Forsyth Michael NewLord Forsyth of Drumlean is a former Secretary of State for Scotland.

Of course a lot can happen in two years, but the Eastleigh
by-election suggests we might be heading for a Labour or Lib/Lab administration
at the next general election as the centre-right vote is split by UKIP.   Both would ruin the country with their prescriptions
for higher income taxes, wealth taxes and more borrowing. The stakes could not
be higher and this month’s budget is George Osborne’s last chance to change
course and tell the British people the truth about the scale of the problems
facing our country.

The Chancellor should stop talking about austerity and start
explaining how we restore prosperity. He should focus the Nation’s attention on
our escalating debt rather than the deficit which is just the amount by which
that debt is increasing. Boasting about cutting the deficit by a quarter is just
misleading as the public think the debt and the deficit are the same

A poll carried out by Comres for
the Centre for Policy Studies last summer asked people whether the coalition
were planning to reduce the national debt by around £600 billion, increase it
by £600 billion, or neither reduce or increase it during the course of this
Parliament. Only 10% got the answer right. A similar poll for ITN carried out
at the time of the Autumn statement found only 6% knew the answer. Our National
debt is forecast to rise by £605 billion from 52.5% of GDP in 2009/10 to 76.3%
in 2014/15. Those intending to vote Conservative were found to be the most
misinformed about this with two thirds believing the Coalition Government were
planning to reduce the national debt. Interestingly UKIP voters were the best

This is a major problem. How can we expect the public to
accept that public spending is too high, that tough decisions are needed to
protect the future of our public services, or that the size of the State is
hampering growth if they believe we are paying down debt and the differences
between the parties is just about pace? 
And what will the voters think at the general election when they
discover that debt and the costs of servicing it have soared?

Last year at the re-launch of the coalition in a tractor
factory the Deputy Prime Minister, Nick Clegg said:

“I actually think we’ve got a moral duty to the next generation, and to
our children and grandchildren, to wipe the slate clean for them. We’ve set out
a plan, it lasts about six or seven years, to wipe the slate clean for them. To
rid people of that sort of dead weight of debt.”

Is it possible that even Mr Clegg does not understand the
position?  He will need a pretty big
duster to wipe the slate clean. The national debt will have grown to around
£1.5trillion or 85% of GDP on the Governments own projections in 6 or 7 years
time. On my calculation £1.5 trillion in
one pound coins laid edge to edge would stretch to the moon and back 43 times,
or around the world more than 800 times.

The key to reducing the debt is to get the economy growing
again although there are alarming signs that some people seen encouraging
inflation as being an easy way out. The Chancellors decision to freeze the
allowances on inheritance tax, the failure to adjust income tax thresholds for
higher rate tax payers and the ending of inflation allowances on capital gains
taxes are all stealth taxes which reward governments which debase the currency
and punish people who work hard and save.

Quantitative easing is forcing businesses to put enormous
sums into their pension funds – money which would otherwise be available for
investment and job creation. This is because employer liabilities are calculated
using government bond yields which are artificially depressed by QE. Similarly
annuity rates are distorted giving pensioners a much lower income than could
reasonably be expected after a lifetime of saving. Banks are being heavily
criticised for not lending enough but how can they lend more if they are being
required by regulators to hold more capital and liquidity in the form of cash
or government bonds being created by QE. The Chancellor should announce an
immediate halt to quantitative easing and an absolute commitment to sound

At present the only part of the economy growing is the size
of the state, with the latest OECD figures showing nearly half of our GDP being
spent by Government. Of course Ed Balls and Gordon Brown are to blame for much
of this. In 2000 when Brown was Chancellor it was 37%. Those calling for a
Keynesian boost to achieve growth should reflect on the massive increase in
Government spending that has already occurred and which has resulted in our
current predicament. The tax and debt burden needed to fund this is too high
and like a cuckoo in the nest is now threatening our future.

Our energy policy is undermining growth and adding to the
pressures on families. Windmills onshore or offshore and Scottish roofs
glistening with solar panels in the rain are not going to make a difference to
climate change or even to Britain’s carbon footprint.  As Professor Dieter helm points out in The
Carbon Crunch:

“Even with the larger wind turbines hundreds are needed to match a
single gas, coal or nuclear power station. Indeed they may actually exacerbate
global emissions as they drive up energy prices and thereby encourage further
deindustrialisation at home, relying on imports of carbon intensive goods from

The Chancellor should put the windmill subsidies on ice, end
the dithering which is holding up the investment in new nuclear power plants
and ask John Hayes, the Energy Minister, to bring forward proposals which will
enhance our country’s competitiveness.

In opposition, George Osborne committed himself to lower,
flatter, fairer, simpler taxes. He should return to that agenda which will
deliver enhanced revenue and a growing economy. Sadly, according to the
Taxpayers Alliance, the Government has imposed 299 tax increases and only 119
reductions. The increases in capital gains tax and taxation of North Sea oil
resulted in less revenue. His reversal of the raid on North Sea oil and tax
cuts stimulated a huge increase in investment, jobs and future tax receipts.
Instead of complaining about multinationals not paying tax here, he should cut
corporation tax to attract companies to the UK and to encourage domestic investment
and growth.

With calls for government to control the prices of energy
and alcohol, wage freezes in the public sector, predictions of stagflation,
ministers singling out individuals as the unacceptable faces of capitalism,
gloomy forecasts of years of austerity ahead, warnings the lights will go out
from power shortages, and even the Daleks appearing at Westminster, we could be
forgiven for thinking we had slipped back to the 1970s and forgotten some
important lessons.

Margaret Thatcher saved our country then with an optimistic
but firm agenda for change. She had the courage and the convictions to see it
through. She needed no focus groups or opinion pollsters to guide her.  She cut taxes, promoted enterprise and
competition and axed unnecessary bureaucracy and wasteful expenditure.  Of course she was helped by the revenues from
North Sea oil just as natural gas fracking offers to transform our economic
prospects today. She had faith in the British people’s ability to flourish if
Government set them free. Let our children grow tall she said – and they did.