Andy Haldane, the Bank of England’s chief economist, has likened the economy to a ‘coiled spring’. British households have saved an ‘astonishing’ £250 billion equivalent to 20% of normal annual household spending) while businesses are sitting on a £100 billion cash.
Noel Craven of Quartet Asset Management and our Podcast Professional of the week is also upbeat (see his predictions below).
The biggest concern to what I think will undoubtedly be a recovery, is what will Rishi Sunak do in next month’s budget.
According to figures released recently the British economy shrank by the most of any major country in the world during 2020 in a recession that was the deepest in 300 years. It therefore needs time, clarity and help to recover.
These are my ideas as to what I would like the chancellor to do next month.
Top of my list is that businesses need certainty so that they can begin to plan.
They need to know when they can operate freely again – which must be the first priority.
Once the NHS is no longer under threat of being overwhelmed businesses must be allowed to work freely again and if there are to be restrictions what will they be – a vaccine passport before you can go to the theatre, or into a restaurant, a negative testing result to be allowed back to school?
Already we have seen London covid-19 cases shrink by 90% - how much further will it need to shrink before lockdown is lifted. Bristol scientist Profession Adam Finn is on record as saying that the vaccines are now ‘definitely doing the job’ in stopping people getting coronavirus so severely that they had to be hospitalised.
Second, the chancellor must rule out any tax increases, for the foreseeable future. It is not as if the economy cannot bear the increased debt for a while longer given the low rates of interest. We need to signal to the world that we are open for business post Brexit and what sort of business that will be – needs to be clearly set out.
Personally, I think the chancellor should go even further; he should stimulate the economy by reducing taxes such as a lowering of VAT and suspension of air travel duty. We are no longer part of the EU and therefore we can decide what taxes and at what rates we want to introduce.
Fourthly, I would also like to see a resurrection of a form of entrepreneur’s relief for capital gains tax. A lot of businesses have collapsed in the past twelve months and entrepreneurs need to be encouraged back into business. The lowering of the relief from £10 million to £1million needs to be reversed, our entrepreneurs need to be encouraged to take risks again to get the economy moving
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