George Osborne, before he became the Tories? chief political strategist, expressed all this as eloquently as any of us could wish. I was present some years ago when he gave a splendid speech to the annual general meeting of the Centre for Policy Studies. Lower taxes, he said then, were not just morally desirable: they were economically necessary. In a world where emerging economies such as Estonia had a capital gains tax of nil, Britain could not survive economically with punitively high taxes on business activity. Yes, sir ? George understood it then and he understands it now. And so does his boss, who may be putting the brakes on careless talk from the Treasury, but whose grasp of economic reality is pretty reliable.
It is not the danger of economic consequences ? Mr Cable?s imagined ?widening? of the budget deficit ? that frightens the PM and the Chancellor away from tax cuts. They know that well-aimed tax reductions would stimulate growth ? which would produce more revenue ? and thus be self-financing. The economy would become more dynamic, more diverse and more flexible because smaller enterprises would be allowed to flourish and expand.
Yet they hold back, because of the risk of political consequences. A more dynamic, diverse economy produces differentials of wealth: some sections grow faster than others, and the creation of wealth races ahead of the state?s ability to moderate or redistribute it. In the medium term at least, some people are going to be a lot better off than some others.
And in the short term? Oh dear. Abolish the 50p tax rate and you will unleash an avalanche of ?same old Tories, out to help their rich friends, blah-blah?. Reduce the National Insurance contribution of employers and this will be caricatured as another favour to the boss class rather than as removing a disincentive to employ more people. So political expedience (or cowardice) defeats economic conscience: doing what they think will keep them out of electoral danger takes precedence over doing what they know would be in the best interests of the country. So terrified are they of the spectre of previous lost propaganda wars that they will not even engage in the argument ? or attempt to educate voters on the fiscal logic that could make for a better future.
So here?s a thought: why not take the fight to the enemy and make a more daring move? If reducing business taxes carries too much unfortunate baggage, why not reduce the taxes of ordinary people, too? And do it while there is still time for the effects to become clear before the next general election. The longer you spend arguing with yourself, the less likely you will be to produce the goods in time.
How about, say, raising the threshold for the 40p income tax rate, which Labour held fixed for years, thus dragging enormous numbers of modest earners into super-tax? And what about cutting those grotesque ?green? taxes that make the cost of home energy and petrol so terrifying? Very expensive for the Treasury? Damaging to the modernisers? ?green? agenda? Maybe, but let people have more (real) money to spend, take away their fear of ever-spiralling costs, allow the entrepreneurial spirit of the country to flourish and you will be amazed at how much prosperity and optimism emerge.
Aung San Suu Kyi Queen Elizabeth II King Abdullah Mahmoud Ahmadinejad Omar al-Bashir
No comments:
Post a Comment