Cameron to unveil "economic recovery plan"

In a speech this morning David Cameron will unveil the Conservatives' "economic recovery plan".  He will say that we need action to address the multitude of gathering economic problems.  Interviewed at 7.50am on the Today programme, he emphasised:

• Tory plans to help first-time buyers as helpful to the housing market;
• The new Fair Fuel Stabiliser to help tackle the cost of living; and
• Urgent action to improve depositor protection, ideally before Parliament begins its long recess.

Capturing most attention this morning, however, is his idea to introduce some form of US-style insolvency rules that would give struggling companies a "stay of execution".  This morning's FT looks at what such a "Chapter 11" system might give to businesses:

1. "an “automatic stay of enforcement” of debt by creditors, granted for a renewable period of a few months, while management stays and tries to negotiate a restructuring;
2. priority funding for distressed companies, to whom lenders could give money in exchange for “super priority” over other unsecured creditors; and
3. binding measures agreed by court and a majority of creditors to stop “unscrupulous” creditors from vetoing desirable restructurings."

During the Today programme interview he was pressed on whether he would stick to Labour's spending plans.  He said that 2% annual growth was already "very tough".  If spending restraint had been carried out in the good economic times we could now afford to cut taxes, he continued, to boost the economy but Labour had left the "cupboard bare".  Asked if taxes might yet have to rise, he replied "I hope that won't be the case".

George Osborne, Shadow Chancellor, will address the Centre for Policy Studies this evening and will say that Tory economic and social policy are different sides of the same coin.  Unless we fix Britain's broken society and reduce the demands on government, we will struggle to produce a competitive state.

Related link: On yesterday's Platform we published some suggestions for increasing Britain's economic growth.

10.30am: Full Cameron speech (PDF)

Comments

[Graeme Pirie]

Surely it would be better to focus on policies that helped businesses BEFORE they get to liquidation stage?

How about a policy that reduces the excess tax & NI burdens on small businesses? Kill off some of the ridiculous red tape and regulation might help as well!

[Matt Wright]

Some good points esp about social and economic policy links. This is developing into a good theme.

[Iain]

"He said that 2% annual growth was already "very tough". "

Only if you intend to keep the bloated state in the obese condition it is in. If there was a desire to cut the state back to the jobs a state should do then a 2% growth would be unnecessary for you would be looking for a reduction in expenditure. Every time Gordon Brown goes abroad he costs us billions, he went to Brussels and threw billions at them with out getting anything for it. When ever he goes to Africa it cost us billions. When he went to India he tossed them £800 million. When he went to China he tossed them millions as well, and this is before look at matters here, like yesterday where the Treasury Select Committee who said billions was being stolen from Brown's tax credit system.

[Alan S]

2% may be "very tough" for the public sector but how would David Cameron describe the FALLING income of many households in this country? Very, very, very tough. If the proceeds of growth are to be shared we should also see a sharing of the pain of recession.

[David Cooper]

Tim, how about a link on the side to John Redwood's latest article "Let's cut through the tax and spending debate" - particularly relevant in today's context.

[Editor]

Your wish is my command David!

I've added a link on the homepage and here it is for others.

[Dorian Grape]

First time buyers.

We need 5,000,000 new homes to be built over the next twenty years to match population trends but lost in the mist of the coming recession is that all the big boy developers are laying off staff and grinding to a halt. Where will the first time buyers be living if the housing stock is not being built?

Yes, zero stamp duty up 250K might help but if there are no new 125K homes coming onto the market to feed the market then how can the property ladder operate? Yes, thousands will be re-possessed but where do the evictees live if social housing remains tied to enabling new development? Which is now not happening.

Meanwhile, the government has empowered our unelected planning officers with delegated powers to stifle the life out of what little potential for development that remains. Planning applications are now routinely blocked from even reaching elected representatives for consideration at planning committee.

In other words we face a major housing crisis because of the collapse in the housing market, zero new build and planning control procedures that actively inhibit supply.

[Lindsay Jenkins]

We dont need more clever government interventions.

How about rolling back the frontiers of the state, as a famous lady once said?

An incoming Conservative government could aim to halve the state sector - any inroads at all would be gratefully received by the heavily tax paying masses.

Leaving the EU would save every family thousands a year - and give us back control of our planning laws - to answer Dorian Grape.

[bluepatriot]

I'm very pleased that we are talking about the economy.

It's the top issue now on the doorsteps.

[Tim Lee]

Spare us, please, from any "Chapter 11" clone in the UK. If you want a great example of what this does to an industry over the medium to long term, look no further than the US airline industry. For too long, players who should have died away due to their poor strategies, overmanning and over-unionisation have been propped up via Chapter 11, to the extent that most of the US industry is now bankrupt, provides lousy customer service, runs older fleets (which they can't afford to replace, and which are environmentally and efficiently poor) and can't hope to turn a profit due to massive overcapacity.

One or two US majors need to go to the wall, so that new players can enter the market, and existing players can make a profit. Chapter 11 prevents this to the detriment of all. How can one have new shoots if everyone is cultivating the weeds?

As one very wise person once said - you can't buck the market. Chapter 11 is protectionism at its very worst, and should be something that we on the right decry, not support.

[Paul D]

Chap on 5live just welcomed this, said his business is going under because creditors aren't paying on time

Federation of Small Businesses spokesman also welcoming it

Expect Darling to announce a half-baked copy of this by the weekend

[Lindsay Jenkins]

We don’t need more clever government interventions – all of which would cost money.

Roll back the frontiers of the state, as a famous lady once said. That would be relief indeed for the taxpaying masses.

Leaving the EU would alone save every family thousands - and give us back control of our planning to answer Dorian Grape.

[Letters From A Tory]

I still don't like this idea of helping first-time buyers with stamp duty. Shouldn't we be looking at a flat rate of stamp duty for everyone or doing something similar to raising the income tax threshold?

I'd like to see more creative thinking in this area.

[Rod Greenough]

Encouragement and assistance for small companies is no better than it has been since 1997, especially in the present economic climate. These companies play no small part in the country's future and desrve beter treatment. Relief on the costs of filing patents and subsequent maintainance of IPR worldwide would be a useful contribution.

[Andy Peterkin]

Shareholders hate Chapter 11. Incompetent management teams love it.

Not wanted here, thanks.

[christina Speight]

I have just been listening to Cameron's speech. He made one acknowledgment that the economy was not perfect but little sign that he has any idea of the scale of the crisis enveloping us. He still trots out his discredited mantra about 'sharing the proceeds of growth' (2% ?? !!!) and letting the state grow more slowly. Growth ?

With redundancies piling up (except amongst bureaucrats) and large scale unemployment looming, tax revenues falling (except from oil) , bankruptcies galore, extensive repossessions, excessive taxation, defence spending needing review, what growth?

What is vital is less government, less bureaucrats, and lower taxes.

What he repeated today is recipe for stagflation which would ultimately ruin us.

Lindsay Jenkins @ 0957 is spot on. Roll back the frontiers of the state and leave the EU . (The EU is making us close 40% of our electricity generating plant which will be catastrophic!)

[Iain]

"What is vital is less government, less bureaucrats, and lower taxes."

Especially with the factory gate prices out this morning which show they are rising at an annual rate of 30%, yet the Government are intent on loading more costs onto business with every PC benefit they can dream up.

[Norm Brainer]

So we have
a protectionist 'chapter 11' style idea
a price fixing fuel idea
extra 'measures'
I'm not too sure about helping 1st time buyers into an already overcrowded market, although not taxing them isn't helping the 1st time buyers, just hindering 2nd - If they announce more shared ownership then I'd be worried.

[Alan.S]

Why do we have stamp duty on house purchases anyway ?
We pay tax on everything we earn
We pay tax on everything we buy
We pay tax on everything we leave behind when we die.
Enough really is Enough now. It is time to trim government excesses to make this country a good place to live in again

[Michael Rutherford]

"Norm Brainer", would it be rude of me to suggest it's quite a long time since you were a first time buyer?

[Saltmaker]

If the proceeds of growth are to be shared we should also see a sharing of the pain of recession.

You mean like civil servants losing their team building jollies? It couldn't happen -- it's one of the targets they have to meet.

[Norm Brainer]

It wouldn't be rude, but I'm a 0th time buyer.
There's far too much encouragement for people to buy when renting would be much more suitable.
There's a limited supply of houses. Encouraging 1st time buyers with shared ownership pushes up demand.
The scheme to remove stamp duty for 1st time buyers may look like an encouragement for 1st time buyers, but look at it from an absolute position and it's just a deterrent to buying 2nd time.
If we got rid of stamp duty it would mean more people would upgrade to a better house and leave an affordable one behind.
Instead we encourage people to stay where they are and so make modifications to their house to make it more expensive.

[Editor]

Fraser Nelson is also criticising the Chapter 11 idea over at Coffee House.

[C List and Proud]

Dorian,

We only need 5,000,000 new "homes" (3m actually) if we continue with the appalling trend of family breakdown, worklessness in the indigeous population and, as a consequence of that, excessive immigration.

Sort out the basics of welfare policy and the latter two reduce and the first becomes less of a problem as more stable families develop as a consequence.

The strategy is relatively easy, doing it is tough because of all the whingers and moaners who will highlight individual cases of hardship rather than look at the bigger picture.

[Mark Fulford]

The only protection businesses need is from taxes and the liquidators who consume whatever assets their bankrupt debtors may have had. Any business that has experienced bad debt (and most have) knows that the original estimate of 20p in the pound will be long gone by the time the taxes are paid and the liquidators have troughed-out.

Chapter 11 is a crap idea. I don’t expect David Cameron to have much direct experience of the gritty end of business, but it would be nice if he’d pick some advisors who have.

[Cleethorpes Rock]

I heard Cameron on the Today show this morning, but felt a little uneasy at some of the things he said.

Guaranteeing a larger proportion of depositors' cash would be funded by extending the Financial Services Compensation Scheme (FSCS), which is paid for by a levy on Financial Services companies by the FSA. If this were to increase, it would put an extra burden on companies which are already seeing less business as clients try to make ends meet. Extending FSCS also won't do anything to stop the root cause of Northern-Rock type fiascos. Introducing a version of Chapter 11 would be a similar sticking plaster over another compund fracture. We need to make the climate for business in Britain much better, by giving tax incentives for R&D, reducing regulation, cutting corporation tax DRASTICALLY and improving educational standards, especially in Maths, English and Science.

I was also disappointed that when the presenter challenged Cameron that some of his proposals would involve "taking money away from the government", he tried to claim that they wouldn't and that government wouldn't lose out on tax money, instead of saying "the government has too much money that should be in businesses, workers' pockets and family budgets. The government isn't the solution to the problem, it IS the problem." He then trotted out the line about "sharing the proceeds of growth".

If the economy is shrinking, how does he proose to share the proceeds of growth if there aren't any?

[David_McD]

For the last several years, we have had a balance of payments deficit of approximately 5% of GNP. This, taken with the rate of increase of personal debt in recent years, indicates that we have been spending about 5% more than we earn.

I am just a simple soul but, to me, this indicates that, all other things being equal, we would eventually have to stop borrowing and start repaying, indicating that the economy would have to shrink be more than 5%. Unfortunately, all things are not equal. Oil prices have shot up (yes, sooner or later, they will fall back but not to the low levels they were) and we are entering a world economic downturn which is likely to come down particular heavily on financial services, upon which our economy has become far too dependent.

So, our economy will shrink even more, perhaps by 10%. This implies that there will be fewer immigrant nannies for the chattering classes, single mums will have to stay with their parents rather than be allocated flats of their own, divorcing couples will have to forego the pleasure of turning one household into two and we will have to keep Granny in the spare bedroom rather than shove her into a “home”. As for first time buyers, they will just have to rent share or stay with mum and dad until they have saved up the 20% deposit that was previously required and now is so again; they will, however, be greatly helped by falling house prices which are a GOOD THING! Rising food prices are a GOOD THING too because they will stimulate farmers everywhere (in the UK and also in Africa) to grow more food.

In the longer term, we will have to learn to pay our way in the world by producing things (both manufactured goods and intellectual value) which foreigners want to buy. There are still some British companies that do this (eg. Rolls Royce, Weir, Glaxo Smith Kline and many smaller companies) albeit not nearly as many as there should be.

We have been eating the seed corn for several years and now we will have to learn again about planting for the future. Neither the Tories nor the Labour party seem to be able to grasp all this whereas the Lib Dems just do not grasp anything.

[Michael McGowan]

Mark, I totally agree on Chapter 11. What is more, the banks will simply price the cost of a Chapter 11-type regime into their business loans.

[David]

"If the proceeds of growth are to be shared we should also see a sharing of the pain of recession. "

It certainly will share the pain a lot more if we starve the services that the increased numbers of those without a job or income will need during a recession.

[Edward Huxley]

Lindsay Jenkins is right. No.1 priority should be to leave the EU and get back to governing ourselves. Unfortunately David Cameron has put the EU as 7th or 8th in his list of priorities; like Labour & the Libdems the Tories want to play down the fact that 80% of our laws come from Brussels - makes their jobs appear a waste of time and our money.

I do not read the Daily Express and don`t know anyone who does. However the paper recently conducted a poll on Britain`s membershiop of the European Union. Nearly 10,000 responded and 95% said we should leave the EU.

If we stay in there is no point about banging on about British taxes and jobs. It will all be decided on the Continent.