If you don't read it but want to understand the economic challenges facing this country I heartily recommend Allister Heath's daily letter in City AM. You can read it here. It's worth adding to your Favourites.
Here's a selection of Allister's wisdom from the last week or so:
Against a graduate tax: "The coalition will fortunately not be imposing a graduate super-tax on students who go into higher-paying jobs, the option favoured by Vince Cable. This would have been a disaster, promoting an even greater brain drain. Ministers may support instead variable interest rates on student loans so that high-earning graduates can be charged more on their borrowing."
George Osborne's badly-designed child benefit reform: "Imagine that you are just below the 40 per cent tax rate. Your boss offers you a promotion and a pay rise of £1,000 – astonishingly, rather than celebrating, you will refuse. As the Institute of Fiscal Studies points out, a family with two children receives £1,750 a year in child benefit. A one-earner couple with two children with a gross income of £43,876-£46,850 would be worse off than if their income were £43,875. Crazy. A one-earner couple with an income of £43,875 would need a pay rise of £2,975 to ensure they were no worse off after paying direct tax and losing child benefit."
Britain's new brain drain: "Kinetic Partners estimates that around 1,000 hedge fund managers have already left the UK; it puts their average income at £1.5m-£2m per year. The loss to the exchequer has now reached a minimum of £500m and is probably much higher. Two individual moves alone will have cut the exchequer’s revenues by £200m. Over time, the biggest problem will not be the jobs that actually relocate – it is the jobs that won’t be created in the UK, including support staff, retailers and others. We ought to be trying to attract companies and labour, not to repel them. The Kinetic report adds that the increasingly nasty political climate, constant banker-bashing and general anti-capitalist mood music is also beginning to drive people away. Nobody likes to be loathed."
How the €uro did for Eire: "Even in January 2006, when many of the more idiotic lending decisions taken by Irish banks were being planned, the European Central Bank’s main interest rate was just 2.25 per cent. This probably made sense for Germany and maybe even for France. But it was an absurdly low rate for Ireland, which could have done with rates of eight per cent or even nine per cent. Inflation in the Emerald Isle hit 4.2 per cent in August, way too high; for 2006 as a whole, Ireland’s GDP surged by 6.0 per cent and its gross national product by 7.4 per cent. In other words, at the height of a property, economic and mortgage boom, Ireland was enjoying negative interest rates after adjusting for inflation."
