No cuts, no growth, no surprise 7

Rory Meakin 2020 Tax Commission

John Redwood MP has an interesting blog today on the talk of downward revisions to growth over the weekend.

“I find it surprising that people are surprised that growth is slow. It all goes back to the misunderstanding about which sector, public or private, took the hit last year… the first Coalition year saw continued growth in overall public spending, along with substantial tax increases (imposed by both Labour and the Coalition governments) and a big surge in inflation.”

He needn't worry, spending's still growing

This has taken its toll on the economy. While fiscal contraction remains necessary to close the dangerously unsustainable deficit, it has largely come through tax rises rather than the public spending cuts the private sector needs if it is to grow. Those ‘cuts’ which have happened in the public sector have been outweighed by large increases in other areas so that the net effect has been that the only thing cut is the rate of increase in spending.

He also has something to say about what the Government should do about the mismatch between the two sectors:

“The continuing large fiscal stimulus did not work. We need a private sector stimulus, not more public spending. Constantly increasing public spending and borrowing can increase the squeeze on the private sector, as it is allied to present and future tax rises to pay for it all.”

The economy needs taxes to be cut and simplified. They’re too high and far too complicated. But it’s not just taxes which are choking off growth in the private sector. Regulation hurts, too. Measures such as abolishing restrictions on Sunday trading and loosening Britain’s notoriously restrictive planning regulations represent a ‘quick win’ the Government can achieve fast without necessary but politically difficult spending cuts. With some taxes such as the 50p rate which simply don’t raise much revenue at all (if any), there’s plenty the Government could be doing right now while it gets on with the cuts that have been talked about for so long.

Rory Meakin

Rory is a Research Associate at the TaxPayers’ Alliance. Rory’s work is focussed on tax policy and economics, with a particular focus on tax simplification.

Follow @rorymeakin

Steve Collins

Yes, we do need tax cuts – starting at the bottom, not the usual ‘top down’ approach to taxation.

Yes, we do need some loosening of regulation – especially for small and medium sized companies.

No, we do not need to abolish restrictions on Sunday trading – the balance between commercial activity and making Sunday just like any other ruddy day is currently about right – no further meddling please.

No, we do not need a loosening of ‘Britain’s notoriously restrictive (they’re not) planning regs’ either. If you let developers ride roughshod over local communities we’ll soon have the entire country concreted over in the name of ‘progress’. We will be haunted by some of the worst 1970′s-style planning abominations.

Typical TPA – the bottom line is all that matters, and peoples’ quality of life can go to hell……

The private sector and the banks need to pull their fingers out and stop whinging. There are high levels of public spending and taxation (even higher) in France and Germany too, yet they’re recovering from the recession far better and far quicker than we are.

The trouble is we are so dependent on ‘services’ rather than actually making and exporting things that it’s going to take us a helluva lot longer to drag ourselves out the the mire, if we ever do.

Thanks City of London. Thanks a bunch.

Anonymous

You really don’t understand, do you?

WE’re too expensive to ‘make things’ (high taxes, incredibly restrictive regulation, punitive planning laws, environmental taxes, landfill taxes, waste taxes not to mention the silly minimum wage), so we don’t. The result of this is high unemployment meaning high state dependency.

Loosening planning regulations is sensible as it means we can actually get on with building homes and businesses to duh, raise taxes. You can do what you like with your Sunday. Or Monday. or any day of the week. No one forces you to go shopping, after all. But then, no one ‘forces’ you to pay tax, do they. Oh, hang on. They do.

The public sector needs bombing from orbit it is so vast. The banking sector is fine. Labour deregulation caused this problem, so it is, as usual, the fault of government interference.

Because you don’t seem to understand, I’ll say it again: the state needs to shrink: radically. This allows taxes to be cut and for the waste in the public sector to be controlled. When the state costs more than the private sector can pay for there is only one option.

Hardeep

Same old record Steve old chum, please give it a rest from time to time

The top-down approach that you refer to is hardly in motion, in fact I always hear that ‘reforms’ will protect the bottom rungs of the ladder such people earning less than a certain amount. In fact in the current climate it’s high earners that are being wacked for higher and higher taxes.

The bottom line you mention, well who’s bottom line is it? The TPA’s I doubt they own nor have any shareholding in the country. The benefit of low taxes is for all, thus in turn your low earning mates, so everyone wins. What would be desirable to you that high earners are highly taxed because they work harder or are more successful?

I find your comments unecessary at the best of times but this time they are quite frankly off the mark. The country is in a mess and the TPA are merely adding a voice to the debate (before the EU clamps down on free speech via the tax system).

Excessive taxation is like a blocked pipe it prevents water from flowing freely and frequently ends up damaging the rest of the plumbing too. Why is it so wrong for me to work and keep more of my money?

Steve Collins

Firstly, Hardeep old fella, one thing I won’t be doing is giving it a rest…

Secondly, I believe that you’ve either misrepresented or misunderstood what I’ve written. I made it quite clear that we do need tax cuts to jump start our moribund economy. I just want to make sure that those cuts start at the bottom – not the top-down cuts that are so beloved by right-wing politicians and commentators.

However, just to make it clear – I’m not against a review of the 50p rate – if it’s not bringing any money in, then there’s no point in it. But, I really don’t believe that it’s a massive burden to ask people earning over £43k or so to pay 40% tax – I do and I don’t mind at all.

Thirdly, I was referring to the ‘bottom line’ regarding Rory Meakin’s plea to make Sunday exactly the same as any other day. Most people don’t want this – they would prefer to have a day of rest. Also, I am concerned at any proposal to loosen planning regs. So, my bottom line reference was commenting on the TPA’s propensity to ignore quality of life considerations.

You may well find my comments unnecessary, but it would help if you understood them prior to commenting.

Anonymous

You don’t understand basic economics of supply and demand. Taxes are too high which drives talented people out of the country. We need them to pay or the rest of us.Why should someone who has specific skills and high pay be forced to hand over 40% of their investment in their ability to the state to see it given to someone who hasn’t put the effort in and doesn’t have the motivation they do?

Or see it given to a state ‘worker’ to spend who provides nothing the tax payer wants or needs? It is offensive, standing completely at odds with common sense and the basic fundamentals of working for a living.

Your comments aren’t unnecessary, they’re just plain ignorant. You truly do not seem to understand the most basic of facts.