The BBC’s current favourite sport is to play back endlessly Boris Johnson’s supposed car crash of a speech to the Confederation of British Industry on Monday.
I’ve lost count of the number of times I’ve heard it. But the Prime Minister’s shambolic, though in parts rather amusing, address to a dumbfounded audience told us nothing about him we didn’t already know.
What obsesses the ‘Westminster bubble’ is often only of passing interest to the great majority of people.
The BBC and much of the media largely ignored a more noteworthy speech made on the same day as Boris’s performance. It was about taxes, which I’m sure was closer to voters’ preoccupations.
It was delivered by Lord Frost (the Brexit Minister), and it was one of the most forthright contributions we’ve heard so far from members of Cabinet regarding the high taxes and high spending habits of this government.
The Centre for Policy Studies was addressed by Lord Frost, Brexit minister. He criticized the government for its high taxation policy and high spending.
His essential message was that, if we follow the ‘European social model’ of myriad employment regulations, hefty taxes and stratospheric welfare spending, we will — like most of the EU — enjoy only modest economic growth, and squander the opportunities of Brexit.
The British economy is recovering. Manufacturing orders have reached their highest level since records began 44 year ago. Business confidence has returned to pre-pandemic levels.
I’m sure Lord Frost wouldn’t dispute the strength of the recovery. This can be attributed to the successful booster jabs and the opening of the economy, which Labour strongly opposed since July.
They appear to have protected us — touch wood — from the spiralling infection rates experienced by several EU countries.
In particular, Germany, which is Europe’s largest economy, is expected to stagnate in the final quarter of this year. If the UK manages to escape another lockdown (which seems unlikely), then our economic outlook is bright.
However, Lord Frost’s remarks were focused on the longer term, when Covid will mostly be a bad memory, and post-Brexit Britain will be carving out a new role for itself.
His intervention was especially arresting because he isn’t a Treasury minister, and therefore is not expected to comment on economic policy.
He will be relieved that his somewhat provocative observations haven’t been rubbished by No10. ‘Frosty’, as he is affectionately known by the PM, with whom he is on friendly terms, has been allowed to get away with what other ministers might not be.
No 10 has even pointed out that in his discursive speech to the CBI, Mr Johnson stated that ‘government should make sure there is less regulation and indeed less taxation’.
In last month’s Budget, Mr Sunak declared in a similar vein that his ‘goal is to reduce taxes’. It is clear that the current direction of travel has gone in the other direction. The Government appears to have ditched any hope of this country becoming a dynamic ‘Singapore-on-Thames’ now we have freed ourselves from the shackles of the EU.
The tax burden for the next year will increase by painfully increasing National Insurance. In 2023, companies will pay more Corporation Tax.
What struck me most about Lord Frost’s speech was his call for a ‘free debate’. This suggests that he thinks economic policy is being pushed through Cabinet by the Prime Minster and Rishi Sunak (compliant Chancellor), without any alternatives being discussed.
Consider some alarming figures. According to the Tax Foundation, an American think-tank, Britain currently has the 22nd most competitive tax system among the Organisation for Economic Co-operation and Development’s 37 developed countries. That’s pretty dismal.
Although the CBI was focused on Boris Johnson’s remarks about Peppa Pig to them, Lord Frost delivered an important speech about taxes
Lord Frost’s call for a ‘free debate’ suggests he believes the Prime Minister and Chancellor Rishi Sunak are steamrollering economic policy through Cabinet
But the Centre for Policy Studies — the Thatcherite think-tank under whose auspices Lord Frost delivered his speech — reckons that, when all the planned tax rises have taken effect in 2023, the UK will tumble to 30th place.
We will be further behind Japan, Germany and the U.S., but only just ahead France and Italy. These two economic sclerotic laggards squeeze every last cent of tax from their poor citizens.
Isn’t Britain’s prospective performance pretty shaming? The lesson Margaret Thatcher taught the British nation in the 1980s — that lower taxation leads to faster economic growth — has been largely forgotten by the present Tory Government.
Take a look at the growth rates achieved during the glory days of Thatcherism. The growth rate in 1985 was over 4 percentage points, and it was higher than 3 percent in 1986. It exceeded 5 percent in 1988 and 1987.
By the UK’s historical standards, these were stonking increases. Compare the forecasts produced by the independent Office for Budget Responsibility (OBR), which accompanied Mr Sunak’s Budget. The OBR predicts a measly increase of 1.3 percent in 2024, and 1.6% in 2025 after a rebound from the pandemic.
The 1980s saw a much greater rate of growth due to factors beyond lower taxes. Thatcher’s taming of disruptive trade unions, which had virtually brought the country to a halt in the 1970s, was crucial.
But the lesson nonetheless remains — that, all things being equal, lower taxation is likely to engender more robust economic growth, some of which can be used to pay for improved public services.
The high taxes that are being charged to billionaires and entrepreneurs around the world can cause them to move to other countries.
Is it possible to reverse the trend towards taxation that is too restrictive? It won’t, as long as Government continues to be addicted to increasing spending. This will not satisfy Labour no matter how high the level.
Mr Sunak boasted during his Budget speech that the Government’s departmental expenditure will soar by £150billion over this Parliament. It is an astonishing 3.8 Percent increase in real terms per year. This, Mr Sunak claimed with misplaced pride, represents the fastest growth in Government spending over the 21st century.
These include the years that Gordon Brown as Chancellor was spending cash. Lord Frost’s outspoken intervention makes me hope that the argument is not irrevocably lost.
It comes after Leader of the Commons Jacob Rees-Mogg dared to say that Britain is taxed ‘as highly as the country can afford’.
Foreign Secretary Liz Truss also recently warned about tax rises and higher spending, which ‘ultimately leads to worse outcomes for everyone’.
She rightly said that the Tories must embrace free enterprise instead of ‘inexorably growing the size of the State’.
And yet it was reported earlier this week that Treasury officials, with either the approval or connivance of Rishi Sunak, have effectively killed off free ports, the low tax zones which the Chancellor had promised would provide an ‘unprecedented economic boost’.
They seem to be against Treasury orthodoxy. Somehow, Boris Johnson must be persuaded by his colleagues of what he once knew in his heart — that the best way of creating a dynamic economy is to reduce taxation and control public spending, which includes not pouring endless billions into the maw of an insatiable NHS.
We are thankful that the future is brighter. We have survived the worst of this pandemic with luck. We are only now trying to capitalise on Brexit’s potential blessings.