We’ve been here before: Britain’s decline and fall is not inevitable

 
David Davis
THERE is one, single policy issue that dominates British politics today: the economy. It is the preeminent issue that determines the welfare of British citizens. Whether they have a job, how well paid they are in that job, what taxes they have to pay, what healthcare and pensions they get, how good their children’s education will be – all of this depends on the health of the economy. And the health of that economy is pretty dire.

We are making heavy weather of deficit reduction. The government borrowed £3.4bn more in July than in the same month last year. And growth prospects look poor. Quite simply, we are bumping along the bottom.

Of course, the chancellor can quite properly point to reasons beyond his control: the spectacular debt overhang that he inherited from a fiscally incontinent Labour government; the depression of our export market by the incompetent and futile policies of the Eurozone powers; the devastating impact on our economy of the bank failures. He is right to point these out, but an alibi is not a policy.

There is a risk that by focusing on parcelling out blame, we accept our circumstances with too much fatalism. In economics, to understand should not be to excuse. The parlous circumstances should not be an excuse for inaction, but rather a spur to dramatic action.

There are those who think that our comparative decline is inevitable; that the rise of massive low-cost competition from China, India, Brazil and the other emerging economies means an inevitable decline of the West in general, and Britain in particular; that we face a future of low growth and poor prospects; that this is the new normal. This is fatalistic nonsense.

We have been here before, of course. In the 1970s the British establishment was convinced that the job of the government was to manage our inevitable decline – to accept that the rise of the Eastern Tigers would eclipse us economically, and the rise of the Soviet Union, believe it or not, would eclipse us politically.

All of that was swept away by the Thatcher government of 1979, which recognised that its job was to solve problems, not simply to mitigate their consequences. Today’s circumstances are difficult, but not impossible.

What is fundamentally important is that we attack the problem of low growth in the British economy before, once again, our nation gets used to the idea of perpetual decline.

While the actions necessary will prove painful in the short term, the longer we wait before we start, the harder the task becomes. It was the indecisive decade of the 1970s that made the early 1980s so traumatic.

Precisely because our economy is bumping along the bottom, to shock it into activity the government needs to be strategically bold with radical reforms such as excluding small businesses from large amounts of regulation, implementing mini-jobs, cutting taxes – most importantly the employment killers like capital gains tax, employers National Insurance and corporation tax – abandoning the carbon price floor and radical reform of our domestic banking system.

More than this, the government should lay out a long-term vision of a tax and regulatory structure which will encourage enterprise and favours employment creation in the private sector. It should make clear to the people of Britain that there is a competitive future.

We’ve seen the continuation of a higher band of additional income tax; an increase in employers’ National Insurance Contributions (a tax on jobs); a VAT hike from 17.5 per cent to 20 per cent; increases in stamp duty, fuel duty and air passenger duty. A country cannot tax its way to prosperity. Income taxes, employment taxes, capital taxes, sales taxes, are all too high and too complex.

The government needs a coherent long term strategy for a genuinely lower, flatter tax. There is no need to reinvent the wheel here. There was a brilliant exposition of what is necessary published by the The TaxPayers’ Alliance’s/IoD 2020 Tax Commission. This strategy would eliminate the vast complexity of our tax, destroying the chance of tax evasion as well as reducing the problems the government are currently having with avoidance.

We need to cut taxes and we need to take a sharp knife to the Gordian Knot of the British tax code.

We are not quite out of time, but it is the eleventh hour, if not yet the fifty-ninth minute. The chancellor is a clever and resourceful man. He should take the opportunity of the Autumn Statement in a few weeks time, and lay out a plan to reinvigorate Britain.

David Davis is MP for Haltemprice and Howden. This article is based on a speech given at the Centre for Policy Studies.