Growth forecasts and a lack of ambition portend a grim economic future
For all the pageantry of yesterday’s spring statement, the truth is that just one thing really matters: the drastic, deeply concerning downgrade in the UK’s growth forecasts. There are only so many political sleight of hands that any Chancellor can do to hide the fact that unless the UK finds the secret sauce of sustained economic growth, soon, we could be heading for a period of economic stagnation that would make Japan’s lost decade look like a bump in the road.
The UK is facing myriad challenges to its current operating model. It is impossible to sustain the level of public spending envisaged now by governments of all sides with the predicted level of economic growth. It is not feasible to imagine the required economic growth emerging in an environment that demands a tax burden at a seven-decade high. The cheering backbenchers behind Rishi Sunak yesterday will no doubt not have noticed that fiscal drag will all but eliminate the benefits of a penny off income tax nor that the rise in national insurance contributions will take most of the punch out of increased thresholds.
Whither the free market Tories? Whither the advocates of a smaller state, with lower business taxes? For reasons best known only to bureaucrats it requires a lengthy consultation with business bodies to decide, by Autumn, on a tax programme to encourage businesses to invest. The sheer gall of a government asking for thanks for such a programme having whacked up corporation tax by several percentage points, turning the profits that could have been reinvested into more productive businesses into sticking plasters on an unreformed state.
If this sounds like a call for a twenty-first century version of a Reaganite rebellion, that’s because it is. Britain’s demographics can not sustain the state that all political parties seem to have tacitly agreed on. The Tories promised transformation when they won in 2019. So far, they are wasting not just a majority but a crisis. Now is the time for reform.