Is Britain gripped by the orthodoxy of managed decline? It does appear so. Yesterday saw the Institute of Fiscal Studies, the respected economic wonk shop, bemoan Liz Truss’ tax cuts as piling on debt in a time of poor economic growth.
Another, the Institute for Public Policy Research, has rubbished the idea that tax cuts could possibly stimulate investment.
All around ahead of this week’s mini-budget one hears the calls for restraint, to avoid the apparent recklessness of allowing people to keep more of their money.
These organisations, with fine researchers and brains the size of planets, appear slightly trapped in a worldview that can only ever see downsides. It is a disease that has gripped much of the British establishment – that we are on the path to becoming a medium-sized economy with a far larger state, and we should prepare for that inevitability sooner rather than later.
Thank goodness then for the Centre for Policy Studies, whose dynamic tax modelling dares to dream the impossible dream – that Britain could actually grow again. They also point out the unsayable, missed by many of those mainstream commentators, that the ‘cut’ to corporation tax is only the reversal of a hike: the 1.2 per GDP boost the CPS foresee is only, as they put it, “avoiding a hit to GDP that would otherwise have taken place.” It is indicative of the worldview of so many opinion-formers in Britain that a recent tax hike appears now to have taken on the character of Sinai’s tablets of stone.
That perhaps reflects the speed with which the state eats up any penny the taxman hands it, but it does not have to be that way. Buried in the IFS’ release on the plague of locusts that could descend on Britain thanks to Trussonomics is an acknowledgement that for the UK to achieve the necessary trend growth our ageing population needs, it would “require a great deal of luck… or a concerted change in policy direction.” The latter is occurring in front of our very eyes, and it’s not before time.