Lord Forsyth: Time for a touch on the tiller, George
Of course a lot can happen in two years, but the Eastleigh by-election suggests we might be heading for a Labour or Lib/Lab administration at the next general election as the centre-right vote is split by UKIP. Both would ruin the country with their prescriptions for higher income taxes, wealth taxes and more borrowing. The stakes could not be higher and this month’s budget is George Osborne’s last chance to change course and tell the British people the truth about the scale of the problems facing our country.
The Chancellor should stop talking about austerity and start explaining how we restore prosperity. He should focus the Nation’s attention on our escalating debt rather than the deficit which is just the amount by which that debt is increasing. Boasting about cutting the deficit by a quarter is just misleading as the public think the debt and the deficit are the same thing.
A poll carried out by Comres for the Centre for Policy Studies last summer asked people whether the coalition were planning to reduce the national debt by around £600 billion, increase it by £600 billion, or neither reduce or increase it during the course of this Parliament. Only 10% got the answer right. A similar poll for ITN carried out at the time of the Autumn statement found only 6% knew the answer. Our National debt is forecast to rise by £605 billion from 52.5% of GDP in 2009/10 to 76.3% in 2014/15. Those intending to vote Conservative were found to be the most misinformed about this with two thirds believing the Coalition Government were planning to reduce the national debt. Interestingly UKIP voters were the best informed.
This is a major problem. How can we expect the public to accept that public spending is too high, that tough decisions are needed to protect the future of our public services, or that the size of the State is hampering growth if they believe we are paying down debt and the differences between the parties is just about pace? And what will the voters think at the general election when they discover that debt and the costs of servicing it have soared?
“I actually think we’ve got a moral duty to the next generation, and to our children and grandchildren, to wipe the slate clean for them. We’ve set out a plan, it lasts about six or seven years, to wipe the slate clean for them. To rid people of that sort of dead weight of debt.”
Is it possible that even Mr Clegg does not understand the position? He will need a pretty big duster to wipe the slate clean. The national debt will have grown to around £1.5trillion or 85% of GDP on the Governments own projections in 6 or 7 years time. On my calculation £1.5 trillion in one pound coins laid edge to edge would stretch to the moon and back 43 times, or around the world more than 800 times.
The key to reducing the debt is to get the economy growing again although there are alarming signs that some people seen encouraging inflation as being an easy way out. The Chancellors decision to freeze the allowances on inheritance tax, the failure to adjust income tax thresholds for higher rate tax payers and the ending of inflation allowances on capital gains taxes are all stealth taxes which reward governments which debase the currency and punish people who work hard and save.
Quantitative easing is forcing businesses to put enormous sums into their pension funds - money which would otherwise be available for investment and job creation. This is because employer liabilities are calculated using government bond yields which are artificially depressed by QE. Similarly annuity rates are distorted giving pensioners a much lower income than could reasonably be expected after a lifetime of saving. Banks are being heavily criticised for not lending enough but how can they lend more if they are being required by regulators to hold more capital and liquidity in the form of cash or government bonds being created by QE. The Chancellor should announce an immediate halt to quantitative easing and an absolute commitment to sound money.
At present the only part of the economy growing is the size of the state, with the latest OECD figures showing nearly half of our GDP being spent by Government. Of course Ed Balls and Gordon Brown are to blame for much of this. In 2000 when Brown was Chancellor it was 37%. Those calling for a Keynesian boost to achieve growth should reflect on the massive increase in Government spending that has already occurred and which has resulted in our current predicament. The tax and debt burden needed to fund this is too high and like a cuckoo in the nest is now threatening our future.
Our energy policy is undermining growth and adding to the pressures on families. Windmills onshore or offshore and Scottish roofs glistening with solar panels in the rain are not going to make a difference to climate change or even to Britain’s carbon footprint. As Professor Dieter helm points out in The Carbon Crunch:
“Even with the larger wind turbines hundreds are needed to match a single gas, coal or nuclear power station. Indeed they may actually exacerbate global emissions as they drive up energy prices and thereby encourage further deindustrialisation at home, relying on imports of carbon intensive goods from abroad.”
The Chancellor should put the windmill subsidies on ice, end the dithering which is holding up the investment in new nuclear power plants and ask John Hayes, the Energy Minister, to bring forward proposals which will enhance our country’s competitiveness.
In opposition, George Osborne committed himself to lower, flatter, fairer, simpler taxes. He should return to that agenda which will deliver enhanced revenue and a growing economy. Sadly, according to the Taxpayers Alliance, the Government has imposed 299 tax increases and only 119 reductions. The increases in capital gains tax and taxation of North Sea oil resulted in less revenue. His reversal of the raid on North Sea oil and tax cuts stimulated a huge increase in investment, jobs and future tax receipts. Instead of complaining about multinationals not paying tax here, he should cut corporation tax to attract companies to the UK and to encourage domestic investment and growth.
With calls for government to control the prices of energy and alcohol, wage freezes in the public sector, predictions of stagflation, ministers singling out individuals as the unacceptable faces of capitalism, gloomy forecasts of years of austerity ahead, warnings the lights will go out from power shortages, and even the Daleks appearing at Westminster, we could be forgiven for thinking we had slipped back to the 1970s and forgotten some important lessons.
Margaret Thatcher saved our country then with an optimistic but firm agenda for change. She had the courage and the convictions to see it through. She needed no focus groups or opinion pollsters to guide her. She cut taxes, promoted enterprise and competition and axed unnecessary bureaucracy and wasteful expenditure. Of course she was helped by the revenues from North Sea oil just as natural gas fracking offers to transform our economic prospects today. She had faith in the British people’s ability to flourish if Government set them free. Let our children grow tall she said - and they did.