Philip Hammond: We make progress by embracing the market

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Philip Hammond writes in today's City A.M (Source: Getty)

A market that works is the bedrock of any successful economy.

That is a belief that has united mainstream British political parties for the past 35 years. Elections have been fought on arguments about how to achieve the best balance in the economy – but we have found consensus on the fundamental principles underpinning it.

As we saw in Brighton last week, that consensus is now broken.

Jeremy Corbyn and John McDonnell have hijacked the Labour party and are using it as a vehicle to promote their negative agenda of failed ideas – offering easy answers to difficult questions. But anyone who remembers the 1970s knows how that story ends.

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Inflation at 27 per cent, nationalised industries running massive losses, a top rate of income taxes at 83 per cent, corporation tax at 52 per cent, a brain drain of talent, and a winter of discontent.

Corbyn and McDonnell know this – that’s why they are “war gaming” for the disastrous impact their hackneyed ideas would have, including a run on the pound.

And so we have to remake the case for the market economy.

We have to show a new generation how competition unlocks potential.

It frees people and businesses, encourages them to create, take risks, give good ideas a go because they can see the results and benefit from their success.

This makes all of our lives better in a way no amount of state control can ever do. Profits being reinvested in research to generate new products.

Supermarkets providing more choice and better quality at lower prices, delivering to your home at the click of a button.

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Or digital businesses giving the world the smart phone and dreaming up services to transform lives by using it.

None of this would have come about if they had been run by some government commission.

And it is the profits from such businesses that underpin our savings and our pensions. And the tax revenues that a strong market economy generates, which pay for our public services.

Governments spend money made by other people. They do not create the wealth themselves. Hard-working businesses and hard-working families do.

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If the state borrows too much, it ends up sucking the life out of the economy, by spending more and more on interest payments on the debt, and leaving future generations to pay it back, leaving less to spend on public services and less for investment in Britain’s future.

Because a market economy, and good public services, are not opposites. They are two sides of the same coin.

Well-run, properly-regulated successful businesses in the private sector underpin the prosperity which funds the schools, the healthcare, the roads, the police and the councils on which we rely.

And successful businesses in turn rely on a good education system and decent infrastructure to succeed.

By making one stronger, we support the other.

That is the Conservative way forward. Making progress by embracing the market.