I am sure you’ve had an opportunity to read many commentaries about the Autumn Statement. Yes we all know it doesn’t say much and yes we all know that the small print will eat any positive idea alive. It is also pretty clear that this budget is a little bit like take from one hand and give with the other. And this therefore reminded me of the following economic analysis.
A small Irish town is struggling with the aftermath of the recession. As it happens a German tourist arrives who wants to stay overnight. Being suspicious he asks the hotel owner to inspect the room first. The hotel owner being suspicious says he will only allow access to the keys if there is a deposit of €100 which the visitor can have back if he doesn’t want to take the room. The visitor takes the keys and hands over the €100. He then goes upstairs to inspect the room. The hotel owner quickly takes the €100 and runs next door to pay his debt to the butcher. The butcher quickly takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 and heads off to pay his bill at the pub. The publican takes the €100 note and pays his debts to the local prostitute who had been forced to offer her services on credit. The prostitute then takes the €100 and rushes back to the hotel owner to pay her debt for using the hotel rooms. At that very moment the visitor from Germany comes down the stairs and states that the rooms are not satisfactory, picks up the €100 and leaves town. The moral of the story: no one produced anything, no one earned anything, but suddenly the whole town is out of debt and looking to the future with a lot more optimism.
Dear reader there is a serious point. Rather than having a tsunami of initiatives and giving money to banks and giving money to construction industries and so on would it not be simpler if the Chancellor simply injects money into the economy by giving it to real people who can make real use of it? Not only would it make the Statement much simpler it would also make the economy much better.