Tories must revive the culture of work

After two years of flirting with recession, the British economy has finally taken the plunge. Yesterday, the Office for National Statistics confirmed that the UK contracted by 0.3 per cent in the final three months of 2023, after it had also declined in the third quarter.

Some might argue that this is only a “technical” recession, that the fall was “shallow”. Obviously, it is good news that Britain has avoided the much sharper downturn that had previously been predicted, and some are forecasting that growth will now pick up to some minor degree. But the overall picture is one of stagnation. Britain desperately needs a credible plan for returning to robust growth.

Several reasons have been advanced for the country’s current economic malaise, including higher interest rates. The gridlock caused by the planning system and high energy prices caused in part by the rush to net zero are no doubt also partly to blame but, as the ONS itself implied, perhaps one of the most damaging factors is the epidemic of worklessness afflicting Britain.

Some 9.3 million working age people remain outside employment, up significantly since the eve of the pandemic. Millions sit on inflation-linked benefits that have kept pace with rising prices even as wages have fallen in real terms.

At the same time, the tax burden on the working population is rising to its highest level since the 1940s, driven in part by the growing cost of the welfare state. This is clearly an unsustainable state of affairs; work must be made to pay in Britain.

This only boosts the argument for the Chancellor to use his upcoming Budget to introduce major tax cuts, not just to reduce disincentives for people to work, but to reward entrepreneurship and risktaking more broadly.

This need not put unsustainable pressure on the public finances. Indeed, tax cuts would be an expansionary boost to the economy that could well end up paying for themselves. If Britain is to shake itself out of its torpor, it will need to draw the workless back into the labour market and drive investment up. Both will be hard to achieve unless taxes are lower.

A great many of the country’s problems could be ameliorated were economic growth much higher. Conservatives have also long known the best way of achieving that. The state has to get out of the way, so that individuals and businesses can flourish.