The interim report of John Redwood’s Economic Competitiveness Policy Group has just been published. It includes an interesting comparison of the recent economic histories of Scotland and Ireland and concludes that Ireland’s low corporate tax rates are a key component of the Celtic Tiger’s success.
The report notes how Brown’s British economy has been sliding down the global competitiveness league and that Britain could be performing so much better. The report includes a powerful restatement of the importance of economic growth:
"Just consider this: every extra one percent of growth would yield an additional £5,000 million a year of extra tax revenue to spend on public services, and an extra £7,000 million for individuals and families to spend. That is the equivalent of £400 extra for the average family to spend, and £320 extra per family on public services. If the UK had grown as quickly as Ireland in the period 1998-2004 families would have £4,800 extra to spend each year, and their public services would have £3,200 extra to spend on them."
In the Conservative Party’s legitimate desire to protect the environment and promote a healthy family life balance we cannot afford to allow the economy to slow. I’ve never been a fan of Edward Heath but this statement of his – in response to the extreme thinking of some 1970s environmentalists – was spot on:
"The alternative to expansion is not, as some occasionally seem to suppose, an England of quiet market towns linked only by steam trains puffing slowly and peacefully through green meadows. The alternative is slums, dangerous roads, old factories, cramped schools, stunted lives.”
At the end of this interim report there is a promise to focus on ten main barriers to higher UK growth:
- "The shortage of transport capacity of all kinds. We are examining a range of options to raise the rate of investment in transport networks, particularly through private capital.
- The high price of energy. We will offer regulatory changes which encourage the provision of more local energy schemes, and offer sufficient supply of gas for our needs.
- The high and growing burden of regulation. We will offer proposals for cutting the volume and impact of regulation on business, and better processes to ensure proper control is kept over the cost of all regulation.
- Taxation. We will examine options put forward by the Tax Reform Commission to restore the UK’s tax competitiveness as a location for people to create jobs, as opportunity presents to implement such a programme. We will show how raising the growth rate will itself swell public revenues.
- Higher education. We will comment on the strength of UK universities compared with European continental ones, but will draw attention to the growing lead by the principal US institutions. We will provide options to make it easier and more attractive for UK universities to raise endowment money and to grow their asset base.
- Skills. We will recommend ways of increasing the numbers taught physics, maths and chemistry to a reasonable standard, and ways to make the vocational strand of education more worthwhile. The UK lacks scientists and mathematicians at all levels of educational achievement, and has a shortage of good craftsmen and technicians.
- Pensions and savings. We will propose means to make it more attractive for people to save for their retirement, and for the other big events of life.
- Wider ownership. We will review the tax and regulatory framework, to enable more people to own their own home, to own shares in the business they work for, and to participate in the success of their employer’s business.
- Intellectual property and knowledge transfer. We will offer means to strengthen the UK’s ability of transfer ideas from the laboratory and classroom to the factory and office.
- Public sector efficiency. We will present a menu of ways that productivity and quality can be improved in the main public services."