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UNEMPLOYMENT is on the rise again. Today's figures from the Office of National Statistics show that joblessness has risen to 1.79 million nationally and the situation is far worse in London. Here there has been an increase of nearly one per cent between June and August — and the trend is up.
Given the likely heavy impact of recession here, the Mayor is right today to tell the London Assembly that “we must make sure that we continue a vital programme of investment in London infrastructure”. There is a good economic case for central government to focus on public-sector projects which promise to benefit the economy in the long term while reducing joblessness now. There is Crossrail, a rail link that is needed now and will be even more necessary once the downturn is over. There is the Olympics site, as well as the long-overdue upgrades of the Tube, the Thames Tideway Tunnel and the extension of the East London line. Crossrail alone, Mr Johnson says, will need 28,000 workers; for all this work, London will need no fewer than 20,000 engineers.
The crucial aspect of this is that all these projects other than the Games are investments that promise to bear economic fruit in the future. Crossrail, for instance, will increase London's transport capacity by 10 per cent and will help ensure that business is not deterred from coming here when times improve by an overcrowded, unworkable transport system. It would make sense to proceed with all these projects at any time; the recession is just one more reason to ensure that they are kept on schedule.
Public spending is not an end in itself, even in a recession: it is right that the Government should now be seeking to cut jobs in its own departments. But unlike most of the expansion in the public sector over the past decade, these infrastructure projects will pay for themselves. The bonus is that they will diminish the scale of unemployment to the benefit of the capital — and the Treasury.
Bail-out doubts
TWO days after the announcement of the Government's bail-out of the banks, critics are taking exception to the details of the plan. One objection is that the plan obliges participating banks to cut dividends. These would be restored after one year.Another concerns the overtly political demand by the Treasury that banks in receipt of state help assist homeowners and businesses.
The deal requires the three part-nationalised banks to ensure “the availability of lending” to homeowners and businesses at 2007 levels or higher. This is wrong. As the Lib-Dem economics spokesman, Vince Cable, said: ”Using banks as an arm of social policy is problematic.” Worse, returning to easy credit threatens to replicate the situation from which we are trying to extricate ourselves.
One of the reasons why HBOS has had to receive £11.5 billion in the bailout is because of its lax lending policy. It gave mortgages on unrealistic multiples of income or on the basis of unsubstantiated statements of income. The collapse of the sub-prime market was partly occasioned by lax lending to people who were not credit-worthy. Plainly, some banks have been unduly reluctant to lend to perfectly credit-worthy businesses and households — or have done so on outrageous terms — and that situation need changing. But a return to easy credit should not be the quid pro for the bail-out.
Booker surprise
YET again the bookies have been confounded by the results of the Man Booker prize, which has been awarded to a young Indian first-time novelist. Aravind Adiga's The White Tiger deals with the underbelly of Indian society, charting the rise in fortune of the son of a rickshaw puller by morally dubious means. Unlike most fashionable Indian novels this one has few illusions about the realities of life in the subcontinent; unlike most Booker winners, it may actually be widely read.
Reader views (1)
I agree with this article... big time.
I also think that they should also review corporate tax policies for small businesses.
In my business, at the year-end, we are faced with the choice of paying massive tax rates of up to 40% on profits or clearing the profit by paying staff bigger bonuses.
A better way would be to allow the businesses to deposit a percentage of this year's profits as a tax-free cash reserve for next year's slow periods.
This would enable businesses to more effectively be prepared for slow periods and crisis like this one, rather than relying on overdrafts from banks to get us through slow times.
Everything has it's ups and downs, and the tax code shouldn't encourage so many small businesses to live this close to the edge that they need to get rid of staff when the bank's overdrafts dry up or business is slow for a bit.
That'd help the stability for small businesses in times like these.
What do you think?
- Terry, London, United Kingdom, 15/10/2008 17:15
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