Juliet Samuel
Our Chancellor should free the economy from inefficient, expensive and stifling regulations
There’ll be no “deal dividend”, as Philip Hammond likes to call it. Crudely, the Chancellor had tried to lure wavering MPS into supporting the Government’s Brexit deal with the promise of stronger growth and looser fiscal policy if they fell into line.
Awkwardly, however, the economy is still doing rather well. Yes, it has slowed, but it’s generating such unexpectedly strong tax receipts that the Chancellor has a multibillionpound windfall to play with in today’s Spring Statement. Aside from the need to fulfil Theresa May’s rash promise that “austerity is over”, it’s hard to see the argument for any broad economic stimulus. Yet even though Mr Hammond downgraded today’s event from a Budget to a Statement, he will still face pressure to “do something”.
If he were to launch a stimulus, tax cuts would make more sense than spending pledges. They get to work faster and feed through into broadbased economic activity. But rather than being guided by any deal dividend or Brexit “punishment Budget”, it is the slowing global economy that should occupy the Chancellor’s thoughts. He should be ready with a package of cuts to stamp duty, VAT and corporation tax, not yet, but as they become needed.
Meanwhile, spending pressures are building up. There is the gargantuan £20 billion annual increase promised to the NHS. But cash crunches in social care, the police, higher education and defence are becoming more politically toxic by the day. All in all, it wouldn’t cost much to neutralise most of these issues temporarily. But plugging holes with stopgap measures does not amount to an economic policy.
What Mr Hammond should do, but is incapable of doing, is set out a long-term vision of where his party wants to take the economy. He is unable to do this not just because he is a self-confessed spreadsheet man, but because his party can’t fall in behind any serious proposal for the country while it is still tearing itself to pieces on Brexit under a leader no one likes.
What could a Conservative policy look like? At its core should be a project to free innovative forces from a stifling regulatory system, hemmed in by decades’ worth of planning, environmental rules and bureaucratic diktats. The UK is a place where building things, whether it’s houses, runways, power plants or train lines, takes decades, if it happens at all, yet we expect to compete in future with places like China, where a high-speed rail line can be installed in three years.
Democracy will always take longer to complete controversial projects than totalitarianism. But our system is too bogged down, slow and expensive. Is it any wonder that the prices of basic goods like energy and train tickets have risen, even as our infrastructure fails to keep up with needs?
Meanwhile, we are too reliant for growth on debt-fuelled consumption. The global financial system is broken, with central banks trying to raise interest rates to something like normal levels and being repeatedly put off by market convulsions and fragile household balance sheets.
Until major economies raise their productive capacity by clearing away obstacles and investing more, the system is stuck in a cycle of ultracheap money perpetuating zombie projects like the euro and short-term consumption. The UK could find more efficient ways to regulate, replacing emissions targets with a carbon tax, and throwing out blunt instruments like the Common Agricultural Policy and GM crop bans in favour of more flexible regimes driven by science.
Britain is also the second biggest exporter of services in the world. We should use this advantage to pursue a trade policy that establishes mutual recognition of standards across borders, furthering the reach of capitalist, democratic ideals and reducing barriers for our businesses to export. Such a policy cannot work from inside the EU, but it can proceed via bilateral, memorandum-based deals rather than old-fashioned, tariff-based agreements and should be possible, assuming our politicians deliver at least some kind of Brexit.
Instead of considering what solutions Britain can pursue to address the enormous economic and demographic challenges ahead, our politicians are stuck on trying to stop or dilute Brexit. Mr Hammond could start to lay out a comprehensive Conservative answer to these problems today. But he won’t.