Simon Littlejohns, tax partner at accountants PKF (UK) in Birmingham, says a re-emphasis on wealth creation is needed to get the economy back in gear...
In a recent conversation with a member of the Bank of England Monetary Policy Committee, it was pointed out that there has never been a better time to be in business.
Consistently low inflation, comparatively low rates of business taxation, year-onyear managed and sustainable economic growth, general Government optimism about the state of our national finances.
It sounds like a recipe for economic success. But I'm still not so sure.
I do want to be confident about the UK's future prosperity. I want to believe that next year is going to better than this one. I want to be happy in the knowledge that investment decisions we make now have a reasonable expectation of paying off over the next few years.
It is in my clients' interest for the future to be bright - and obviously that's in my interest.
So why am I so nervous? Let's get the obvious joke over and done with. I'm an accountant, trained to analyse and dissect the past, expert in looking for the clouds on the horizon and to distrust any evident silver lining, paid to identify the flaws in any proposal put to me. The glass is always, by nature and by training, half empty.
Actually, this is not true. I'll lay claim to bucking the trend towards the Pythonesque accountancy stereotype. I'm an optimist, with a generally genial and sunny disposition. The glass is regularly half full, occasionally, even, close to over-brimming. I disdain the stereotype, and look for the opportunities as well as the threats.
But I'm still nervous, and I'll explain why.
Who's creating the wealth? At any point in time, economically speaking, there are winners and losers. Some businesses are on the way up as others seek the counsel of corporate recovery specialists. That is the way of things.
However, my extremely unscientific and anecdotal survey of clients, colleagues, contacts and acquaintances suggests that economic optimism is distinctly lacking.
They see only three significant growth areas in the UK economy - at the Stock Exchange; oil conglomerates and banking institutions; elsewhere, it's the notforprofit sector. Oh, and there's also Tesco and a few of the mobile phone companies, who seem to grow exponentially while the rest of the retail sector tightens their belts in anticipation of another indifferent Christmas.
Many others are showing varying degrees of nervousness. Service sector, retail, wholesale and manufacturing, North, South, East, West, they're not talking recession, that would be overstating the point. It's more a general uncertainty, as order books shorten, raw material and utility costs increase, margins get narrower and cash gets tighter.
Certainly, wealth is being created, but I'm not persuaded that there's enough wealth creation going on across the economy in general and certainly not enough to pay for the Government's proposed social programme.
Don't get me wrong. I'm happy to see new schools and hospitals going up. I just want to be sure that we can afford them.
Stock Exchange growth for oil companies and banks is as much a function of the vagaries of the market place as an indicator of underlying wealth creation. And not wishing to court undue controversy, the not-for-profit sector, in the main, does not create wealth.
In the meantime, Chancellor Gordon Brown's books need to be balanced.
Any way you look at it, current Government policy is to tax and spend, albeit far more subtly than 20 years ago. At times of economic growth this policy can pass generally unobserved - other than by the wealth creators who see a growing and not insignificant chunk of their wealth collected for the greater good.
But tax and spend is a dangerous strategy at times of economic uncertainty. We know from painful experience that central government spending to get us out of an economic recession really does not work and, to my knowledge, no one wants to return to the old cycle of "boom and bust".
Indeed, there is an identifiable cycle which links economic growth and decline to business confidence.
As economic confidence weakens, businesses and individuals disinvest, company results deteriorate, so there's less profit. Lower profits mean lower tax yields. To balance the books the Chancellor raises tax rates, acting as an economic disincentive, with less wealth created, and hence we can end up taxing ourselves into recession.
In part to avoid this from happening, the proposal at the last election was to reduce government bureaucracy, redeploying civil servants, and hence cut Exchequer spending - or at least, to re-direct that spend to front line services.
This has not happened. In consequence, I see only three possible outcomes over the next year: fail to deliver on the promises, break a fundamental "golden rule" and disproportionately increase Government borrowing, or raise taxes.
We are probably facing a combination of all three - but my money is on this being biased towards increased taxation.
So we face an interesting scenario. Economic confidence on the wane, Government promises which are likely to lead to tax increases, companies and individuals looking to reduce their risk in the medium term by tightening their belts and reducing their exposure to debt, so consuming less.
At best economic stagnation; at worst the start of recession.
Interestingly, we can already see this happening. House sales are down, and not simply because of interest rate changes. People do not want additional debt. Retail sales are disappointing - many people are actively reducing their credit card exposure. Saving money might even become fashionable again.
So, are we looking at a return to boom and bust? I just don't know.
Does the answer lie in the question? I wish I genuinely had all the answers. I do not.
However, I do have opinions, based on experience (and whisky fuelled conversations held late into the night).
Firstly, a rethink of Government proposals is necessary to put wealth creation at the heart of policy. Entrepreneurship, profit motive, shopkeeping, call it what you will, needs to take priority over raising taxes to support the economically inactive.
This is unlikely to be a popular opinion, especially since our instinct, self-interest and good upbringing lead the majority of us to hold out the helping hand to those less fortunate than ourselves.
However, the hand that is held out needs to be strong and well intentioned to give any benefit. All too often, our social spend is poorly directed, not sustained and inadequately controlled.
So less tax and better but limited state intervention.
Where national and local authorities do feel a compelling need to intervene, then they should do so in significant and meaningful ways. We need to get away from piecemeal handouts that have travelled through the hands of 15 different committees, departments and agencies, and invest in purposeful landmark projects.
At the very least, better to see iconic buildings reaching to the sky than to see multiple £20,000s frittered away on pet projects.
Secondly, to re-evaluate our attitude to Europe. I believe we need to challenge the complacency implicit in the prevailing mood, that we are doing better than the rest of Western Europe so we must be getting something right.
The UK needs to compete internationally with the more economically active regions, China, India, Eastern Europe, and to accept that our success needs to be measured on a global scale. With this in mind, we need to assess the extent to which enforcing European social policy and extending employee rights is at odds with our need for a level playing field with international competitors, especially those countries where labour costs are lower and where economic activity faces less onerous regulation.
Lastly, for the Government to deliver on one of its key promises; to fundamentally reduce the cost of our national bureaucracy. I do not advocate a slash and burn approach. Civil servants, in the main, perform important national roles. But, without significant tax increases, the growth in the civil service is something that the nation cannot afford.
The Chancellor knows this, has promised action, and we are still waiting. If our national bureaucracy is not reduced then taxes will have to rise. Otherwise, without unwise national borrowing, we will not see the promised delivery - and ongoing financing - of schools and hospitals.
I believe that, as a nation, we need to do more to encourage the wealth creators - in the expectation that there should then be more wealth to share around.
This may not be "fair" or "targeted", but wealth creation, profits and business confidence drive our economic and, ultimately, our national success. The concept of "trickle down", where wealth works its way through the local economy to the betterment of all of society, deserves a proper re-evaluation.
Stating simply that it didn't work for Thatcher during the 80s, is both ill considered and naive.