Don’t take economic growth for granted
One of the central arguments for Brexit was that it would incentivise Britain’s political establishment to pursue better policies. Why? First, accountability would be increased: all decision-making would rest with Parliament again, and MPs could no longer blame distant bureaucrats or judges. Over time, the quality of politicians and civil servants would also go up: Westminster would become a proper capital, rather than a glorified seat of local government. Secondly, economic policies would need to shift to attract capital and to help the economy adjust to our exit from the single market and customs union. Outside the EU bubble, forced to trade globally, Britain would need some tough medicine and politicians would feel compelled to deliver it.
So far, we have seen signs of the first Brexit effect: the Tory government is generally much keener than its recent predecessors to deliver for the electorate. It is waging cultural wars and seeking to help the Red Wall. Unfortunately, there are as yet few signs of the second Brexit effect. In fact, the opposite: the Budget was the worst since Norman Lamont’s massive tax-hiking debacle of 1993, with corporation tax raised to a Corbynesque 25 per cent. True, Rishi Sunak’s support for freeports is a good move and his super-expensing will help in the short-term, but we will then face a massive supply shock in 2023.
Having gone this far, the Chancellor must resolve to go no further: no wealth taxes, no windfall raids, no new property taxes and certainly no attacks on capital gains. Corporate income is already being taxed much more heavily; hiking CGT would be a further self-defeating blow.
If this Government is to make Brexit a success, it cannot keep taking the miracle that is capitalist economic growth for granted. It must begin a root-and-branch overhaul of public spending to cut billions. It cannot keep assuming that grands
projets and government direction will propel Britain upwards: if it were that simple, France would have enjoyed a multi-decade economic boom. We do need better broadband and better transport, but the benefits will only be reaped if taxes are kept low and incentives maximised.
Brexit cannot afford another anti-growth budget of the sort we were hit with last week.