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Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.

The particular issue which the Prime Minister champions, and with which I wholly agree, is that we are the Party of upward social mobility and equality of opportunity. While too often schools and universities are brain washing their students into socialist impracticalities, happily never have so many young people set up, or gone to work for, new businesses. Of 500,000 students leaving our universities each year, 350,000 now go to work for SMEs. This is a real achievement.

For two years, Brexit has crowded out much discussion of other political issues. In the meantime, a Conservative Government has become increasingly socialist. I thought we had won the battle in favour of market economics under Margaret Thatcher, but now it appears it needs fighting for all over again. The establishment is no doubt well-intentioned, but is likely to inflict substantial damage on the British economy from ill-conceived interventions.

It is the job of Government to make the rules, and here they should be mostly via the law – not quasi-law, regulation. The state is there to step in if some area of the economy is not working well – often caused by monopoly or oligopoly. The Government is there, in-particular, to prevent monopoly and oligopoly. It was oligopoly which was largely responsible for the poor conduct of our established banks.

We seem to be returning in some areas to the half-baked Heath days of Government thinking it should control as much as possible, even prices and incomes. The very notion that civil servants will be more effective at determining appropriate prices or incomes than the market forces of supply and demand is itself absurd, as was demonstrated over 40 years ago.

As Conservatives have hitherto supported and stood for, a successful economy needs lower, not higher, taxation – as Trump is now delivering successfully in the USA. Yet the UK tax take is at its highest ever and the Government is looking at ways to raise more taxation to finance the never-ending demands of the NHS.

First of all, with regards to particular taxes, government should favour taxes that are cheaper and simpler to collect; the level of individual taxes should be determined by Laffer Curve principles i.e. the level of taxation which optimises tax revenues. Too often, as with Osborne’s huge increase in Stamp Duty applying to more expensive London property, too high taxation actually reduces tax revenue as it kills off transactions.

The Government needs to face up to the fact that the NHS cannot be wholly funded from general taxation. There are several areas where it makes sense to render charges. Some, such as visits to the GP, could be a modest charge, e.g. no more than £20, and so can be universal. Others, which could be significantly larger, should be levied on a means-tested basis – for example the cost of board and lodging in hospital. The arrangements for NHS dentists’ charges work reasonably well and sensibly, and without citizen complaint. There is a lesson to be learned here for the rest of the NHS.

Clearly there are some areas of public service,which it is appropriate for the state to provide and to pay for from taxation. Defence and policing are the most obvious. But the most important issue for tax policy should be to help achieve a successful, growing economy. Failed economic policy about the world is invariably the result of communism or socialism – Venezuela today, Cuba recently, the Iron Curtain countries, and Russia being prime examples. The GNP of Russia in 1914 had not been re-achieved by 1980.

My experience and observations of commercial and citizen behaviour are also that behaviour is driven by tax issues far more than governments or the Civil Service realise or accept. If tax rates are unreasonably high – again, for example, Stamp Duty on property applicable on London property values – the market goes dead. If there is no taxation and no charge, e.g. the NHS, demand is limitless.

In thinking about factors which have pushed Government policy in a socialist direction, one of these has undoubtedly been Conservative measures taking large numbers of people wholly out of the tax net. Thatcher deliberately left in place small income tax liabilities for most citizens, so that people knew what it was like to pay tax. No wonder ‘Tax the Rich’ has again become fashionable when a majority of citizens now don’t pay any income tax.

Unfortunately, this Government’s economic policies are increasingly reminiscent of the Heath years. There are occasions when governments have to be pragmatic but, as Thatcher demonstrated, sticking to your principles for most of the time pays off politically and keeps you on you the right track. It is also no accident that those of us who look to a Conservative government to support a market economy are also Brexit supporters. Continental European politics is different in nature to the UK, and is substantially socialist; hence the poor economic growth performance.

123 comments for: Howard Flight: This Conservative Government has slipped towards socialism – the rot must be stopped

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