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How do we get the UK economy growing again? Watch the STRICT BUSINESS debate on reducing growth
By peacetime standards, Britain’s national debt, the accumulation of years of government borrowing, is uncomfortably high.
Still, that’s no excuse for a Tory government to refrain from efforts to boost our national productivity and growth.
Unless Rishi Sunak and his Chancellor Jeremy Hunt recognize that high taxes stifle business investment and deny workers an incentive to work harder, they risk sending the nation into a doomsday scenario of rising taxes as it struggles to control the national debt to get.
In a largely ignored portion of his fall statement, in which he piled on the torment for business by withdrawing pledges to cut corporate taxes and agreeing to a Labor-LibDem agenda for windfall taxes on the oil and gas industry, Hunt spoke about his aim to make Britain the new ‘Silicon Valley’. But the only way to do that is to pursue a growth agenda.
No one wants a repeat of last September’s Trussonomics experiment. The objectives of the mini-budget for tax cuts were commendable, but the execution was amateurish. It provided traders in the financial markets with a golden opportunity to bet against the pound and the price of UK government stocks.
The truth is that Britain’s underlying tax situation is infinitely better than most of our competitors, with the exception of Germany.
Take the predicament of the US economy. President Joe Biden’s Treasury Secretary Janet Yellen, who had the audacity to lecture Kwarteng about unfunded tax cuts, has spearheaded a spending spree that has pushed the federal government to the brink of shutdown.
Last month it hit the statutory debt ceiling of $31.4 trillion (£25 trillion) or 122 percent of the total output of the almighty US economy.
That’s ten times Britain’s £2.5 trillion debt, or 87 percent of the country’s output, according to the International Monetary Fund.
Meanwhile, France is in the IMF’s crosshairs thanks to a debt level that has risen to 112 percent of GDP.
Despite this, Sunak and Hunt have adopted the narrative that Britain is something of a budgetary pariah, with no leeway on taxation. This is a canard that should be banned from public discourse.
The Bank of England’s latest GDP forecasts were hard to read
Take the recent government finance figures for December reported by the Financial Times under the headline ‘December borrowing doubles to record’. A drill down in the figures reveals a completely different story.
Borrowing represents the difference between two very large numbers: what the government spends in a month and what it collects in taxes and other charges. But the statistics are skewed by substantial one-off incidents.
In December’s case, the result was distorted by the ‘energy price guarantee’, with payouts and subsidies to help households and businesses cope with rising fuel bills, amounting to £6.7 billion.
The interest account on the £17.3 billion national debt is also misleading. It is based on high interest payments that are likely to fall sharply as inflation eases this year and next.
In other words, the fiscal crisis is much less serious than is being suggested.