We asked a few friends of ConservativeHome to offer 100 word thoughts on how George Osborne might prepare to lift Britain’s economy. Our contributors didn’t all keep to the word limit but their responses cover a wide range of economic policy angles.
Nicholas Boys-Smith, Consultant Director of Reform: "George Osborne is the most successful Conservative Shadow Chancellor since Geoffrey Howe. He has turned the debate on an iconic right of centre policy (inheritance tax), stymied plans for a 2007 election, prised open important new debates on tax complexity and green taxation and even managed to win the favours of the Prime Minister’s erstwhile mistress, Miss Prudence. Now it gets really hard. He has five key challenges;
- Radically simplifying the tax system so that Britain is once again internationally attractive – merging National Insurance and aligning the accounting and tax systems would be a start;
- Devising green taxes which can be implemented without increasing tax or complicating the system all over again – no easy task in the current climate;
- Making sure that the Treasury can support the wealth of ideas now emerging to channel private funds and voluntary energy into mending our starkly broken society and benefits system (this means taking on debt and risk – again not easy);
- Judging how many ideas to reveal in advance of the election (he needs substance) and how many to keep in reserve (he needs surprises and not all ideas will necessarily be election-winners); and
- Perhaps hardest of all, devising the 200 day plan which will effect most of his programme – politics being the art of the possible and electoral honeymoons being short…"
Michael Fallon MP: "We will probably inherit public finances in their worst state since 1975. The public are ready for honesty: they know that, like any household, government has to cut its costs and its borrowing. We can protect frontline public services but will have to be much tougher elsewhere: too many shadow ministers seem to assume that the current department budget is theirs to spend. We also need to make in-work benefits more effective: tax credits are fine in principle but poorly administered and go too far up the income scale."
Mark Field MP, CentreRight contributor: "The Party needs to make a strong case for reduction of personal taxation paid by the lowest earners. I believe that far more attention now needs to be directed on the lowest paid in our communities. At the moment you barely have to earn £105 per week in order to start paying income tax. Rather than institutionalising the complexities of tax credits, I should like the Conservative Party promote a system whereby no one earning less than £200 per week pays any income tax at all. Similarly by raising slightly the thresholds of those paying tax at the higher rate, the better-off in our society would not benefit from this long overdue extension of the zero rating."
Oliver Marc Hartwich, Chief Economist of Policy Exchange: ""How could an incoming Conservative government increase economic growth? On the one hand, of course, increasing economic growth should not be too difficult. If the experts are correct, there will hardly be any economic growth, maybe even a recession at the time of the next election. On the other hand, and more seriously, these tough economic conditions require an adequate policy response. It is easy to say that Britain’s structural deficit will leave little room for manoeuvre. True as this may be, the party should still find the courage to do the things that will make economic growth more likely in the long run: shrink the proportion of GDP that the state is consuming, keep taxes low, lower barriers to market entry by reducing regulatory burdens. Conservative economic policy has always been best when it was economically liberal."
Andrew Lilico, Managing Director of Europe Economics and CentreRight contributor: "For an incoming Conservative government to increase long-term growth, I would recommend (a) the introduction of a robust price-level (average inflation) target; (b) enhanced use of market mechanisms in public services. A price-level target would increase certainty over the long-term inflation rate, leading to more investment and less loss in inflation-proofing contracts, and hence to more growth. Productivity growth in public services is very low, and so this very large portion of the economy contributes little to overall economic growth. The use of more market mechanisms (especially on the demand side) would lead to higher productivity growth and more innovation, adding materially to the overall growth of the economy."
In the next part of this series, which will be published in a few days, we’ll turn to foreign policy.