Extra

Tories must reject Project Fear 2.0 if Britain is to beat recession

Written by Javed Iqbal

Bank of England announcement of interest rate increases merely confirms that excess money printing, encouraged by former chancellors Rishi Sunak, has been inflationary and that the government should have taken out long-term loans when money was cheaper. Long-term debt is still possible and should be sought. The answer to the stagflation we face is economic growth and there is no time to lose. In my opinion, only the Secretary of State Liz Truss offers this.

What is most astonishing in observing the central economic debate in the Conservative Party is that perfectly intelligent MPs and commentators are prepared to believe the very institutions and characters who got their predictions so wrong during Brexit’s Project Fear. The OBR, the OECD, people like George Osborne and John Major. The infighting among the Conservative Party leadership hopefuls is reminiscent of the same thing that led Major to lead us into “Black Monday” and the Conservative Party was out of office for fifteen years. I am of course referring to the desire to stay close to the failing The Eurozonean attachment to the value of Sterling and for fiscal prudence.

The OBR warning that UK government debt is on an unsustainable path is a red herring. The current economic situation is analogous to the one after World War One: We have a one-time debt pile that can be paid off via long-term or perpetual government bonds, while there is a desperate need to stimulate growth, which itself will generate tax revenue. It is a sign of Mr. Sunak’s captivity to the Treasury’s mandarin doctrine that he did not create long-term debt while interest rates were even lower, a sign of his weakness.

Sir. Sunak’s perspective is the myopic of a city boy, blind to the broader economy and business, which through adherence to the socialist formulas of tax increases, big government and unimaginative regulatory prudence will lead our country into stagflation.

The recipe for a successful economy at this point, on which everything else depends, is not rocket science, it is simply: lower taxes, cut government, cut regulation, cut net zero, cut tariffs, cut NI protocol, cut HS2. Increase investment in business and infrastructure, including housing, roads and digital. Provide energy security by extracting UK natural shale gas at below world market prices and invest in the long-term development of home-grown nuclear power.

The first effort should be on taxes, especially the supply side. To promote investment and business confidence, corporate tax should be immediately reduced to fifteen percent with a view to eliminating it in the longer term. This is a tax paid by UK businesses and largely avoided by multinationals. There should be a sharp cut in fuel tax and a percentage reduction in income tax. This will help with the cost of living crisis and boost confidence.

Sir. Sunak has picked up on the idea of ​​deregulation late in the day, but seems to be limited to city rules and GDPR – while this is commendable, deregulation should be paramount. The one thing that family businesses, which make up 85% of UK businesses, complain about as a burden is red tape. A simplification of the tax legislation would be a good starting point to reduce the burden on the company.

These are not tax breaks inflationary. Even if this were true, the effect would be small. The Bank of England suggests the latest cost-of-living support package of more than £15 billion will add just 0.1 percentage point to inflation. In any case, the global supply pressures that generate inflation will ease next year. Within a few years of the First World War, which had similar inflationary supply pressures, there was a minus ten percent deflation.

The agenda for tax cuts, deregulation and free markets is a recipe for growth and a much-needed productivity boost. It encourages hard work and ensures that the UK can reach net zero without impoverishing the people of our country. It’s a conservative agenda for freedom, independence and self-improvement, not to mention home ownership.

There is only one candidate left in the race who shows any understanding of the current economic challenges: Liz Truss. It is amazing that our former Chancellor and the Treasury seem to be so off-beam.


John Longworth is an entrepreneur, Chair of the Independent Business Network of Family Businesses and former DG of the UK Chambers of Commerce

About the author

Javed Iqbal

Leave a Comment