to do so.