Politics

Rachel Reeves has no answer to Britain’s financial mess

philmullan Debt, Economic policy, Politics, state, Welfarism

The deluded chancellor is at it again as Rachel Reeves prepares her second “one-time-only” tax-raising and debt-increasing autumn Budget. After last year’s Budget, the chancellor declared: “We will never need to do another budget like this again… We have now set the envelope for spending for this parliament, and we are not going to be coming back with more tax increases or, indeed, with more borrowing.”

But Rachel Reeves has spent much of the past month suggesting that it would be necessary to raise income-tax rates in the next budget. But now Reeves has U-turned on her U-turn. Having spent weeks suggesting the dire state of the public finances necessitated income tax rises, she appears to have changed her mind again. According to reports, Reeves was told by the God-like Office for Budget Responsibility this week that the government’s financial shortfall will be not quite as large as first forecasted – closer to £20 billion than £30 billion. This ‘good news’ apparently allowed Reeves to back down on some of her floated increases in income tax rates. There’s little doubt that political expediency also played a significant role in this U-turn on a U-turn.

This government seems to have absolutely no idea how to tackle Britain’s profound economic challenges. So let’s imagine an alternative approach: a new government is elected next week, with a mandate to fix things. What sort of budget could it come up with in the interests of the country?

Read the full article here.

This is worse than the IMF-bailout crisis

philmullan Debt, Economic policy, Politics, Productivity, state , , ,

Economists and other commentators have been warning that Britain is heading towards a 1970s-style debt crisis – that is, at some point soon, bond investors might stop lending to the government. Critics claim we could be looking at a situation similar to that which faced James Callaghan’s Labour government in 1976, when it had to resort to an International Monetary Fund (IMF) bailout. But in some ways, Britain finds itself in a much worse state, economically and politically, than it did in the 1970s.

Productivity growth is much weaker than in the 1970s. The decay in productivity growth over the past half-century underpins the incapacity of the state, and the degradation of public services and infrastructure. Indeed, it is the problem of productivity growth that has produced the government’s most pressing economic challenge: how to deal with the unprecedented peacetime expansion in public indebtedness.

If productivity decline is a result of economic constraints that have been built up over time, the grim state of the public finances is different – it is primarily a political problem. Since the 1980s, successive governments of all political stripes have side-stepped the reality of the productivity slowdown. Instead they have acted as if ‘money is no object’. This is a matter of bad political choices, not economic fate.

Whatever you think of the politics and policies of the Callaghan-Healey team in the late 1970s, their robust political leadership shows up the timidity and ineffectiveness of Starmer and Reeves. Unlike Labour in the 1970s, Starmer and Reeves have no plan or clue how to steer the UK from disaster.

Read the full article here.


 

The economic case for mass migration has never looked so weak

philmullan Cultural renaissance, Democracy, Economics, Politics, Productivity

Earlier this month, Professor David Miles from Imperial College Business School intervened in the UK’s most contentious issue – immigration. In an essay published by the Common Good Foundation, Miles argued that ‘there are serious problems with the idea that [immigration-driven] faster population growth can consistently alleviate fiscal problems’. He urged the government to prioritise getting British people into work, rather than relying on migrants to solve the nation’s economic problems. 

For a long time, the conventional economic wisdom was the opposite – that immigration benefitted the economy. This argument would be routinely trotted out to justify denouncing anyone who questioned immigration levels as, at least, idiotic, probably ‘far right’ and certainly not worth debating.

Miles’s essay shows that the establishment is changing its views on immigration, thanks in large part to popular pressure. For far too long, successive governments have reduced what should be publicly debated political decisions – on the public finances, on infrastructure projects, on immigration and so much more – to technical economic questions. An honest public debate on immigration that breaks away from simplistic economic pros and cons is certainly long overdue. 

Read the full article here.

Why a wealth tax is a terrible idea

philmullan Debt, Economic policy, Politics, state, Welfarism

The wealth tax cure-all is having its day. Long time a favourite of the ‘progressive’ left to ameliorate the evils of capitalism, it has gained extra exposure from Gary Stevenson, the City trader turned bestselling author, YouTuber and leftist poster-boy. This self-acclaimed “very, very good economist” puts taxing the rich at the centre of his crusade for a fairer society. More recently, with the Labour government’s fiscal plans in tatters, their former leader Neil Kinnock floated the expediency of a 2 per cent tax on assets valued above £10 million. Subsequently at Prime Minister’s Questions the current leader Keir Starmer refused to rule out a new tax on wealth. 

Little better illustrates today’s political and cultural barriers to economic growth than these voguish proposals for a wealth tax. The suggestion of taxing the super-rich to address the government’s fiscal hole is another lily-livered evasion of the tough decisions required. It expresses the cultural and political elites’ prerogative that there is always some other group who can pay for social needs and for their own privileges.

Governments need to stop assuming there is always someone to pay for their spineless overspending. 

Read the full article here.

Labour has no answers to Britain’s economic slump

philmullan Cultural renaissance, Economic growth, Economic policy, Politics, Zombie economy

The government’s long-awaited industrial strategy is a weak rehash of familiar, failed ideas.

After Labour’s first year of chaos and U-turns, the prime minister Keir Starmer managed to keep a straight face when claiming this 10-year industrial strategy provided ‘stability’ and ‘certainty’ for business. Though if any business leaders thought the document offered ‘certainty’ even about taxation levels just four months’ hence in the autumn Budget, they would have been disappointed.

This stereotypical industrial policy announcement prompts three questions. Why did it take them so long to draw up something so standard? Second, why is there such a gap between the widely-perceived scale of our economic problems and this hackneyed set of policies? And, third, more perplexing, why is there still so much support across the political spectrum for the idea of an ‘industrial strategy’, when all these blueprints for change have been so ineffective in shaking Britain out of its economic stupor? 

For answers to these questions, read the full article here.