George Osborne hits all the right notes in first major economics article

George Osborne writes an excellent article for this morning's Telegraph - his first as the new Shadow Chancellor.

As this blog has noted - a broad economic policy is a essential if this party is going to become both economically competent and socially compassionate.

George Osborne says that Tory economic policy must be forged in the context of the intensity of the international economic environment. During Gordon Brown's tenure Britain has dropped from 4th to 11th place in the league table of competitive economies. Mr Osborne's prescription is...

> A modern, integrated transport infrastructure,
> A reduction of Gordon Brown's £40bn regulatory burden,
> A strong macroeconomic environment (Tories want to keep an independent Bank of England - Labour still plan to replace it with an interest rate regime designed in Frankfurt),
> Simplification of taxes.

It's good to see that lower taxation is on Mr Osborne's agenda but only as one plank of a broader economic policy.

Mr Osborne sees tax as an economy-boosting weapon and I hope he'll find and consistently use a ’Don’t Think Of An Elephant!’ term like 'economy-boosting tax relief' so that his words help with the advocacy work that is going to be necessary.

If room becomes available to cut personal taxation, the Shadow Chancellor said the "poorest in society" were most deserving. He correctly points out that the lowest-paid "face the highest tax burden".

Comments

[Nikolai]

It is not correct to state that the lowest paid face the highest tax burden, since they pay the same or a lower PERCENTAGE of their income. They too will pay 20% of their earnings. In real terms they face the lowest tax burden, since they contribute the least to the state.

Even if they face the same tax burden as a percentage of their income, in general they are more likely to rely on the State and State provided facilities such as schools and hospitals and therefore they get more out. Should they pay more ? Maybe the fairest form of taxation would be a flat tax, a poll tax, where everyone pays exactly the same amount. The poorest in society will put in a larger proportion of their income than the rich, but they will recieve a larger proportion out of society. Think of it as an investment in the state.

By contrast, the wealthy, who tend to benefit the least from the state will pay and rightly, a smaller proportion of their income.

Or maybe we could lower taxation to pre World War I levels, whereby an income tax was considered to be an extraordinary tax.

Then we could privatise facilities like the NHS and schools. Which of course would be political suicide, since everyone likes to live off each other. But it is a thought.

Are we not coming to the end of our democracy:

Lord Thomas B. Macaulay "A democracy cannot survive as a permanent form of government. It can last only until its citizens discover that they can vote themselves largesse from the public treasury." Which is actually borrowed from an Ancient Greek commentator.

[Paul Marks]

Reducing the weight of regulations is a good thing - although this means we must take back powers from the E.U. (whether our "partners" agree or not), as we can not seriously talk about deregulation whilst the E.U. calls the shots in this area.

As has often been pointed out by many people, threats of trade sanctions by the E.U. are absurd - as the main E.U. nations sell us far more than we sell them. So this bluff can be called.

On the Bank of England: Well the British money supply is expanding at least as fast as the Euro money supply (see the back pages of the "Economist" any week for the stats) - so even I would not make a jigoistic claim that all things in Britain are fine. Of course joining the Euro would mean even lower interest rates for central bank credit-money (harldy a good idea).

Sadly the notion that "expanding the money supply" is good for long term economic prosperity has been an article of faith for many decades (whenever there are problems the cry goes up "cut interest rates"). Once it was believed that this credit money expansion should be linked to the general "price level" (in order to prevent, horrors of horrors, falling prices), but at least since Keynes the doctrine has been to issue more money (by various clever means)as soon as there is trouble - whether the "price level" is going up, down or sideways.

I do not expect to convince anyone here that credit money expansion is the cause of the "boom-bust cycle", but for anyone who thinks (along with Mr Blair and Mr Brown) that this cycle has been "abolished" I would advice them to watch and see.

As for fiscal policy: Tax simplification would be nice - however tax changes that would really give help to the economy (such as reducing the top rate of income tax and getting rid of such taxes as inheritance tax and capital gains tax) tend to be ruled out by the modern doctrine that any tax change must be presented as giving direct help to the poor.

However, tax changes (whilst nice) are not nearly as important as getting a grip on GOVERNMENT SPENDING. As we all know "there is trouble ahead".

The deficit is large (larger than it looks when one examines Enron style tricks such as the P.F.I. schemes) and is going to get much larger over the next few years as the economy goes into decline. It is more than possible that tax reductions for "the rich" would help the economy grow (or at least decline less) and thus help the fiscal position - but they can not be relied upon on their own (and are, anyway, semi ruled out by the modern religious doctrine - see above).

The first task for any Conservative government will be to save money - in order to prevent (as much as possible) financial melt down.

Sadly it is not possible for M.P.s to talk about this (in even the most careful way) whilst Mr Howard remains leader.

Removing sitting members of Parliament because one does not like what they have said (or, in the case of Mr Flight, because of what they did NOT say)shows a lack of judgement similar to that of Charles I.

Only after Mr Howard is gone, and (hopefully) the power of arbitrary removal from the "candidate list" is abolished, can freedom of speech be restored to members of Parliament.

[malcolm]

I am thoroughly amazed that so many commentators on this Blog seem to defend Howard Flight.Whatever the merits of what he wanted to do,he was sacked because he was prepared for the Conservative party to lie in our election manifesto.
That may be alright for new Labour,indeed they've become masters at it,but it damned well isn't alright for the Conservative party.
If MPs tell lies they should be fired end of story.I hope I'm not being too naive about this but I really believe that we shouldn,t follow Blair and his cronies in besmirching British politics but try to be honourable in everything we do.

[Edward]

Howard Flight's indescretion would be the same as if a Labour figure had implied there was a wide ranging plan for tax increases after the election. Of course such a person should have been sacked.

What was ironic about Flight is that Nick Herbert has far stronger free-market ideas than Flight, its just that he holds them in public rather than implying that there is a hidden agenda.

[malcolm]

Exactly Edward.I do not have a problem with Howard Flights ideas,I do have a massive problem with the way he seemed to want to hoodwink the electorate.
Maybe I'm being a fool, Tony Blair seems to get away with it every time without courting the electoral disaster he so richly deserves.
Having said that,many people in this country seem to think that all politicians behave like this and are therefore lying scum.
As Conservatives we have to show we are better than that but it is a long and deeply frustrating process.

[Alexander Drake]

One thing that amazes me about so many leading Conservatives is their naivety. EVERY speaking event is a public event that you should assume will pop up on Sky or the papers within moments. Going off-message while on-the-record is just madness. Flight had it coming to him and I can't believe that didn't occur to him.

Many Tories didn't like our Lynton Crosby's approach - but it helped to shut down the image of internal disorder, instantly. If it looks like you can't govern your party, then you can't govern your country. Australian Liberals learnt that the hard way in the 1980s.

[Paul Marks]

Mr Flight said nothing about "lies" (or about "secret plans"). He was faced with a question from a person demanding more action, and he gave a standard politician's reply - you have to get elected first. Basically it was a standard way of defusing the irritaion of the person asking the question.

Of course Mr Flight would have liked more of the James report to be approved (so would James - as he has confirmed). But he would settle for what he could get. "We will do what needs to be done" is harldy a specific promise (still less a suggestion of "lies" or "secret plans").

He might have replied to the question differently. "I am sorry, but our leader is a shit and I was lucky to get him to approve any savings at all". But Mr Flight clearly wanted to be polite. So pointing out that the spending plans approved by the Conservative party leadership called for a increase almost as large as Labour's proposed increase was not something he wished to say.

As for "sacking", Mr Flight resigned from his post when all the shouting started (this was a mistake - he should have waited till Mr Howard sacked him).

But this was not what I was writing about - Mr Flight was defacto REMOVED FROM PARLIAMENT (I was not writing about his Deputy Chairman thing).

If Mr Howard really thinks he can arbitarily remove a member of Parliament then he is unfit to hold office.

Nothing to do with Mr Crosby - I will not blame the monkey for the action of the organ grinder.

As for "shut down the image of internal disorder" - in an odd way yes. A couple of days ago Mr Howard got 4 votes (including his own vote) for the proposals he put before Conservative members of the House of Commons.

Whatever divisions exist among Conservative M.P.s Mr Howard has at least managed to unite almost everyone in regards to their opinion of him.

[malcolm]

If Howard Flight had not essentially connived at telling lies he could have sued Tom Baldwin & The Times.(I hope somebody does soon).He didn't because he knew that he would lose.Face it Paul,Flight deserved what he got and I hope other MPs remember his fate if they are tempted to be less than honest.
Regarding MH and the forthcoming leadership battle I think only a fool would argue that it couldn't have been handled better.However his humilation by his own MPs does the Conservative Partys reputation no good at all but rather fosters the thought that many of our parliamentarians are disloyal back stabbers.I f this humiliation had been delivered on some huge point of principle or in defence of the Conservative members I could have understood it, but it wasn't and it's brought no tangible gain to our party at all.

[Alexander Drake]

Paul, I understand where you are coming from completely. I think the better way to diffuse whatever 'irritation' the questioner may have had though, would be to stonewall - i.e. stick to the agreed line. This may have left an irritated supporter, but no opportunity for the appearance of disunity or discord for our opponents or the media to exploit.

Is this harsh? Yes. But so is the discipline you need to be effective in politics. If you are in politics and you want a friend, buy a dog.

On your other point though, MH removed Flight as the Conservative for Arundel rather than from the Commons. It may be a safe Conservative seat but the distinction is still important.

Obviously MH thought that action was necessary - and I think it is necessary to take the action he did. The leader must be able to take action to ensure the team appears united. Going off-message is not an excuse. Loose lips sink ships.