Crisis over? Don't bank on it

One observer whose job gives him an insight into a range of businesses across the economic spectrum, said that anything which was consumerfacing has had a very tough month. Retail we know about, but leisure has also taken a hit, which brings in pubs, restaurants, travel and, to some extent, gambling. The impression he got was of a nation tightening its belt.

The trouble is that the executives running these businesses do not know what to think because of the impact of Easter. Last year the four-day break fell in April but this year's was in March, and the difference it makes is enough to make straightforward year-on-year comparison difficult. The more sophisticated businesses have three-month rolling data, which smooths out the effect of holidays and poor weather. They don't like the trend, either.

If this slowdown is indeed as marked as it seems, another surprise is the relative dearth of profit warnings. It could be, of course, that the growing use of quarterly trading announcements gives companies the opportunity quietly to adjust expectations, but it might also be that companies still have no feel yet for how genuinely bad this experience really is.

They are holding on because they don't want to risk a radical change of strategy, involving scalebacks and cost cuts, on the basis of what may turn out to be just one month of bad figures. They do not want to give in to pessimism unless it becomes something they really cannot ignore.

Unfortunately, there is not much good news coming from anywhere else in the economy. New mortgages for house purchase plunged last month to within a whisker of the lows set in the early 1990s.

There is little hope of an early respite, as loan conditions are still getting tighter. Nationwide is the latest lender to require a 10% deposit, and this in turn is likely to undermine house prices. The more evidence accumulates that house prices are falling, the more likely it is that consumers will feel poorer and spend less.

We have heard a lot in recent days about how the bankers feel they are over the worst. Personally, I think that is premature, but even if true, it applies only to bankers. It looks increasingly likely that for the rest of the economy the troubles are only just beginning.

Call a halt to taxing times

Government ministers give the impression that the limit of their ambition now is to get through the day without becoming embroiled in another disaster - but even that limited goal can be hard to achieve.

Nowhere is this more obvious than in tax. The Government has alienated entrepreneurs with capital gains tax, the financial community with non-dom tax and Labour's core vote with the abolition of the 10p tax band, all within a few weeks. It is still not out of the woods as drugs firm Shire and media company UBM announce they are moving their tax domicile to Ireland, where the corporation tax rate is lower and the tax on overseas earnings easier to live with. Other more substantive businesses such as WPP indicate they may follow. HSBC, the world's largest bank, has dropped similarly dark hints in the past.

We are seeing the death throes of a tax system that is no longer fit for purpose. It could just about cope up to 10 years ago, but with Gordon Brown's chancellorship there came a political demand that it produce more and more revenue, and it has been stretched to breaking point.

The demand for money led to a clamp-down on evasion, a systematic attack on avoidance schemes, the targeting of multinationals and a significantly more hardnosed attitude by the then Inland Revenue towards all taxpayers. The merger with Customs & Excise brought a further layer of aggression. Goodwill between taxpayers and tax authorities has all but evaporated because the politicians have determined to spend more than the system can reasonably produce.

Speaking at a breakfast yesterday organised by business consultants PARC, Madsen Pirie of the Adam Smith Institute said that after years in the wilderness, tax reform is back on the agenda. I hope he is right, though it seems to me there is a long way to go before the Government will listen. But in time, it will surely have to, because the country cannot go on like this.

Cue for action by shareholders

The Governor of the Bank of England, Mervyn King, spoke for many when he tore into the City's bonus culture and the part it has played in causing the excesses that have led to the credit crunch.

But it is difficult to see his call for reform making much headway. Those who would have to implement the change - the executives in the banks - have too much to lose. Turkeys just don't vote for Christmas.

Instead, we need a shareholder revolt. There is no reason why bonuses should be paid at all. Doctors do not require a bonus to complete an operation successfully; architects don't expect £1 million extra for putting up a building that does not immediately fall down.

Only in finance has the bizarre notion come into being that the salary is to get people to turn up to work, but they require a bonus on top of that to do the job properly.

It's time to pay them a decent salary and stop all the nonsense on top.