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Alternative Conservative economic strategies

By Paul Goodman
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Tim Montgomerie wrote earlier this morning about an alternative Conservative plan for the economy.  It's therefore timely to list other schemes from the centre-right - of which very few from have come from the Commons, and those mostly from the older generation of Tory MPs.

There are two main alternatives to the Government's policy.  The first is: spend more (to go for growth) and the second is: spend less, cut taxes and deregulate (to the same end).

No Conservative MP has backed Ed Balls's calls for higher spending, though Jesse Norman supports more on capital projects and and David Ruffley (who wants some tax cuts) has said that the markets won't "go haywire if there was a modest loosening in borrowing in the short run".

The main voices on the centre-right that have called for lower spending outside the think-tanks are those of David David and John Redwood:
  • Davis and Redwood proposed a Finance Bill in ConservativeHome's Alternative Queen's Speech last Spring, which would "set rates that increase the amount of tax the rich pay, and which ease the burden on people lower down the income scale". The authors wrote that "the Bill needs to take more people out of 40% tax...The top rate of tax should be set at 40%, the rate Mr Brown always used as Chancellor in the belief that such a rate maximised revenue from the rich. Capital Gains Tax should be set at 20%, not 28%, to stimulate more transactions and raise more revenue."
  • Later in the year, Davis called for "shock therapy" for the economy, which would "focus on tax simplification and tax reduction (partly financed by faster spending cuts but also by belief in the dynamic effects of lower taxes); greater competition in the banking sector; a new energy policy that puts economic needs before green objectives; freer trade; infrastructure investment (including greater airport capacity but no HS2); and deregulation - he identifies red tape as the number one economic problem."
  • Kwasi Kwarteng of the Free Enterprise group has urged a Swiss-style debt brake to "balance our structural budget each and every year. Shortfalls in any one year should be compensated for with greater austerity in the next. A debt brake provides enough flexibility in an economic crisis, without the unnecessary discretion that allowed persistent deficits to be run from 2002. It forces a government to run surpluses in the good times, saving money for when trouble arrives. In practice, it ensures that government spending grows no faster than tax revenues." See here.
  • ConservativeHome got savings proposals worth over £50 billion from five think-tankers, and said that £10 billion of them could be effected immediately. Ideas included reducing housing benefit to a maximum 95% of the rent; limiting child benefits to the amount paid in JSA to young adults; dropping the commitment to extend free early education available to three and four year olds to some groups of families with two year olds; capping statutory maternity pay at £800 per week and making the 6000 people who live in social housing and earn over £100,000 a year pay the full market rent for their housing.
  • Of the centre-right columnists, Fraser Nelson is probably the one who has set out an alternative economic strategy in the most detail. He wants help for the low paid, in the form of "reducing National Insurance, cutting employers contribution or even German-style mini jobs", and has warned the Government to be careful with tax credits, since "people are proving more sensitive than you might think to work incentives".  Youth unemployment should be treated as "a national emergency"; the welfare cap "can be lowered, if it helps the low-paid and tilts the bias back towards work".


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