Osborne must send entrepreneurs and investors a 10,000-volt message

By Tim Montgomerie

George Osborne has taken the tough decisions on spending cuts.

Has he taken the tough decisions on growth?

A few weeks ago I argued that George Osborne should have increased sin taxes to pay for lower jobs taxes. Despite the resistance of ConHome readers to my original post I've returned to the theme in an article for today's Times (£):

"Commentators have rightly focused on the extent to which [George Osborne's Budget] distributed money from the wealthy to the poor, but little attention has been paid to the extent to which there was redistribution from the unproductive to the productive sectors of the economy. Mr Osborne did not deliver the great restructuring of the tax system that would have sent entrepreneurs and investors a 10,000-volt message. Where, for example, was the increase in council tax on very expensive properties to pay for reductions in the higher rate of income tax? Where was the sin tax on pollution that could finance lower business rates? Where was the attack on middle-class welfare that Mr Osborne could have used to eliminate the welfare trap that imprisons the low-paid? These actions would hurt many voters in the short run, but creating a tax system that has the principal aim of creating tomorrow’s wealth is potentially a great reforming project and a worthy response to Britain’s crisis of competitiveness."

Of course, in an ideal world, we'd not be putting up any taxes. Unfortunately we don't live in anything close to an ideal world but in the messy world left behind by Mr Brown. In his autumn review I hope the Chancellor will use the economic crisis to restructure the tax system in a pro-growth direction. His pre-announced annual cuts in corporation tax are a good start but they are not enough.

A second area where unpopular decisions need to be taken is with regard to the banks. The temptation is to bash the banks and as today's Telegraph warns, it's a temptation that Vince Cable seems unable to resist.  What we need, as John Redwood has argued, is counter-cyclical regulatory policy. Banks need to be freed to lend to business now and only regulated more actively when growth is secure.

Business also needs cheap energy. Chris Huhne's green policies threaten this. The Coalition should cancel all expensive climate change policies - at least until the rest of the world signs up to the same use of what Bill Gates has called immature technologies {It won't}. To do otherwise amounts to unilateral economic disarmament.