So, economic stimulus

[fivemack]

VAT has gone down by 2.5% as of 1 December, which means the fancy camera I want to buy could conceivably cost 15 quid less in the New Year than it does now. Of course, fancy cameras being made mostly of microchips, it's likely to cost fifteen quid less anyway thanks to process optimisation in the silicon foundries of Taiwan, but hopefully these are cumulative.

But the purpose of an economic stimulus can't just be to move lumps of consumption around by a few months; I don't think that even in the current climate it's necessary to run a big sale in November purely so that you have the cash to pay the salaries for your shop workers in December.

So Alistair Darling's job is to make Britons more profligate than they are now for the next two years (despite the financial mess being, as far as I can see, a function of a decade of unbalanced profligacy) and more frugal than they are now for at least four years to follow. I don't see how subtle tweaks to the tax system can do this; indeed, I don't know if it can be done. Interest rates are the obvious instrument, but profligacy and frugality are functions of upbringing and circumstance in that order; after-tax interest rates on straight savings accounts are now below the rate of inflation, but this has meant that I grumble slightly, keep most of my money in just-as-insured short-term bonds, and devote slightly more to the stock market where there's a possibility of higher returns.

What government policy would make you go out and spend more in February?

Comments

[papersky.livejournal.com]

I thought of a good system in the summer for Britain to allow ordinary people to buy houses. I was thinking of it in the context of houses in villages where people buy holiday houses or commute houses so the locals get priced out, but it works more widely than that.

So if you have lived in an area for x time -- like five years, or ten years -- and the bank will lend you three times your salary, and you have a deposit saved, such that you could buy a house if it only cost four times your salary, then you find a sensible house within walking distance of your parents or where you're paying rent and the government pays the difference, and owns that % of the house forever, or until you sell it, or until you become rich and buy them out, at a % rate, not a number rate. The government is investing in people's houses, and mostly (house prices mostly rise) making a moderate long term profit.

As well as community building and the other positive social effects, this would have the incidental benefit of preventing financial crises like the current one in the US because people wouldn't be desperate enough to take out crazy mortgages.