George Osborne seeks to ride the Celtic Tiger

A leader in today's Telegraph notes the impact of Gordon Brown's fat government on the UK economy:

"The transfer of wealth from the productive to the unproductive sector, accomplished with remorseless determination by Gordon Brown, is the prime reason why (as the OECD reported yesterday) Britain's economy now has a lower growth rate than the EU average."

One economy with above-average growth is Ireland.  The Shadow Chancellor George Osborne is in Dublin today to study the reasons behind the last decade's spectacular growth in that country.  ConservativeHome will link to his speech as soon as we have it but he uses an article in today's Times to identify three main lessons from Ireland:

(1) Ireland’s "world-class" education system: "On various different rankings it is placed either third or fourth in the world. By contrast, Britain is ranked 33rd and our poor education performance is repeatedly identified by organisations such as the OECD as our greatest weakness... It is telling that even limited education reform is proving such a struggle for the Prime Minister."

(2) "World class" research and development: "Using the best R&D, businesses can grow and make the most of the huge opportunities that exist in the world. That is why it is shocking that the level of R&D spending actually fell in Britain last year. Ireland’s intellectual property laws give incentives for companies to innovate, and the tax system gives huge incentives to turn R&D into the finished article. No tax is paid on revenue from intellectual property where the underlying R&D work was carried out in Ireland. While the Treasury here fiddles with its complex R&D tax credit system, I want to examine whether we could not adopt elements of Ireland's simple and effective approach."

(3) Competitive tax levels: "In a world where cheap, rapid communication means that investment decisions are made on a global basis, capital will go wherever investment is most attractive. Ireland’s business tax rates are only 12.5 per cent, while Britain's are becoming among the highest in the developed world."

George Osborne's focus on corporate tax rates echoes the insight of Nick Longworth from Tuesday's Platform column.  Nick predicted "that the first budget of a Cameron administration will bring cuts in corporate tax rates, and simplification of tax rules, and no reductions in income tax".  Mr Osborne's article is encouraging as it notes that Ireland's record exposes the left's "false choice... between lower taxes and public services":

"In Ireland they have doubled spending on public services in the past decade while reducing taxes and shrinking the State’s share of national income. So not only does Ireland now have lower business and income taxes than the UK, there are also twice as many hospital beds per head of population."

George Osborne is making the right arguments about Gordon Brown's tax burden and its effect on Britain's economy but will he make bold and fast enough conclusions to start making the necessary case for tax relief to the British people?

2pm update: Download full text of George_Osborne's_speech.pdf

Comments

[Guido Fawkes]

..and we don't have ID cards plus fox hunting is a popular legal pursuit.

Erin Go Bragh!

[Matthew Oxley]

While I'd welcome Corperation Tax reductions (depending on which levels are affected), I still think cuts on personal taxation would make more sense.

Giving companies a break is very important but with the current state of affairs

a) the public don't see anything particularly wrong with the Economy so won't be particulary thrilled about lower taxes on companies.

b) people WOULD notice a reduction in thier income tax.

Still, the beeb knows best

[Sam Coates]

A large international poll revealed that the British are seen as the best educated people in the world (Also the most polite and most boring).

[Edward]

The rest of the world can't be that stupid then, Sam!

[wasp]

Cut corporation taxes AND stand up to big business?

I remember DC specifically mentioning corporation taxes in the Question Time leadership debate, its clearly a priority. And rightly so, Brown has used corporation taxes on oil as a get out of jail free card.

[Ed R]

They've had 'a little bit' of EU help along the way! Some places in Ireland you can't go up the road without running into another EU-sponsored development project. I wonder if that could have anything to do with it?

[Wat Tyler]

So...flat tax is out, but George still obviously reckons he's got room to cut corporate taxes.

Excellent article in today's Speccie by Fraser Nelson. He sets out all the numbers on state dependency and how we Tories are so boxed in on tax:

"The architects of New Labour used to dream about such an outcome. ‘There will never be a common morality of the citizenship until a majority of the population benefit from the welfare state,’ wrote Anthony Giddens in his book The Third Way. So it must be enormously satisfying for the Prime Minister, after years of expanding welfare and the public sector workforce, that he has achieved this goal. His army of state beneficiaries now has four divisions: state employees (15 per cent of the electorate), the out-of-work and on welfare (11 per cent), benefit-dependent pensioners (18 per cent) and pensioners with independent means (8 per cent). Add these all together, and it turns out that more than half of the electorate are today, in one way or another, in the pay of the government. And this is before counting untraceable tax credits or subsidy-dependent farmers."

Don't hold your breath for any tax cuts.

[Michael McGowan]

I could hardly believe what I was reading when I read Osborne's article in the "Times". He claims that he has gone to Dublin to listen and learn. The reality is that he has gone there with his mind already closed to the various things the Irish have done to turn their economy around.

Nelson's article is right on the money. The message for the productive sectors of the UK economy, especially financial services, is "offshore, offshore, offshore"....

[just curious]

"I could hardly believe what I was reading when I read Osborne's article in the "Times". He claims that he has gone to Dublin to listen and learn. The reality is that he has gone there with his mind already closed to the various things the Irish have done to turn their economy around."

Believe it! This (above) comment is absolutely correct otherwise. An article pretending the Irish have done what the Conservative Party's two most senior public school boys want to do--that could easily have been written before arriving and will have been speedily accepted by "give me a place on the A list, please, please "Dave" and "George" [not their real names]" Danny Finkletstein.

In reality, Ireland has aggressively cut tax on business and individuals--the exact opposite of the approach these two suggest, the strong supply-side effects of which have enabled them to boost spending on top of a favorable settlement with the EU. God alone knows why it is deemed "caring" to cut taxes for corporations but not actually for people.

By the way, who pays for these trips (there was a similar one to China pointing out how the economic reforms there had really anticipated the Cameroonian rebranding of the Conservative Party)? Does the taxpayer pay? Or Central Office? Or does he pay for it out of his vast personal inheritance?

[Rob G]

Just curious: "Ireland has aggressively cut tax on business and individuals". A quick search on Google shows that income tax rates in Ireland are 20% (on the first 28,000 Euros for an individual) and 42%. Not that different from the UK.

[just curious]

"Just curious: "Ireland has aggressively cut tax on business and individuals". A quick search on Google shows that income tax rates in Ireland are 20% (on the first 28,000 Euros for an individual) and 42%. Not that different from the UK."

Which is not at all inconsistent with having aggressively cut them.

I don't know what's worse. The Cameron-Osborne leaderhsip... or their sychophants in the party. In the former's defence, at least they know they are spinning a line... even if it does sometimes blow up in their faces (see Osborne's dishonest claim that Thatcher did not promise income tax cuts in 1979 in an attempt to justify his and Cameron's own opposition to such a strategy).

[Martin Smith]

Excuse me for not noticing what all the furore is about here. The Shadow Chancellor goes to Ireland and discovers that the combination top-class education & R+D, with a shrinking state with low disincentives (taxes) to enterprise has encouraged economic growth. Apart from making an attempt for the "stating the bleeding obvious" award I fail to see what Osborne has done wrong here....

[what's wrong?]

"I fail to see what Osborne has done wrong here...."

Opposed to education vouchers and tax cuts.

[just curious]

"Opposed to education vouchers and tax cuts."

and favors big government spending increases on government education and healthcare.

[Ted]

Quick look at personal tax rates & allowances ceratinly didn't show aggressively lower income tax rates - actualy I'd be a lot worse off (low personal tax allowance, 42% on earnings over approx £19,000, NI at 4% up to £31,000 but with another 2% on all earnings with no upper limit).

[Richard]

"Nick predicted "that the first budget of a Cameron administration will bring cuts in corporate tax rates, and simplification of tax rules, and no reductions in income tax"."

Tax cuts are to be welcomed but I can't imagine this would go down well with the electorate. It would be portrayed as the Tories helping their friends in Big Business.

"A large international poll revealed that the British are seen as the best educated people in the world (Also the most polite and most boring)."

Probably something to do with the fact that British private schools are ranked as the best in the world.

"Cut corporation taxes AND stand up to big business?"

Standing up to big business does not mean being anti-business. It means not passing regulations that harm small businesses but not big businesses.

[Martin Smith]

"Opposed to education vouchers and tax cuts"

Opposed to tax cuts? No way. View item (3) above. He is championing low taxes - and in a way that demonstrates their link to economic growth, which is far more effective than any Tory has done for the last decade. DC has said they come second to stability, in the knowledge that the 2 are not opposed, to put the public's mind at rest and reassure them that our tax cuts will not cause instability.

Opposed to education vouchers? Not sure he has ever said that. DC has said that rigour and standards are more important, but does that really mean that we will not also be extending choice? It's a tenuous assumption.

[Michael McGowan]

The Irish experience is the exact opposite of those who say that tax cuts come before stability (whatever that means). The whole point about Ireland was the need to generate growth to create stability and cut burgeoning government debt, which they have done. Cutting taxes, especially corporate taxes (now 12.5%) was part of that process. Their income tax rates have also come down a lot relative to what they were before, and thresholds have been raised.

What has not been pointed out on this site is that the Irish have also gone out of their way to create a tax-friendly environment to encourage the financial services industry to relocate to Dublin. These have been successful.

[H F J]

"Opposed to tax cuts? No way. View item (3) above. He is championing low taxes - and in a way that demonstrates their link to economic growth, which is far more effective than any Tory has done for the last decade. DC has said they come second to stability, in the knowledge that the 2 are not opposed, to put the public's mind at rest and reassure them that our tax cuts will not cause instability."

"Opposed to education vouchers? Not sure he has ever said that. DC has said that rigour and standards are more important, but does that really mean that we will not also be extending choice? It's a tenuous assumption."

The debate is over, just curious. Cameron's blind followers are worse than his leadership. The latter will believe anything, at least the former know what they're doing, even if it is wrong.

Opposed to tax cuts--no promises other than a pledge not to cut tax if the public finances are in bad shape. By the way, Labour, like Cameron, hinted (pre-election) at cutting corporation tax and did so in office. So what? We are talking about a serious tax cutting agenda... like the one they had in Ireland over the last decade and a half while Conservative and Labour governments were, few tiny tax cuts sprinkled sparingly here and there, RAISING TAXES. Not cutting taxes to "protect" some imagined "economic instability" caused by cutting taxes in some imaginary world? That's new Labour's excuse for opposing tax cuts.

See Nicholas Boles' comments about eductaion vouchers to the Adam Smith Institute. See also Cameron's criticism of the choice idea. See also what Willets and Nick Gibb, a big critic of the choice approach in print, and also appointed education spokesmen by one David Cameron have to say.

Just curious: which is worse: Cameron's followers who believe in rejecting tax cuts or school choice or Portillo's former followers who used to disdain such positions when they came from people like Ken Clarke and now embrace them with enthusiasm.

[malcolm]

Poor George he goes to Ireland to see if he can learn some economic lessons and gets absolutely slated by a bunch of people most of whom attack him using pseudonyms! What has he ever done to deserve such hatred?He's only been Shadow Chancellor for five minutes.

[Matt Taylor]

Poor George? He deserves it. That speech, like his remarks on Thatcher's 1979 tax cut promise, was an exercise in intellectual dishonesty.

[RichardSM]

Fast forward to 2010 and Ireland is having to be bailed out.

But this is what Osborne said in 2006:

"I think that Britain can learn from how Ireland is prospering in the new global economy…”

“Ireland stands as a shining example of the art of the possible in economic policy-making.”

“We in Britain would do well to listen and learn from our Irish neighbours.”