Riches or ruin?

The choice over Bri­tain’s eco­nomic fu­ture could not be starker, says City Edi­tor ALEX BRUM­MER

Scottish Daily Mail - - City & Finance -

THE Tory man­i­festo sig­nalled an end to Bri­tain’s age of aus­ter­ity with pots of money for the NHS and the na­tion’s in­fra­struc­ture, as well as mod­est tax cuts.

By the stan­dards of re­cent bud­gets, when suc­ces­sive chan­cel­lors have strug­gled to keep the pub­lic fi­nances on a tight rein, Boris John­son and Sa­jid Javid are off to the races.

But in stark con­trast to Jeremy Cor­byn’s tax-and-spend ex­trav­a­ganza of £83bn, put for­ward in a Labour man­i­festo that would kill as­pi­ra­tion, en­ter­prise and en­trepreneur­ship, the Tory pledges are grounded in re­al­ity.

In­deed, the metic­u­lous way in which the cost­ings of the John­son man­i­festo are pre­sented give them the feel and look of the ‘Red Book’ – with in­de­pen­dent fig­ures from the Of­fice for Bud­get Re­spon­si­bil­ity – which ac­com­pa­nies every bud­get. But then, this spend­ing spree al­most cer­tainly is the bud­get we would have seen last month had the De­cem­ber election not been called.

Con­ser­va­tive pledges made since the Gen­eral Election was called pro­pose an ex­tra £10.2bn of pub­lic spend­ing be­tween 2020-21 and 2023-24. This is in ad­di­tion to the 4.1pc jump in spend­ing by gov­ern­ment de­part­ments, un­veiled by the Chan­cel­lor, Javid (pic­tured left), in his Septem­ber 2019 pub­lic spend­ing re­view.

Ad­mit­tedly, th­ese pledges come nowhere near Labour’s eye-wa­ter­ing plans. But they do seem to add up.

In con­trast, Cor­byn & Co would splash out a stag­ger­ing £28 for every ex­tra pound which the Con­ser­va­tives are plan­ning to spend. If Labour were elected, the size of the state would swell from close to 38pc of to­tal na­tional out­put to more than 44pc – the big­gest in­crease in peace­time his­tory.

And that pro­jec­tion doesn’t even in­clude the on-the-hoof de­ci­sion over the week­end by Shadow Chan­cel­lor John McDon­nell

(pic­tured right) to throw in an ex­tra £58bn of spend­ing, com­mit­ting the party to restor­ing the pen­sions of women born in the 1950s who have lost out fi­nan­cially due to state pension age changes.

NO ONE dis­putes that the women were treated un­fairly by a wel­fare sys­tem that is ad­just­ing to peo­ple liv­ing longer. How­ever, to sim­ply an­nounce that the Gov­ern­ment will fully rec­om­pense them, with­out any in­di­ca­tion of where the cash comes from, shows the true ex­tent of Labour’s ir­re­spon­si­bil­ity – and it could quickly leave the UK hu­mil­i­ated and queu­ing up for an In­ter­na­tional Mone­tary Fund bail-out along­side se­rial de­fault­ers such as Ar­gentina.

Rather than mak­ing such lu­di­crously grandiose prom­ises, the Tory man­i­festo of­fers sen­si­ble pledges, such as £22bn of ex­tra long-term in­vest­ment (in ad­di­tion to the £10.5bn in pub­lic spend­ing) in the na­tion’s in­fra­struc­ture.

This money would be used for projects rang­ing from mend­ing pot­holes to boost­ing the net­work of elec­tric ve­hi­cle charg­ing points, bet­ter in­su­la­tion for homes and im­prov­ing in­ter-city travel links.

Most of this should be fully de­liv­er­able dur­ing the next Par­lia­ment with­out cre­at­ing the vast, costly bu­reau­cra­cies Labour pro­poses to ex­e­cute its spend­ing plans, or hit­ting the ob­vi­ous con­straints of skilled labour short­ages. (The one project that won’t be com­pleted soon is the HS2 link be­tween Lon­don, Manch­ester and Leeds – along with a fur­ther high-speed link across the Pen­nines.)

But with all this spend­ing, how can Bri­tain af­ford the man­i­festo’s Thatcherit­e prom­ise of a ‘triple lock’ to prevent VAT, Na­tional In­surance Con­tri­bu­tions (NIC) and in­come tax – the three taxes which most im­pact on or­di­nary peo­ple – from be­ing raised dur­ing the next Par­lia­ment?

The triple lock will be pop­u­lar – and it puts blue wa­ter be­tween John­son and Cor­byn, who plans to sad­dle all fam­i­lies earn­ing more than £80,000 a year with bur­den­some taxes which would send many of the na­tion’s strivers and wealth cre­ators over­seas.

But it has to be paid. And busi­ness will be dis­ap­pointed that John­son and Javid have cho­sen to fund it by do­ing away with pre­vi­ously pledged cuts in cor­po­ra­tion tax.

The re­duc­tion of taxes on UK com­pa­nies over re­cent years has en­abled us to com­pete with the likes of Ire­land and Sin­ga­pore for over­seas in­vest­ment. But now, UK firms face ad­di­tional taxes of £23.5bn in the next four years.

Yet Labour’s plans for cor­po­ra­tion tax are in­fin­itely worse. The FT last week said the Labour man­i­festo would cre­ate the world’s ‘harsh­est tax regime on busi­ness in­come among large ad­vanced economies’.

WHILE Labour would frighten fi­nan­cial mar­kets to death, de­stroy Bri­tain’s credit rat­ing and lead the whole na­tion over an eco­nomic precipice, the Con­ser­va­tives seek to pro­vide a fis­cal stim­u­lus that should boost out­put but not at the cost of de­stroy­ing care­fully built growth and sta­bil­ity.

Mark Car­ney, gover­nor of the Bank of Eng­land, and the busi­ness lead­ers I en­gage with every day be­lieve that if the UK seals a Brexit deal, as the Tories hope, pent-up in­vest­ment by UK busi­nesses will be un­leashed.

Growth will pick up from its sub­oc­tane lev­els, jobs will be cre­ated and re­cent real-term wage in­creases will be boosted fur­ther.

The slow­down in the econ­omy will be re­versed and Bri­tain will be in a po­si­tion to lead the rest of the world out of stag­na­tion.

The fact is, this Tory man­i­festo lays the ground­work for a restora­tion of much-needed busi­ness and con­sumer con­fi­dence.

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