The premise of the book, and films, Brewster’s Millions, is based on the often overlooked truth that spending large sums of money sensibly can
be as difficult as earning it.
So it is not surprising that the G-20, having decided that
money needs to be pumped into the world economy, is finding it quite hard to
In America, the stimulus package has been revised and
revised again, as neither the Treasury Secretary nor Congress have any real
idea how to spend the money they have agreed to spend.
Yet Britain deserves the prize for spending most money with
least positive economic effect. The government has increased both taxes and
borrowing in order to cut the Value Added Tax on sales by 2½%.
This has been mocked by the German Minister of Finance who pointed out,
undiplomatically but accurately, that no one is going to buy a DVD player just
because it now costs £39.10 rather than £39.90.
Many retailers are not bothering to pass the cut on. Others
point out that it makes no difference because they are already discounting
their products by 25% or more in a desperate effort to attract sales.
Meanwhile, the cut imposes an unnecessary extra burden on
business, which has to pay a considerable amount to adapt cash registers and
accounting systems to the new rate. Since none of the British ministers has
ever run a business, none of them realised how counter-productive their alleged
cash injection will be.
The net effect is to burden the supply side – business – in
order to stimulate consumer demand. Since it was people spending – and
therefore borrowing – which got us into this mess, the solution is not more
spending and borrowing but investment in viable business.
This is precisely what the British government is