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The IEA criticises the Coalition for failing to reduce the size of government and calls for tax cuts

By Matthew Barrett
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This morning's growth forecast figures were disappointing. David Cameron, speaking to LBC radio, said:

"Obviously the growth forecasts are a matter for the bank of England, but they’ve all been coming in line with the reality, which has frankly been disappointing. I think what’s happening is there’s a rebalancing of the British economy taking place. ... yes, it’s tough, yes the growth figures have been disappointing, but there’s a rebalancing of the economy taking place – more enterprise, more small businesses, more start-up businesses that are going to be the engine of the future, and we just have to roll up our sleeves and work really hard to achieve this economic rebalancing that has to happen."

IEAThe Institute of Economic Affairs' Communications Director, Ruth Porter, has released a statement calling for the state to get out of the way, and allow tax cuts and labour market liberalisation:

"It’s hardly surprising the economy is not recovering when the government has failed to reduce public spending significantly. Focusing on increasing private sector investment and productivity is the key. Heavy regulation and high taxes will inevitably put businesses off investing."

The IEA recommends:

"Rather than raising various taxes, the coalition needs to focus on creating the space for major tax cuts. Deregulation measures such as liberalising the planning environment would also be a massive boost to industry. They must also counter the uncertainty facing businesses by making the labour market more flexible. Increasing productivity is vital and reducing high marginal tax rates will help with this."

The IEA and other think tanks have been calling for - to little avail - tax cuts and labour market liberalisations to help spur growth. Perhaps the "Economic Regeneration Bill" drawn up by Downing Street to replace Lords reform, which will be designed to relax planning regulations, will go some way to satisfying the IEA's de-regulation concerns - but there are still no plans to cut taxes or outline a comprehensive growth agenda in a way that would make the centre-right think-tank world happy. 


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