Bo-Jo can give the economy back its mojo by ditching Left-wing Toryism
Boris is apparently thinking about giving us a cheering, exciting first budget which will sweep us past any little local difficulty that a no-deal Brexit might entail. It is claimed he is considering a reduction in stamp duty. He has already said he wants to increase the threshold for higher rate tax. This first budget will show us what kind of prime minister he will be.
This is what he should do: first, he should bring home to us all that our taxes are far too high. Most people are unaware that, in the wake of the 2008 crisis, the tax take has kept on rising to a historically high level. It amounts to 34.6 per cent of GDP, the highest for 50 years. All this taxing and government spending cramps economic growth. That’s partly because governments invest badly. It’s partly because individuals are more motivated if they can keep more of the money they earn. Also, in a low-tax environment, skilled workers and companies are more likely to work here, creating enterprises and paying tax.
So go for it, Boris! Raise the threshold for higher rate income tax. While you are about it, lower the top rate of tax back down to 40 per cent. There is a good chance that a reduction in the top rate will bring in
more money, not less, just like the previous reduction. That, too, will encourage international businesses to come here post-Brexit. On top of that, lower corporation tax. On past form, that will increase revenue, too.
You should help the poorest in society. But be honest about it and economically literate. Raising the living wage could lead to higher unemployment. It would be better to make the poor richer by cutting the regressive taxes that hurt them most. Make food cheaper post-Brexit by having zero tariffs on foodstuffs from abroad. That would be a clear Brexit dividend from leaving the EU. It would help the Third World, too.
Bring down inheritance tax. You will remember, Boris, that for a brief period George Osborne became very popular in 2007 when he talked about raising the inheritance tax threshold to £1m. He didn’t do it in office, of course. But you could free a lot of people from worry by halving the rate to 20 per cent. The revenue will not drop as much as the Treasury will doubtless forecast. People will no longer go to such extreme lengths to avoid inheritance tax as they do now.
And yes, bring down stamp duty. George Osborne raised the rate to a penal 12 per cent on the most valuable properties in an attempt to persuade the BBC and the Left-wing press that he was a nice guy because his austerity measures were going to hurt the rich as well as everyone else. Tax policy should not be about hurting anybody. It should be about raising money fairly and encouraging growth. Nobody on the Left paid the slightest bit of attention to Osborne’s gesture and it has constipated the property market. Bring down all stamp duty and remember that after Gordon Brown’s
at telegraph.co.uk/ opinion first budget, in 1998, the top rate of stamp duty was only two per cent.
Where are you going to raise some money? The easy first hit would be to cancel HS2. The overwhelming view of economists is that it is a bad use of public money. We know, Boris, that you have a love of grand plans. But get a grip. To produce a successful economy, you need tax reductions, not grands projets. Put this sign above your mirror: “People spend their money more wisely than governments”. You can also save by not renewing Help to Buy, which increased demand for housing but not supply. Supply is the problem.
There are hints that you would like to do some deregulation. That is more like it. Most people have little idea how much overregulation damages growth – and Britain desperately needs growth. Almost all academic studies suggest that the slowing effect of regulation is substantial. One study found that extra regulation in the US since 1949 has reduced economic growth there by 2 per cent a year. The compound effect over time is astonishing. The American economy would be more than three times bigger than it is today without this extra regulation. Start deregulating straight away.
To be frank, Boris, I doubt that you really get all this. I fear that you are too wedded to “One Nation” gesture politics rather than sound policy. But if you try to please the Left-wing media, you will fail. They are against you regardless. So you might as well do the right things that will make the economy thrive. You are a delegator. So go ahead and delegate.
If you do, then you will be remembered, not only as the Conservative leader who helped us through Brexit, but as the prime minister who made the country zing.
An irony of the campaign to choose Britain’s next prime minister is that the state institution most desperate for serious reform is not being discussed in any meaningful fashion: the NHS. Although Jeremy Hunt had ministerial responsibility for it for almost six years, the prime ministers he served wished the secretary of state to engage in day-to-day crisis management rather than overhauling a failing behemoth. He says he will not privatise the NHS. Boris Johnson says the NHS “needs reform,” but we await details. He says it needs more money, but not where it would come from, or how it would be spent efficiently.
Trying to get an appointment with a GP can take days, echoing the sclerosis of a state-provided service once so typical in the Soviet Union and the old Eastern Bloc. One must not exaggerate: we are not yet at the stage of Jeremy Corbyn’s beloved Venezuela, where healthcare resembles that of a war zone and has almost broken down completely. But all the inefficiencies of a statecontrolled system, lacking a price mechanism to ration resources, are glaringly obvious in a way that is absurd in a first-world country.
One of its major burdens is our ageing population. Successive governments have been aware of this particular demographic time-bomb since the mid-Eighties, but have always found reasons to do nothing
To produce a successful economy, you need tax reductions, not grands projets. Put this sign above your mirror: ‘People spend their money more wisely than governments do’
Successive governments have been aware of the ageing population time-bomb since the mid-Eighties but have always found reasons to do nothing about it
at telegraph.co.uk/ opinion about it. To say this cannot go on is beyond understatement.
Fundamental reforms are avoided because of the fear in which the Tory government lives of Labour criticism. Labour deems any attempt to change how the NHS operates to be an attack on the institution itself and a threat to the welfare of the British people. However, support staff, which account for around half a million of the NHS’s workforce, are highly unionised and include a substantial proportion of Labour voters. The service the party claims is there to serve the public is first and foremost there to serve its clientele, and Labour is fiercely protective of it and all its restrictive practices.
The tragedy of the NHS is not only that our next prime minister will probably lack the political will or power to lead essential reforms, but also that the tectonic changes possible in our political fabric would leave no foreseeable government with the motivation or ability to make them. Governments of all hues believe real growth in spending is enough to avoid collapse; but it almost certainly isn’t.
Our social care crisis cannot be kicked down the road any longer without creating a national scandal. A new funding model, an audit of expenditure (particularly on nonclinical staff), better integration with private medicine and the introduction of charging for some services cannot in the present climate even be discussed, let alone implemented. A potential PM who felt able to be honest with the public about the realities of the NHS would show precisely the sort of leadership and credibility that would demand support; but don’t expect it to happen in this contest, or in an election campaign.