A Statement that will strengthen Britain
Brexit offers the chance to build a new economic strategy that enriches and uplifts. The Government sees the possibilities. Writing for us today, Philip Hammond, the Chancellor, says that he wants to help working families in this week’s Autumn Statement, and construct a stronger foundation for the future. His proposals are sound and further reform is to be encouraged. Experience from across the Atlantic shows what potential there is for a business-oriented revolution.
Happily, the Chancellor pledges to spend more on transport. It is particularly pleasing to see him focus on roadworks. The state of Britain’s roads is, in some parts of the country, appalling. The Government calculates that by 2040 the equivalent of 100 million working days could be lost due to congestion, a problem that it believes costs households more than £13 billion a year.
One proposal that catches the eye is the £27 million earmarked to assist the development of an “expressway” between Cambridge, Milton Keynes and Oxford. This is inspired. Connecting two of Britain’s centres of research with a large, well-planned suburban town in the middle has the capacity to create the UK equivalent of California’s Silicon Valley or the Research Triangle in North Carolina. This is surely the future. With London overcrowded and unable to expand sideways, it makes sense to invest in suburbanisation constructed around new, hi-tech industries.
The comparison with US development is more than just coincidence. There are good reasons for the Chancellor to watch what is going on in America, a country that could be on the verge of another supply-side revolution similar to the one that it went through in the Eighties and which created nearly 20 million jobs in the Reagan years.
People have legitimate concerns about the incoming administration, but one hopeful sign is a tax plan that proposes simplifying and cutting rates dramatically. For instance, the higher income rate will fall from 39.6 per cent to 33 per cent and the corporate income tax rate would be slashed by more than half, to 15 per cent. This should be a huge spur to growth.
Britain could feel the benefit if it signs up as early as possible to a free-trade deal with the superpower. The Government should put this at the top of its “to do” list. Brexit gives the UK the chance to strike deals that the EU has struggled with. For older Eurosceptics – many of whom remember the days of Reagan well and with fondness – the prospect of Britain taking part in a North American Free Trade Agreement-style arrangement is a dream come true.
Regarding the UK’s current tax regime, we hope that the Chancellor will be as bold as possible. Of course he is constrained by pessimistic growth forecasts, but a Statement is a chance to set the direction and let business and the voters know what the new Government wants to achieve. It is a chance to signal that Britain wants to unleash the power of popular capitalism.
In the long run, regulations must be swept aside, taxation reduced. Britain needs its own supply-side shake-up. In this Statement, Mr Hammond could start off by slashing stamp duty, a tax cut that would largely pay for itself. The cumulative hikes in this destructive levy since 1997 have been regressive – bad for the housing market, without even bringing in the funds hoped for. This is what excessive government does. Intervene too much and one risks distorting the market. The rising cost of America’s new health insurance regime, Obamacare, is a case in point.
A balance must be struck and Mr Hammond obviously grasps this: spend where necessary to increase self-reliance, but also cut to reduce the state and set the private sector free. The Chancellor writes that the Government will seek to target investment “on generating economic returns for the country”. That is the right approach. Handled well, it could mean that Britain’s detachment from the EU, far from wounding us, liberates the country and gives it a chance to flourish in the new, hi-tech global economy.