Posted by: John | October 17, 2008

Is it time for the Lib Dems to put forward a new economic statement?

In reference to James Graham’s excellent posting:

Particularly to the following words:

(If I’m brutally honest, I don’t think there are any regulatory reforms that will fundamentally change this. I certainly do support land value taxation which would at least make our housing and property market relatively immune to the vagaries of speculation. At least land doesn’t go anywhere. Other ideas such as the Tobin Tax may sound good in theory but will always be undermined by tax havens. And past experience suggests that even the tightest of regulatory regimes will have loopholes that can be exploited, and it was loopholes that got us into this mess.)

I also note Tom Paworth’s posting

In which he states that all the Government is doing is inflationary and thus militating against a savings culture.

I don’t claim to be an economic expert – yet I think you only needed a good head upon your shoulders to have realised that house prices couldn’t go up forever with the kind of levels of personal debt that has amounted was unsustainable.

Isn’t it time that our party got off the fence and stated that we required some sort of restrictions on debt? It’s time surely for us to make supplementary economic proposals that suggest the type of society we want to become as well as the kind of restrictions that we require banks under which to operate.

Make no mistake there’s a cultural war going on between those who think money is just there to service debt and by and those that live within their means. Each party is going to have to choose who it’s going to nudge policy towards.

I know Experian and other credit referencing agencies can halt an individuals credit indirectly yet the rules and regulations that a bank uses (and there must be some even if secret) affects everyone as there can be one rule for the indebted and one rule for the rest that go through personal bankruptcy.

I feel we need as a party to have an economic direction of prioritising savings and the cutting back of extravagent credit and thus ensuring that those `that do the right thing` are protected from bailing out profligate bankers and those that have bought into the `credit-as-she-goes` society.

I have a few suggestions:

1. Double the amount someone can have in a guaranteed interest ISA

2. Regulate mortgages so that they have to be backed by full paperwork and a minimum deposit level

3. Ensure that the top limit is 4x income

4. Credit cards – create a credit limit of one years income divided by six – thus two months income is the top amount you can have. For a back-up card the limit can be divided by two.

These may be unpopular measures and seem at the same time old-fashioned and radical – yet what is the alternative? For those that live within their means self-sacrificing to carry on bailing out others? Won’t there be rules anyway given the shock we’ve just had? What will be the incentive to save?

Cameron can huff and puff as much as he likes yet he’ll have to come up with something concrete. Shouldn’t we be getting there first?

When the history books have been rewritten will it not be seen that the booms and busts have been detrimental to the ordinary working family? That the standard of living that we have now would be LESS than if there had been a proper boring old sound economy?

That it would haave been better to have had a `perpetual spring` rather than the `Tsuanami and Katrina` that seems to have robbed from the poor and given to the rich?



  1. These ideas aren’t all bad, but the post you link to is awful.

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