(Blogged by David Bailey and John Clancy)

The government is making clear that 'Fairness' is the agenda which should drive the way we all deal with the consequences of the recession and how we get out of it. Business Secretary Peter Mandelson is also thinking about which strategic firms need to be saved.

As a consequence, we believe that Lord Mandelson now needs to take centre stage (in the same way Alistair Darling has recently) and deliver an Industry Rescue Statement to take emergency action before the recession bites too deeply.

He needs to commit the government to taking immediate action on how any Administration, Administrative Receiverships, and Liquidations actually take place to ensure that first priority is given to employees of a business instead of the business's bank.

The banks' attitude to small and medium-sized businesses in trouble over the last few months in particular is an indication that, yet again, they live in a bygone world and new emergency legislation is now required to ensure that they are brought up sharp and fairness is injected into the agenda: and fairness based upon what is good for the economy as a whole.

In my recent blog of 30 October, I posed the question "who will be paying the piper" if the Chancellor goes on the promised spending spree in an attempt to re-inflate the economy. This afternoon's Pre-Budget Show provided the answer. It's going to be everyone!

Forget a 45% tax rate on earnings above £150,000 (from April 2011); forget the reduction in the personal allowance of those earning over £100,000 and its abolition for those earning over £140,000 (both from April 2010). None of these measures will begin to generate any significant amounts of tax.

What is really paying for this supposed spending spree is a 0.5% increase in both employee's and employer's National Insurance from April 2011.

Is there really going to be a spending spree equal to the magnitude of the borrowing, proposed by the Chancellor? No there is not!

The Chancellor has referred repeatedly to spending money in order to help the economy out of the current recession; he referred today to borrowing an extra £78bn in 2008-09 and a further £118bn in 2009-10. There is no way in which the measures announced today will put £196bn back into the economy or anything remotely approaching this figure.

Alistair Darling admitted today that the expected tax receipts for the current year from financial services firms i.e. banks and building society, are way down. They will certainly be down from the property and construction sector and, of course, the Chancellor has already lost the substantial amounts of stamp duty land tax that he used to get every time a residential property charged hands.

The inescapable conclusion is therefore, that much of the borrowing is to actually replace the tax receipts that have been lost from falling profits in commerce and industry.

This demonstrates just how susceptible this country is to any economic downturn. Not only are there more jobless people needing state benefits but the taxes are not there to pay for them.

During China's recent economic downturn the Government dipped into existing reserves in order to re-inflate the economy. The sad fact is that the UK does not have any reserves; we are living hand to mouth each year.

As recent reports have made clear we need £21bn every year to pay for civil servants index linked final salary pensions plus who knows how much more to pay for current state pensions for everyone. All of this is being funded by an ever-decreasing working population.

This leads us nicely on to another point - The Chancellor has announced the formation of the "Saving Gateway" which will be introduced nationally in 2010. The Government will contribute 50p for each £1 saved into the new Savings Gateway.
People on qualifying benefits and tax credits, will have the opportunity to open Saving Gateway accounts. It is laudable for the Chancellor to encourage people on low incomes to save; indeed even Mr. McCawber recognised that income of £1 and expenditure of 19s 6d equated to happiness. Why then we must ask does the Chancellor not accept a bit of his own advice and put something away for the rainy days that inevitably come.

What else of interest was in the Pre-Budget Show...

(Blogged by David Bailey and Caroline Chapain)

This week we launched our report into what has happened to the MG Rover workers who lost their jobs so suddenly back in 2005. The research was a joint effort by The Work Foundation and the Birmingham Business School and was funded by the Economic and Social Research Council. Richard Burden, MP for Birmingham Northfield, kindly hosted the event in Westminster.

A short webcast summarising the research can be found here. (you need to scroll down and click on 'download swf file').
What we found was that three years on from the historic collapse of MG Rover in April 2005, 90% of workers who lost their jobs have found new employment, but most have taken deep pay cuts.

We interviewed over 200 workers out of the 6,300 workers ex-Rover workers who lost their jobs when the Longbridge plant closed, and found two thirds have suffered wage falls. Overall, on average wages had fallen by £5,640 per year in real terms. A third of the former workers reported an increase in their salaries. Those out of work the longest suffered the largest drops in income.

A report entitled 'The UK Pensions Crisis' published by the Taxpayers' Alliance and Terry Arthur, a fellow of the Institute of Actuaries has finally confirmed with facts and figures what many people already strongly believed namely that UK private sector pensions are in a mess. The $64,000 question is who is going to pull pensions out of the well; on past performance it is certainly not going to be the Government.

Gordon Brown has decimated every private sector pension and sounded the death knell of final salary schemes.

As America goes to the polls today, I am worried about how both candidates seem hopelessly out of touch with European issues. I mean - neither Obama nor the Other Guy have expressed an opinion on Russell Brand or Jonathan Ross.

At least Gordon Brown shows he is a man of the people. Even if he didn't hear the broadcast himself, he knows what will swing the voters of Fife.

One of the most fascinating things about working in media relations is trying to understand how and why news becomes news.

This last week there should have been two main stories: the US election and Gordon's last stand in a Scottish by-election. Instead we had almost blanket coverage of a prank phone call on a radio show. How did that happen?

It is, of course, wonderful that Lewis Hamilton has become the youngest Formula 1 World Champion Racing Driver and is all set, apparently, to become a multi-millionaire. Less wonderful is the fact that he will be living as a tax exile in Switzerland. But can you blame him if it means that he will keep a lot more of what he earns.

Wealthy potential immigrants to Switzerland can do a deal with the Swiss authorities that limits the amount of Swiss tax they pay. Our government on the other hand has, been busy attacking wealthy foreign nationals who are resident here by withdrawing the remittance basis of taxation once they have been here for seven years unless they pay a fixed annual tax levy of £30,000.

The Swiss have obviously realised that even if wealthy expats are not paying much Swiss tax they are spending money in that country.

If any further proof was needed that no Government in future will be able to squeeze the very wealthy until the "Pips Squeak" this is it. High earners won't stay here and pay what they regard as unacceptably high levels of taxation.

The time has come for politicians of all parties to realise that there is not a bottomless pit of money that they can dip into whenever they want to and leave us all to pick up the bill in the form of increased taxes. People will, like Lewis Hamilton, vote with their feet.