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Work and prosperity
20 April 2012

The Swedish small print: Why tax cuts aren't a shortcut to British recovery

Sweden enjoys the benefit of having its own currency. It also enjoys the benefit of Anders Borg, named by the Financial Times as the best finance minister in Europe. Unsurprisingly, Borg’s successful tax cutting policies earned him a respectful hearing in his recent interview with the Spectator. Just as interesting, however, is Fraser Nelson’s supplementary post on the Coffee House blog in which he covers “a few other points which I didn’t fit into the interview”.

As much as one might wish that George Osborne would assimilate Borg’s approach, it isn’t that simple – as the Swede himself makes clear:

  • “Tax cuts need to be credible to be effective, he says, and Osborne’s deficit is so big that people would just save any money from a tax cut, dulling its stimulatory effect.”

Nevertheless, there are some very useful lessons to be learned from the Swedish experience – not least the seriousness of Borg’s approach to policy making and the policy debate:

  • “In opposition, Borg was famed throughout the party for his ‘macro emails’ — dense arguments for tax cuts, studded with graphs and complicated maths, which filled some 30 pages when printed…
  • "When things got messy, Borg didn’t hide. His own ‘Fiscal Policy Council’ — which the new government established when they took office — was very critical of Borg for not doing debt-fuelled stimulus like everyone else in Europe. Borg then started an extraordinary public row with the chairman of the committee, and even started a blog to argue against that Council’s report in 2009. Rather than crave the approval of external agencies to hide behind, saying ‘I must be right because the ABC and DEF say so’, Borg was alone — with enemies the world over, and even in Stockholm. But he had complete faith in the strength of his argument, which he had rigorously researched.”
  • “…Borg published a massive book explaining how his reforms will adjust the labour market and lower structural unemployment. Again, such a document is unthinkable in Britain.”

Of course, in Britain, our leaders don’t need to bother with such tedious detail. The boring policy stuff can be left to civil servants. After all, what could possibly go wrong?

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