Iain Martin notes in the Telegraph today that the Conservatives need to replace a “doomed policy predicated on the idea of sharing growth that is now non-existent”. He is absolutely right and the party’s leadership clearly accept that.
If they thought that “sharing the proceeds of growth” was relevant to the troubled economic times we are currently enduring then they would be proposing spending cuts and tax increases; sharing the recession-driven fall in government revenue just as they proposed to share growth-driven increases. You don’t have to be a Keynesian to think that is a pretty unappealing idea and that is why they're looking for a new economic policy.
Here’s an idea for a policy better suited to a recession: “Sharing the burdens of recession.”
We can put some stylised numbers on what that would mean. The European Commission expects that the UK economy will shrink by roughly one per cent next year, roughly £15 billion. State spending makes up roughly 40 per cent of the economy. If spending were cut by 40 per cent of £15 billion, if the public sector did its share of the belt tightening, then that would mean savings in public spending of £6 billion. That would be enough to put £100 a year in the pocket of every taxpayer.
You could definitely go further, and the TaxPayers’ Alliance would, but if you put that £6 billion into a simple tax cut that would benefit everyone (e.g. increasing the income tax threshold) it would be a major step towards making the Conservatives the party of choice for anyone wanting to see more money in their pocket.
Are savings of £6 billion achievable?
Definitely. The TPA has already set out a single measure that would save nearly half the amount required: Scrap the regional development agencies. Eric Pickles has already said, to quote from the Birmingham Post, that these bodies are “unrepresentative and unaccountable, and the best thing that could be said about their performance was that they hadn’t done any serious damage.” There are plenty more clear and tangible savings to be had in the 1,162 quangos and agencies that litter Government. From English Partnership to government funded consumer pressure groups and NHS regional bodies there are ineffective organisations and programmes that can be scrapped.
Sharing the proceeds of growth is a slogan suited to very different economic times, the good times which we enjoyed until recently. Now the proper question isn’t how we will share the proceeds of a growing economy, but how we will share the burdens of a recession. The Conservatives should provide an answer to that question which will appeal to a taxpaying public that wants politicians to deliver value for money. Families are tightening their belts. So should government.
