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Westlake Legal Group > Posts tagged "Private Sector"

Andy Street: Our blueprint setting out the economic ambitions of the West Midlands

Andy Street is Mayor of the West Midlands, and is a former Managing Director of John Lewis.

Last week saw the launch of a blueprint setting out the post-Coronavirus economic ambitions of the West Midlands. As a manufacturing heartland, where draftsmen drew up plans for everything from steam engines to Spitfires, blueprints are in our blood. They illuminate our history. This intentionally ambitious £3.2 billion business case draws a clear trajectory to our region’s future.

As Mayor of the West Midlands, it’s my job to attract as much investment as possible. Rishi Sunak’s bold and decisive actions – notably through the furlough scheme – have provided unprecedented economic support for jobs during lockdown. Now, demands on the public purse are high. All investment must be fully justified, diligently used and – crucially – deliver real results. Every penny counts.

Our region was the UK’s fastest growing outside the capital until Covid-19 struck, and as a hotbed of export, manufacturing, construction and professional services, we play a key role in the UK’s economic success. This new blueprint lays out a powerful business case for how continued investment can spark rapid and sustained recovery, not only for us here but for UK PLC.

Our ambition is deliberate because the stakes are high. Research suggests we could be hit harder than most by the lockdown. When coronavirus struck, the West Midlands was in a strong economic position, with record employment figures and productivity growth well ahead of the national rate. However, our economic mix – dependence on manufacturing and business tourism, as well as a significant contribution from universities – leaves us vulnerable.

By following the blueprint we have drawn up, the Government can demonstrate its commitment to ‘levelling-up’ by backing the people of the West Midlands to deliver.

We need to do everything we can to get back on our feet quickly and return to the levels of success we were enjoying before the outbreak hit. That means driving a rapid economic recovery, safeguarding more than 135,000 jobs while building thousands of new homes. It also means learning the lessons of the financial crash of 2008/09, and listening to business.

Investment is crucial. However, while we need significant investment from the Government – £3.2 billion over the next three years – this is broadly in line with the £2.7 billion investment we have secured since 2017, which supported strong economic success here.

Our business plan is to build on our success and on the investment we have already attracted from Government, while leveraging much more private and public sector investment locally, including from our universities.

The blueprint sets out a business case for investments, while outlining the economic benefits they would deliver. For example, it directly supports our automotive sector by harnessing clean technology and electrification. A major investment package, including £250 million towards a Gigafactory producing state-of-the-art batteries, will unlock 51,700 green jobs.

The building of HS2, next year’s Coventry City of Culture festivities and the Birmingham 2022 Commonwealth Games present opportunities to create jobs for local people. By accelerating major infrastructure investment and supporting the recovery of the tourism and cultural sector we can unlock 33,000 jobs.

Then there is the West Midlands’ growing reputation as a hotbed for health research. By investing in healthcare innovation we can protect 3,200 jobs, while improving the health of our population.

Improving transport, housing and digital infrastructure will play a key part in a rapid recovery, while laying the foundations for future economic strength. We can build better transport and digital links to drive productivity and create thousands of jobs in construction. Schemes include extending rail, metro and bus routes, with cash for enhanced digital connectivity and to accelerate fibre connectivity in deprived areas. Reopening long-closed railway stations will better connect people to employment opportunities, attract investment into once-isolated areas and improve productivity.

The West Midlands has pioneered the regeneration of brownfield sites to tackle the housing crisis, while protecting the environment. We even have our own regional definition of ‘affordable housing’ applied at planning level by the West Midlands Combined Authority. We want to build 35,000 new homes – 15,000 of which will be affordable – with a focus on housing key workers. Plans include using a £200m investment package to regenerate derelict eyesores and £24 million for a new National Brownfield Institute in Wolverhampton, which will be a centre of excellence for land reclamation.

Investment to equip people with the skills needed for the future aims to help get them back into work. This includes helping 38,400 young people obtain apprenticeships and work experience, retraining 20,000 workers for in-demand sectors such as health and social care, logistics and business services, and upskilling 24,000 for jobs for the future.

Finally, we want to back the region’s businesses with support schemes – including helping them navigate their way through the post-lockdown world – creating or safeguarding 43,900 jobs.

This ambitious business case is based on our region’s experiences not only of recovering from the last downturn, but on the successes of the last three years. The blueprint has been developed as a team effort between the region’s local enterprise partnerships, universities, business groups and local authorities.  Crucially, some of our biggest employers have also shared their insights about how the region can play its part in securing a strong national recovery, putting central investment to good use.

For the UK to fully recover, all of its regions must recover too – creating a stronger country with a more robust, balanced economy.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Eamonn Butler: More state provision won’t fix social care. It needs partnerships with independent providers.

Dr Eamonn Butler is Director of the Adam Smith Institute.

We carry on spending hundreds of millions on prestige projects such as HS2 at a time when we’ve just blown £300 billion on lockdown policies. But if there is one sector of the economy that really needs some capital investment, it is the social care sector.

Roughly three-quarters of our residential care homes are old and no longer fit for purpose. Many are converted houses and hotels that just aren’t suited to providing for elderly and frail people. And most of those that were purpose built are well below modern standards in terms of bedroom and dayroom sizes, bathroom provision and much else. They need upgrading—or knocking down and replacing.

So that’s a lot of cash, though we could probably bring it in for less than we’re spending on HS2. It’s pretty obviously not going to come from our depleted Treasury, though, and why should it? The older generation have already voted themselves generous benefits—triple-lock pensions, free TV licences, reduced rates of national insurance, winter fuel payments, you name it—at the expense of those who are actually still in work and paying the tax to fund it all. And only a third of them are likely to need any social care at all. So they won’t be thrilled by paying for other people’s.

Yes, there’s been a national debate about how we need to spend more and shove an extra penny on income tax to raise the means-test level and give more people free social care. But again, raising taxes is not exactly a smart policy if you want to grow the new businesses that will get you out of water this deep.

That’s why we say, in our new report Fixing Social Care, that the solution is not more state provision but more partnerships between state and independent sectors. For example, we need new care homes and pension funds and insurers need new long term investments—particularly now that shops and offices might be empty for a while.

Sounds like the basis of a deal. We suggest that investors should create new care homes—not just in ones and twos as at present, but an economies-of-scale dozen at a time, and lease a whole care package to local authorities. That gives councils future security on their caseload and avoids them stumping up huge capital sums.

And why can’t people provide for their own social care, instead of demanding the government pays for everyone? The answer is that insurance is not viable when you have the long-tail risk that a few people might have to spend many, many years in an expensive residential care setting.

So why don’t we make insurance both viable and affordable, by the state stepping in, not to pay for everyone, but just to pay the cost of anyone who needs more than, say, six years’ of care? That would instantly create a market, bring money into the care sector, involve insurers who would make sure that care providers delivered good value for money, and make sure that the mass of people would get dignified care when they needed it.

We need new partnerships in care delivered at home too—something often ignored because it’s not very visible, but actually a huge part of public and private spending. Local authority care at home is pretty dire, selected on price rather than quality, and carers are so strung out travelling from person to person that they have little time when they arrive.

And council budgets are so stretched that many carers, and the private companies that manage home carers, are simply giving up. The virus just made everything worse. Starved of PPE (all destined for the NHS front line), many carers were simply turned away by their vulnerable but frightened clients.

This can’t go on. Let’s welcome in the new generation of care providers who are harnessing artificial intelligence, blockchain and other technology, driven through user-friendly apps like Siri and Alexa, and who employ world-class recruitment, training and management techniques, to deliver services where human beings are in short supply. And there are plenty of other parts of the care system—where half the council spending goes on the under-65s, remember, such as people with physical, mental health or learning problems—that need just this kind of shaking up.

We won’t fix the crisis in social care just by arbitrary boosts to public budget. We need to fix a broken system: to bring in investors, insurers, new providers and new technologies. And throw out all the red tape and ‘always done it this way’ attitude that prevents innovation.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Garvan Walshe: Why the Government must convert its business Covid-19 support away from debt

Garvan Walshe is a former national and international security policy adviser to the Conservative Party.

The immediate economic cost of the Covid-19 epidemic and the measures needed to contain it are starting to become clear.

Vast government borrowing. Huge numbers of people being paid not to work. The total devastation of the travel industry.

But it is also important to look at the longer-term structural effects of the disease and the measures taken against it.

These will determine the shape of the global economy for the decades to come.

The financial crisis twelve years ago has created a world of ultra-cheap money, inflated asset prices, and in the UK, an austerity programme whose effects have been felt by the young immediately, but which have had knock-on effects most visible in continuing weak productivity growth.

The rate of productivity growth is what’s known mathematically as second derivative. It is related not to the level of economic output, nor to the rate it changes (that is, growth), but to rate of change in the rate of change of output.

It is the economic equivalent of R0, the rate at which one person infected by the coronavirus infects another. It feeds though to growth, and on to the level of output.

The way countries cope with the economic effects of the epidemic will have profound effects on productivity.

Among the most important is not actually the evolution of global supply chains, which will recover from this shock and were reconfiguring anyway, or personal habits (once the shock has worn off people will want to see friends, go to conferences and explore the world as much as they ever did), but in the financing of companies.

Just as the wrong post-financial crisis policies saddled some economies with high debt-servicing costs, the wrong Coronavirus support policies will do the same for companies, and smother the creativity on which economic growth depends.

In normal economic circumstances, debt concentrates the mind.

The need to pay it back is supposed to act as a deterrent to borrowing too much, and the need to have it paid back is supposed to prevent reckless lending.

Companies that take on more debt than their revenues allow eventually go bust in the “destruction” part of creative destruction.

The important thing though is that companies’ fortunes are supposed to be contingent upon their own actions: the good ones survive and the bad ones don’t.

But Covid-19 is a global, external shock from outside the economic system. Whether your business is affected by it has a lot more to do with what overall sector it is in, than the quality of its operations.

Certain sectors where the UK is particularly strong, including high value person-to-person services like education, media production and sport have been especially hard hit by the virus.

The music industry, another area of British strength, has been pummelled.

These do not employ huge numbers of people, but they make a lot of money.

At the other end of the labour market, hotels, pubs and restaurants will be devastated.

Though furlough has taken care of their rent bill, and business rates have been drastically reduced, these businesses have ongoing obligations – mainly rent – they still have to pay.

Yet, the Government’s policies to shield businesses from the pandemic have so far chiefly taken the form of providing cash in exchange for creating further ongoing obligations – that is, debt, whether in the form of the Coronavirus Business Interruption Loans, or the Bounceback Loans for micro-businesses.

Debt is suitable for normal times, because it can be used to distinguish between successful companies, and those that need to fail.

But used against an indiscriminate shock like the Coronavirus, it risks becoming a huge weight on the private sector, discouraging innovation and reducing productivity growth even further.

Debt reduces the amount of money a business has available to invest in its own activities.

Repayments must be given priority over research and development, marketing, and even paying staff: it is far easier legally to make someone redundant than default on a debt.

We have a very flexible labour market, which promotes growth and innovation, but debt is an inflexible form of finance that does the reverse.

The usual alternative, equity, won’t quite work in this circumstances.

An equity investor takes a share in the company, and so ties themselves to its fate.

The deal is that if the company doesn’t make any profits, your share is worth nothing. The upside, of course, is that the bigger the profits are, the bigger your reward too.

This is perfectly reasonable for a private individual or venture capital fund in normal times, but unsuitable for mass government support for the economy.

Investors take a lot of time to find out about the companies they invest in, not only to work out whether to invest, but to decide how large a stake they should demand in exchange for their capital.

That is a negotiation only possible under normal market conditions.

The whole point of government support is to prevent companies driven to distress having to sell up because of the pandemic.

And anyway, no government bureaucracy is going to be able to make that kind of decision, especially for hundreds of thousands of SMEs that most need support.

Rather than ordinary debt, which will hang around the necks of businesses for years afterwards, or equity, which is impossible to price under the circumstances, the Government should create securities with income-contingent repayment.

That way companies would pay them back in proportion to the dividends they paid out, crucially, but only after they had paid their staff and invested in their own growth.

The Government could even package up these future income streams and sell them on to interested investors.

This will allow British companies to specialise in what they do best, finding what has been missed by the thorough and ponderous corporate processes favoured by German-style capitalism, and exploiting the opportunities available before they can catch up.

As the international trade expert David Henig puts it “the places we do really well are those where the rules aren’t clear.”

Government support for the economy during the coronavirus should set us up for recovery by enabling us to keep doing what we’re good at.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Matthew Lesh: The radical neoliberal programme which can revitalise the Conservatives

Matthew Lesh is the Head of Research at the Adam Smith Institute.

As the flus from last week’s Conservative Party Conference slowly fade, it is worth turning our minds back to a conference that we must never forget.

It was the autumn of 1980. The country was facing economic turmoil. Decades of Keynesianism was taking its toll with high inflation and low growth.  But there was a leader, a radical neoliberal, who refused to accept the status quo or allow the doomsters to take her off course.  “You turn if you want to, the lady’s not for turning,” Margaret Thatcher told Conservative Party Conference.

Thatcher unashamedly spoke not just of policy change but creating “a new independence of spirit and zest for achievement”. She called her administration “one of the truly radical ministries of post-war Britain”.

Boris Johnson’s party conference speech last week has been lauded for its political nous: get Brexit done, and fund the NHS and other public services.

This makes a lot of political sense, particularly for the party’s ‘Go Midlands, Go North’ strategy: the plan to win northern Leave working class areas who traditionally voted Labour Party.

But Johnson’s spending is frustrating to many free marketeers, who have traditionally found their home in the Conservative Party. Boris speaks of a “dynamic enterprise culture” and the Conservative Party’s history in pioneering “free markets and privatisation”. But so far there has been little meat on the bone, while the party is giving up its reputation for fiscal conservatism by committing to big-spending plans.

Politically, this approach undermines support from economic liberals in London and the Southeast. This danger is heightened by the likes of Sam Gyimah’s defection, signalling the acceptability of the Liberal Democrats to Tory economic liberals. With the Lib Dems also winning over the likes of Chuka Umunna there’s a danger the two main parties are seen by voters to leave the centre stage to the Liberal Democrats — and leave governing alone to the scrap heap of history.

To get a strong majority, Boris needs to win both Chelsea and Fulham as well as Stoke-on-Trent. He needs to be able to hold up his economic credentials to win back Remain-voting Conservatives voters – not just give them another reason to abandon the party.

But this balancing act is nothing new. Thatcher, despite some reforms to childcare and housing subsidies, oversaw a huge increase in social spending. She declared that the NHS is “safe with us” and bragged about “enormous increases in the amount spent on social welfare to help the less fortunate”. David Cameron similarly declared that the NHS is “safe in my hands,” while cutting taxes, introducing free schools and reforming welfare.

Thatcher and Cameron balanced public spending with undertaking fundamental free market economic reform to boost the economy. To ensure the Conservative Party remains a broad coalition, it is important that Boris’ free market rhetoric is given meaning. There needs to be some meat on the bone. The Conservative Party will be much weaker if it does not have a serious economic policy offering that creates a clear distinction with Labour.

On the political left, while many may disagree with their approach and ideas, there is undeniably a radical reimagining of policy and a clear agenda: a four day work week, shutting down private schools and nationalising industry.

Some on the Right have chosen to respond to the emboldened Left by adopting parts of their agenda in the hope of placating and preventing the worst. But, as Theresa May’s premiership displays being Labour-lite and adopting policies like the energy price gap, or nanny state policies like the sugar tax, simply does not work.

The Neoliberal Manifesto, a joint project between the Adam Smith Institute and 1828 released last week at the Conservative Party Conference, presents a positive vision for Britain’s future. In the past, the word “neoliberalism” has been twisted by those seeking to manufacture a strawman on which to blame every societal ill.

But it doesn’t have to be this way. Neoliberals are champions of freedom. We want government to protect and facilitate your ability to flourish; we believe in the power and ability of each individual; we believe in doing what is most effective; we are optimistic about the future; we support market intervention to address specific issues but reject paternalism; we are cosmopolitan and outward-looking to the world.

The manifesto calls for a liberal, free market approach to trade that encompasses cutting tariffs and pursuing deals based on the principle of mutual recognition. It declares that need to reform Britain’s outdated planning laws to allow for the building of more houses to fix Britain’s housing crisis. The manifesto also calls for a simpler, fairer tax system by getting rid of stamp duty and allowing capital expenditures to be expensed in full immediately.

On migration, it calls for a liberal system that brings the most talented people to our nation. On education, it explains the need for more choice. On innovation and technology, it calls for an optimistic approach defined by permissionless innovation.  It also calls for a liberal approach to drugs and personal choices, a compassionate but cost-effective approach to welfare, and addressing climate change without sinking our economy.

Many of these ideas are radical, and today can be expected to receive a mixed reception. But we think that our politicians should lead from the front, not the back. These policies are not designed with the idea of what may or may not be popular today, but rather setting the agenda for the future.

While not every action she took was immediately popular, Thatcher’s agenda transformed the country for the better and proved a politically successful formula across three general election victories. Cameron similarly won a majority after undertaking difficult decisions.

If the Government does not have an offering for people who want lower taxes and the state to live within its means, they risk unexpected losses.  Johnson can follow in the footsteps of successful leaders with his own liberal, free market agenda.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Neil O’Brien: How to rebalance Britain’s unbalanced economy – by levelling up, not levelling down

Neil O’Brien is MP for Harborough.

Even Brexit, it turns out, is about location, location, location. Ben Ansell, an Oxford professor, has found that in wealthier areas, where the price of a house averages £500,000, 70 per cent voted to remain. Poorer areas, where the average house price was £100,000, were an exact mirror image, with 70 per cent voting to leave.

Like a disclosing tablet, the EU referendum highlighted the different economic experiences of different places over recent decades: booming London and the most prosperous home counties voted to Remain, as did Scotland, the next richest part of the country. The reviving cores of our large cities did likewise. But smaller towns and cities, the countryside and coastal places voted overwhelmingly to Leave, as did Wales.

In response, Boris Johnson recently set out his ambition to “level up” poorer areas in a fantastic speech in Manchester. It’s the right thing to do – and it makes political sense too. The 2017 election saw us losing ground in wealthier-but-Remainy areas, and gaining former Labour seats in the midlands (and north) which we’d never gained before. We have huge potential to win in seats where people have felt taken for granted and left behind for many decades.

The economic case for levelling up is clear too. There are no G20 countries which have a more regionally imbalanced economy than the UK and are also richer than the UK. Conversely, all large countries that are richer per head than the UK have a more balanced economy.

In other words, a more balanced economy is a stronger one. In a highly unbalanced economy, resources like land and infrastructure end up overloaded in some parts of the country, and under-used in others, which is costly and wasteful. Given that workers (particularly lower skilled people) don’t simply move away from their families in the face of local economic problems, having greater distances between unemployed workers and job opportunities may well compound problems matching people to job opportunities. There might even be compounding mechanisms: if some areas have high unemployment that can lock in patterns of worklessness.

But to bring about a more balanced economy, there are two big lessons that the Prime Minister must draw from previous successes and failures.

First, the crucial thing is to attract private sector employment – particularly jobs that are knowledge and investment-intensive. The work of academics like Enrico Moretti and think tanks like the Centre for Cities shows how gaining “brain jobs” in the private sector has a much bigger multiplier effect than just moving public sector jobs to an area.

Tax breaks for inward investment can be very effective in attracting in new investment, which is why most other countries offer them. Within the UK, probably our most successful ever regional intervention was Margaret Thatcher luring Nissan to Sunderland with a mix of investment tax breaks, lobbying and the offer of cheap land (an old airfield). It’s now one of the most successful plants in the world.

When people think about regeneration, they often start with plans for a new tram or shiny cultural facility, which tend to be popular, and can indeed help growth in areas that are already motoring along. But such investments aren’t going to do much for areas where the economic engine has rusted up and needs restarting. Detroit famously built a fancy monorail intended to fight its economic decline: but in a city where every factory was gone it remained largely unused, drifting through a city that looked like it had been bombed flat. Without private sector investment, there’s no demand for it or anything much else.

Second, different things work in different places and a different set of policies are needed for our towns than our city centres. During the 1970s and 1980s the “inner cities” were a byword for decline. But in recent decades capital cities and the centres of other larger cities have outperformed other areas, right across the world. The shift from a manufacturing to a professional services economy (plus the growth of universities) revived the centres of our cities.

There are still many problems to solve in our cities, but the places that have struggled the most in recent decades have been rural areas, smaller towns and cities, and the outer parts of large cities (even outer London). Places on the coast and places without a university have suffered particularly badly from a brain drain. Labour have tried to capitalise on their discontent with glossy ads like their film “our town”.

What to do for towns is even trickier than helping big cities grow. Though there are trendy small towns from Hebden Bridge to Hay-on-Wye, simply copying ideas from big cities, like “culture-led regeneration”, is often a recipe for failure in small towns.

Improving connections between city centres and towns might help – Tom Forth has highlighted just how bad we are at this in Britain. The Prime Minister’s new fund to help regenerate town centres is a good move and will make them more attractive. We should do things like re-examine funding historic funding formulas for government spending on science, transport and housing, which are still heavily geared towards supporting London and other areas that are already growing fast. And we should offer devolved economic powers to counties, not just big cities.
The more we can use free market mechanisms to help poorer towns, the more likely we are to succeed.

Looking at Britain as a whole, chronically low investment rates are a big part of our long-term productivity problem. We should cut taxes on business investment across the whole country, and make the UK’s capital allowances among the most generous in the world (at present they’re among the least).

But to level up poorer areas we should go further, and have even more generous tax breaks for investment there, where the problem of low investment and low productivity is most severe. We should also empower the Department for International Trade to take part in the same aggressive tax competition for inward investment that countries in Asia, the US, and our neighbours in Ireland do so successfully. And we should use those tools to encourage inward investment into poorer places.

More generous capital allowances would help lagging regions anyway, even if introduced across the board. While manufacturing accounted for around a quarter of productivity growth nationally since 1997, it provided 40–50 per cent of productivity growth in poorer regions like Wales, the West Midlands and North West. Manufacturing requires roughly twice as much capital investment as the rest of the economy, so an investment-hostile tax system hits poorer places harder.

Ever since the referendum, there’s rightly been renewed focus on how to help poorer places. Helpfully there is decades of evidence about what does and doesn’t work. If we can join up an energetic new Prime Minister with the bit between his teeth, plus a new agenda for left-behind places, then we can really get things moving.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

What Next for the Federal Reserve? ‘Printing’ Cryptocurrency?

Westlake Legal Group usd-2874026_1280-620x349 What Next for the Federal Reserve? ‘Printing’ Cryptocurrency? The Federal Reserve The Fed Technology rtp real time payments Private Sector Front Page Stories Front Page Economy cryptocurrency central bank Business & Economy banks Banking

The Federal Reserve is rightly a bit of a hobgoblin for us less government types:

“The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system.”

Yes.  Because when I think of government – “a safer, more flexible and more stable” anything leaps to mind.

The Fed is also a hobgoblin because – as with all things government:

“Over the years, its role in banking and the economy has expanded.”

When you have government – you have mission creep.  Because – the entirety of human history.

The Fed is ultimately a hobgoblin – because it allegedly exists in some quasi-independent “Fourth Branch of Government” nether world:

“The Federal Reserve, like many other central banks, is an independent government agency….”

Which means…The Fed doesn’t seem to actually be constitutional.

The Constitution creates – three branches of government.  The Executive, the Legislative and the Judicial.

Which means one of two things:

Someone in one of those three branches – has to have direct oversight over The Fed…and can directly order it to do things.

Or…

The Fed is unconstitutional.

Congress cannot create an independent fourth branch.  You have to amend the Constitution to do that.

Attempts by less government types to at least rein in The Fed are always welcome – and have occasionally occurred.

Meet Kentucky Republican Senator Rand Paul.

Dr. Rand Paul: Time for Congress to Pass ‘Audit the Fed’:

“S. 148 would require the nonpartisan, independent Government Accountability Office (GAO) to conduct a thorough audit of the Federal Reserve’s Board of Governors and reserve banks….”

Yes, please.

Because – speaking of The Fed’s “role in banking and the economy” expanding….

Fed to Launch Real-Time Payments System in 2023:

“The Federal Reserve announced Monday it would create and implement a system that would allow consumers and businesses to send and receive money instantaneously by 2023.”

Well that certainly sounds like something the private sector – not the government – should be doing.

Oh look – the private sector is doing it.

Meet North Carolina Republican Congressman Ted Budd.  Who recently, rightly penned:

“In 2015, the Federal Reserve realized this problem needed to be addressed, and to their credit, they encouraged the private sector to develop a solution to the deposit/access time gap.

“Four years later, through American innovation, a real time payments (RTP) system came to fruition and currently reaches over 51 percent of the demand deposit accounts in the country. This allows immediate payment and withdrawal for consumers.”

The United States’ international banking system – is what we’re talking about here.  Because the US banking system – is international.

It ain’t easy to get an entire international banking system – fully online with instantaneous coin availability.

Yet here the private sector is – doing it.

Let’s extrapolate this time frame, shall we?

In four years, the private sector has delivered instantaneous money availability – to half of us.

Which means in another four years – give or take – the private sector will have delivered it…to all of us.

Four years from now – is 2023.

Just as the private sector has finished solving the problem, The Fed – in the name of “solving” a problem already solved by the private sector – will begin creating a whole slew of new problems.

Because that’s what government does.

Government-expanding Obamacare was supposed to increase health insurance access – and reduce premiums and deductibles.

Obamacare killed insurance for ten-plus million Americans – and doubled premiums and tripled deductibles.

The Fed’s plan – is Obamacare for the banking industry.

For yet another reason: Obamacare was designed – to kill the private health insurance sector.

The Fed’s RTP system – could very well kill the private sector RTP system.

In reality, there can be only one RTP system.  For the real time payments to actually be real time payments – every bank will have to be on the same system.

And as we’ve seen since time immemorial – when government and the private sector butt heads…government wins.

And as we’ve seen since time immemorial – that’s an awful outcome.

The government competing with the private sector – is like having a baseball umpire…also pitch for the opposing team.

You have the guy calling balls and strikes – calling balls and strikes for himself.

Guess how all judgement calls going forward will go?

For those too young to remember, we used to have phone books – in which you looked up phone numbers.

The White Pages contained residential numbers – the Yellow Pages business numbers.

We less government types have long had The Yellow Pages Rule:

“If you can find it in the Yellow Pages – government shouldn’t be doing it.”

Economist Steve Moore – is a really bright dude.  He gets all of this – and highlights yet another huge problem with the concept….

Why the Fed Shouldn’t Compete With Private Banks

“No private firm can safely charge as low a price as the Fed or absorb high costs.

“The Fed has an obvious advantage in any venturing into activities now conducted by private lenders: It has effectively the lowest borrowing costs in the world because the full faith and credit of the U.S. government stands behind it.

“The Fed can’t go bankrupt and by its enormous size and stature is the behemoth in the banking universe.”

It’s like competing with Communist China.

The Fed can obnoxiously warp the marketplace to its advantage – in about a million different ways.

Congressman Budd’s bill – doesn’t prevent The Fed from doing getting into the RTP business.

What Budd’s bill does do – is require The Fed to examine how much private sector damage they’ll do if they do this.

Which is certainly a very good idea (for the entirety of government).

Hint: The prospective damage is HUGE:

“It…could cost Americans who are already struggling to live paycheck to paycheck approximately $100 billion over the next five to seven years in unnecessary overdraft and penalty fees.”

But while we’re waiting for Congress to not be Congress and pass Budd’s bill….

President Donald Trump and his Office of Management and Budget (OMB) – can likely require The Fed to do for what Budd’s bill calls.

That is – if we’re going to thankfully, finally end the unconstitutional charade of The Fed’s alleged independence.

For me, I’ll take whatever oversight I can get – any constitutional way I can get it.

So here’s to Budd’s bill.

And here’s to President Trump – trumping Budd’s bill.

The post What Next for the Federal Reserve? ‘Printing’ Cryptocurrency? appeared first on RedState.

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Neil O’Brien: Corbynomics – and why it means that your house, business and savings don’t really belong to you,

Neil O’Brien is MP for Market Harborough.

What is Corbynomics? It goes without saying that it’s a much more extreme economic programme than Labour have ever had before. And that government will spend, tax and borrow more. But Labour have a lot more damaging, half-baked and dangerous ideas.

No-one is thinking about them at the moment, but the scary thing is that within weeks these ideas could be affecting your house, your pension and your job.

For me, the most frustrating thing is that Labour have identified various important issues, but their proposed “solutions” would make matters worse. Let’s look at a couple of examples.

Seizing 10 per cent of all large companies’ shares

Lots of people, including me, worry that current corporate structures create pressures that make managers behave in a short-termist way, squeezing investment to hit short term profit targets and dragging down productivity growth. I’m concerned that publicly quoted firms are beholden to increasingly transient shareholders, interested in immediate returns. They certainly invest far less than privately owned firms who can take a longer-term view.

But my answer to this would be to change the tax treatment of investment, and increase capital allowances so that there’s no disincentive to invest.

Labour’s answer, in contrast, is to forcibly transfer 10 per cent of all companies shares to create a sort of employee-ownership-at-gunpoint.

This is a terrible idea, which would make investment into the UK dry up overnight. After all, if government can steal ten per cent of your shares, what’s to stop them coming back for the rest? Labour protest that the shares are not being stolen – just given to the workers. But that’s a lie, as they also propose that a Labour-run Treasury would take the great majority of the dividends that those shares attract. At the moment, these are owned by savings and pension funds – so the money is ultimately coming out of your pocket.

The total value of the shares stolen by government would be around £300 billion, according to the Financial Times. For comparison, raising the basic rate of tax by one per cent raises £4.5 billion a year, so you can see what a vast tax grab this would be.

Forcing people to sell their properties at a price set by government, and control rents

There are major issues about the balance of rented and owner-occupied property in Britain. We had a long period when the number of properties being moved into the rent-to-buy sector was outstripping the number built, meaning owner occupation fell dramatically. Between 1996 and 2016, the home ownership rate among middle income people aged 25-34 fell from 65 per cent to 27 per cent.

However, in 2015 the Conservative Government reformed the tax treatment of rent to buy and second homes, and in the years since we have seen homeownership rebounding upwards, with both ownership and the rented sector growing in a more balanced way. There are lots more things we could do to grow home ownership.

Corbynista Labour doesn’t really believe in home ownership. They are nostalgic for the world of the 1970s, where around two thirds of households in places like Islington lived in social housing. But they know ownership is popular.
So they have announced the “private sector right to buy”. This will give private tenants the right to make their landlords sell their properties to them at a discount.

In an interview last week, John McDonnell made it clear that government would set the price: “You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy,” he said. “You (the government) set the criteria. I don’t think it’s complicated.”

It’s not complicated. But it is deeply unfair. It would be a retrospective raid on people’s assets. People, including some who are not so rich, have invested in property under certain rules, and would have their savings ripped off them, while other people who invested their money in other things would not. This is arbitrary and unreasonable and would I’m sure be challenged in the courts.

Labour would also set rental prices, promising in a recent document that “There should be a cap on annual permissible rent increases, at no more than the rate of wage inflation or consumer price inflation (whichever is lower).”

This is unworkable or will lead to under investment in rented properties. Why spend lots doing up a flat if you can’t charge more for an improved property? We would quickly be heading back to the 1970s, when there wasn’t enough rented accommodation to go round, and conditions were squalid because of rent controls.

Sectoral wage bargaining

With the National Living Wage, the Conservatives have introduced one of the highest minimum wages in the world. For the lowest paid, the National Living Wage plus the cuts in taxes for lower paid people mean that they take home £4,500 more than they did under the last Labour Government – while employment has soared to a record high. We should be really proud of our record.

However, the National Living Wage is still set by an independent body, and as percentage of average pay in the market, so there is a sensible link to what businesses can afford without sacking people.

In contrast, under Labour politicians would just set rates directly. Labour have also pledged to “roll out sectoral collective bargaining”. Labour said it would “fix the going rate” in each industry and “set fair conditions” for the sector. This would represent an end to the system whereby unions negotiate company by company and, instead, give them power effectively to set national standards on pay and conditions. A new government unit would work with unions to bring firms into line.

This means that if politicians or trade unions decide your business is part of a particular “sector” (a pretty subjective question) then you would be in line for a change in wages which your business might simply be unable to afford. The scope for union bullying and endless court cases and demarcation disputes is obvious. In the car industry, wages are high, so a sectoral wage would be high. If I make plastic bits for the car industry but also other industries, is my business in or out of the automotive sector?

Rebecca Long Bailey has also said that “Labour will also legislate to reduce pay inequality by introducing an Excessive Pay Levy on companies with staff on very high pay.” There is no detail on what the rules will be, but the idea of having wages directly controlled by Jeremy Corbyn is likely to deter inward investment.

What do these ideas have in common?

When New Labour left office, a million people had been thrown on the dole, we’d had the deepest recession since the second world war and government was borrowing more than at any time in our whole peacetime history. In the final year alone, they borrowed £7,900 for every family in Britain.

And that was New Labour. Imaging what the country would look like after Corbyn and McDonnell.

Where Corbyn’s ideas really differ from previous Labour leaders is that he doesn’t really believe in the rule of law. Your house, your business, your savings: all these things don’t really belong to you, in Corbyn’s eyes: you have them only as long as the government suffers you to have them, and they can be retrospectively taken away if he sees fit. In the week Robert Mugabe died, we’ve seen underlined just how important the rule of law is. But under Corbynomics, it would be the first casualty.

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