By Alex Deane. Follow Alex on Twitter.
For months – since very soon after the formation of the Coalition, in fact – many respected Conservative voices have been saying in private that not enough is being done to cut government spending and encourage growth. Yesterday, that view was given a forceful public voice in a speech by David Davis for the CPS.
Alas online it lacks the compelling slides with which DD accompanied his presentation at the ICAEW conference hall (which, by the way, was packed), but I urge you to read it – for both the intellectual rigour and honesty of its message, and for the remarkably direct soundbites. You may have seen some as I livetweeted it (ahem – @ajcdeane) but just to whet your appetite:
"We are bumping along the bottom. Low productivity, no growth, falling real wages… of course, the Chancellor can quite properly point to reasons beyond his control… but an alibi is not a policy.
It has suited both major parties to exaggerate the ferocity of the cuts.
Small businesses create jobs and wealth. But they are also more fragile… it is not an accident that most insolvencies are precipitated by the Revenue.
Let’s start with the easy part – there must be no new taxes. Yes, I’m talking to you, Mr Clegg.
Whenever you increase a tax rate you can be sure that you will collect less tax than you expect. Why? Because people will do less of the activity that you are taxing.
The carbon price floor will not even bring any environmental benefits. Every tonne of carbon priced out of the UK will be emitted more cheaply elsewhere in the world. Global emissions will not be reduced; just outsourced. This is both environmental madness and economic suicide.
[Having pointed out that government grand infrastructure plans are being announced] In hard times many a government has spent money it does not have on infrastructure projects it does not need. Japan has spent trillions since 1990 on projects… it did not work. [Not in the printed copy in such direct terms, but when speaking DD said this meant we should cancel HS2.]"
And there's more. Whilst there is an important point to be made about the fact that the Swiss were more exposed to dependency on banking than we were but have nevertheless recovered more swiftly that we have, the use of Switzerland as an example of economic success is also a pointed indicator in Eurosceptic circles: the fact that the Swiss depend more on Euro-exports than we do, but are still doing better than we are, says something important about our membership (its context, or per se) of the EU.
Davis also talks about the recent example of major labour market reforms in Germany (echoing, of course, the tremendous reforms John Howard carried out in Australia) which turned their economy around from 2003, seeing their surplus/deficit numbers leapfrog ours in international performance.
So we've got to deregulate our economy – regulation is the biggest growth killer in modern economies. Deregulating and taxing less can free the economy (and raise more in the mid- and long-term than taxing more). As Davis points out, 30 years ago we taught the world this – now, we need to relearn the lesson from those other countries who are showing us that it still works.
Sometimes, to turn around apparently irreversible decline, you have to exercise good judgement and then take ferocious risks. David Davis is urging us to do so. I for one would rather we followed that advice than carried along bumping along the bottom.
One also notes that in today's reshuffle, the vast majority of MPs who might agree with this message are about to be disappointed. Might they be inclined to hold their tongues in the future?