Monday, 17 October 2011

The economy cannot grow unless we have more spending power

Hurrah for Janet Daley, writing in 9th October's Sunday Telegraph (page 28). She raises an issue dear to my heart.

"Until the households of Britain feel that it is possible - and sensible - to spend, all the funny money that comes off the the Treasury printing presses, and all the government grants to brave little enterprises, will not amount to a hill of beans."

Daley calls for tax cuts to increase real household income and stimulate consumer spending, arguing that the growth that would be stimulated by that spending would in turn provide more tax revenue.

I agree.

This quarter's IPA Bellwether Report, released last Thursday, shows a modest rise in expenditure but the most significant dip in business confidence ever recorded in its 10 year history.

This apparent contradiction is not surprising when you realise that the majority of expenditure is behind communication of promotional activity; a desperate bit to incentivise short-term purchases which will only lead to profit erosion, if IPA research and analysis based on previous recessions proves accurate.

My message to Government both echoes Daley's and adds a new strand.

Corporates need to be encouraged to spend too, and tax incentives against previous year sales are not a bad place to start. They need help to release investment in mid to long term quality brand communications. This will stimulate real consumer demand, get money circulating in the economy to support the cultural and creative industries, return businesses to profitability and deliver organic growth.

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