If it’s working, let’s do more of it

30 Jan

The UK’s economic recovery is going well.  The nation’s economy is growing at its fastest rate since 2007 – now at an annual rate of 3 per cent – the government deficit is decreasing, unemployment is falling faster than expected, and inflation is bang on target.


Unsurprisingly the coalition – especially the Tory contingent – is keen to tell the media and the electorate that it is thanks to their tax cutting policies and pro-business approach (which concludes having the lowest corporation tax in the G7 group of countries) that the UK’s economy is expanding at its current rate.


To a large extent, I suspect they are right to assume this.  And if this is the case, if the economy is growing due to lower taxes and a better business environment, why isn’t the government promising to cut taxes across the board even further?  Why isn’t George Osborne metaphorically on the rooftops with a megaphone pledging that if they win the next election every individual in every bracket will pay less direct tax and that business taxation will be slashed further?


If this were well articulated this would be a vote-winner and put clear political water between themselves and the other parties, who are, it seems, becoming increasingly interventionist as we move towards the 2015 polling day.


We need to embrace the economic momentum.  As Michael Fallon, the Minister for Business and Enterprise, recently said “This is no time to turn back.”


We need to forget about the so-called ‘war on wealth’ that some Lib Dem and Labour MPs, including Shadow Chancellor Ed Balls, are trying to instigate.


Why? Because implementing the plans being drawn up now, including tax grabs on pension tax relief and expensive properties plus the proposals to bring back a 50p tax rate for top earners, will be of huge detriment to everyone across all income bands in the UK.


For instance, I’m convinced – as are many others – that a 50p tax rate will actually reduce the amount of money received by the Revenue as taxable income will be lower than it otherwise would have been.  In effect, the pie will be considerably smaller but revenue will get a larger slice!


In short, attacking wealth and high incomes is bad economics as it will make Britain a less attractive place to do business and invest and, as such, economic growth will be dampened.


We need to continue – by continuing to cut taxes and being pro business – to truly encourage and properly incentivise our top achievers, our biggest employers and our major investors.


Britain appears to be on the right track but it needs to do more to genuinely embrace free market capitalism as this will unleash untold economic potential.


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