From 8-10th September, the TaxPayers' Alliance were proud to host the 7th annual European Resource Bank, a meeting of academics, free marketeers, think tanks, campaign groups and taxpayer groups from across Europe, the United States, and the rest of the world. We were honoured to have the Rt Hon Lord Forsyth deliver the closing speech, the text of which is reproduced below:
Ladies & Gentlemen, I'd like to just begin by asking you to give a round of applause to Matthew and to Andrew for our marvellous entertainment, the hospitality this evening, but most of all for this fantastic achievement in setting up the TaxPayers' Alliance and turning it into such a formidable organisation in the time of one parliament. It is not an easy thing to do. I've certainly supported them from the beginning, but I never dreamt that they would make so much progress so quickly.
The other person I want to mention who is not here now but was here earlier this evening is Lady Thatcher. Now she will be 85 years old next month, and it is 35 years ago that she became leader of the Conservative party. And many of you perhaps won't remember what the country or the Conservative party was like at that time. It was an absolute shambles.
We had a state in disgrace, running telephones, gas, electricity, and many people in the Conservative party believed that that was the natural way things should be. And the idea that the private sector could run these industries was considered something for a fringe section of the party in some areas. We had a country which was totally dominated by the trade union bosses who had the power to prevent people working through the imposition of the closed shop.
And I tell you this because it's why I got involved in politics at that time. Because for me - how old was I, 20 at that time - I remember reading The Times newspaper, which said no government would be able to govern again without the consent of the trade unions. And people believed that a free enterprise, right of centre government could not actually govern in Britain.
Inflation was heading for 25%, Britain was the sick man of Europe, and the miracle that was achieved by Margaret Thatcher and her colleagues in government even today is quite astonishing.
And how did she do it? She did it by an absolute determined dedication to a small number of principles.
And the first principle was that if you give people capital, if you give them power, if you give them freedom, there are no limits to what can be achieved. And by rolling back the state, she transformed our country.
And by one of these happy coincidences, we had Margaret Thatcher in power in Britain and Ronald Reagan in power in the United States, and together that duo not only saved their own countries, but saved millions of people from the tyranny of communism and rolled back the frontiers of free enterprise around the world, liberating people as we know today. It's the most extraordinary story.
Now, am I one of these kind of grumpy old men looking back to the past? Why am I talking about events that were so long ago. I'm talking about them because the shades of the 70s are stalking our politics today, on both sides of the Atlantic. The foolish thinking, the beliefs that did so much damage.
I thought that when I left politics in 1997 that the work was done. I thought the arrival of Tony Blair and New Labour was the victory for our beliefs. I look at Britain today, I look at what is happening in the United States, and I see that many of the battles that we thought we'd won have got to be fought again.
What are these shades stalking the land? The hostility to business, and the anti-capitalist rhetoric that we see every day in our newspapers and on our airwaves. The wreckless complacency towards defence and security policy. The politics of envy rather than enterprise. The culture of entitlement rather than responsibility. And the return, certainly in Britain, of the dead hand of the state, not through ownership and nationalisation, but even more insidiously through over-mighty regulators and regulations at home and in Europe.
And into the maelstrom has come the TaxPayers’ Alliance, a beacon of hope, fighting those who believe that redistribution is more important than recovery. And speaking up when a political class feel cowered by the client state created by their opponents.
Now I've known Gordon Brown, our late departed Prime Minister, for many years. We got into parliament on the same day. I respect him. He's an old fashioned, dyed-in-the-wool socialist. He didn't set out to ensure that people on £50,000 a year were getting tax credits by coincidence. He didn't set out to hand out vast amounts of money for people to have savings accounts for their children by accident.
He set out to create a dependency on state finance so that at elections he could go round and say “if you vote for people who want to cut taxes then you're gonna to lose all these benefits that we've given you.”
It is a deliberate policy that was embarked upon with a deliberate purpose, and I say that with some feeling because in Scotland, where 66% of the population depend directly or indirectly on the state for their incomes, he had a model. And that is why we have one Conservative seat in Scotland and there are 47 Labour MPs coming from Scotland to determine policy in England.
And if we have AV - and I think the fact that Matthew’s involved in this campaign is fantastic - with AV you have to get 50% of the vote in the constituency to win, then the client state will count for more than anything else. And therefore it is important that, as we are in this coalition government, that we roll back the state and we avoid an electoral system which will encourage a clinging to that client state.
And when the Chief Secretary to the Treasury, as he said the other day, tells us that we will have high taxes in our country for the foreseeable future, he's telling us that he's committed to a policy which will mean less revenue for public services, less money to pay down the debt, and fewer jobs and higher unemployment. I find that utterly inexplicable.
There have been endless studies of the experience of Britain in the 1980s when Margaret Thatcher cut taxes, in the United States when Ronald Reagan cut taxes, when George Bush cut taxes, and around the world in Australia, Ireland, and countless other countries. If you cut high marginal rates of tax you get more money, and the rich end up paying a bigger proportion of the receipts. That is the lesson we learned from Arthur Laffer, that is the lesson which seems it so difficult to get across to government.
I've been reading Tony Blair's book. Even Blair understands. And, to their credit, some of his former cabinet colleagues were opposed to Brown putting up the 50p income tax rate for the reasons which we well understand.
Now of course our national debt is astronomical. Despite all the talk of cuts - and by the way there are no cuts going on, all that’s happening is that the rate of increase of public expenditure is being reduced. By the end of this parliament the national debt in Britain will have doubled again. It doubled in the last parliament, and it will have doubled again to £1.4 trillion.
Now I can't do £1.4 trillion pounds. Matthew very kindly said I was a politician and a banker. I have to confess when the banking crisis started describing myself as a politician again. And then the expenses came around, and I had to become a banker again. But £1.4 trillion pounds, that is a huge sum of money.
How can we imagine it? Well, if you tried to count it, it would take you 46,000 years. If you took one of these - a pound coin - and another one, and you put them edge to edge and you took £1.4 trillion in pound coins, how far do you think the line would stretch?
It stretches to the moon and back 43 times. That is how much we will be in debt by the end of this next parliament.
Now where I have a slightly different take from the government is I don't believe that that can be paid back just by cutting the rate of growth of public expenditure. We need to get the economy growing more quickly. And that means selling goods and services competitively. That means investment, risk and enterprise. That means less regulation and lower taxes, and an end to the populist excoriation of our financial institutions.
This crisis, this financial crisis was not caused by greedy bankers - although there were some spectacular examples of that - it was caused by the global imbalance. The Chinese, the Middle East, and Asia built up huge capital savings whilst in the West we spent as if there was no tomorrow and lived beyond our means, living on the cheap money that came from that source. That global imbalance has not gone away. It’s still there. The crisis was caused by a failure of monetary policy and of a regulatory system that proved to be a Maginot line.
Governments and individuals living beyond their means and now we have to pay back the debt and unless we can get growth again we will face years of pain and falling living standards. the banks are castigated for reckless lending and rightly so, but now their attacked fro not lending enough. how can they if they don't know what the capital requirements imposed upon them are going to be. if their being threatened with taxes which will deplete their ability to lend and if the business models themselves are under attack and uncertainty is being created.
Now Arthur Laffer taught us that if tax is 100%, revenue is 0. If tax is 0% there's no revenue. And inbetween, there will be revenue. The art is to find the level at which the optimal amount of revenue is achieved. Why have we forgotten his message?
Taxes add to the cost of good to the customer and reduce the return to the producer. They depress demand and they reduce growth and in the United States, where there's been a number of studies, typical estimates of a dollar of tax revenue range from 20c to 60c over and above the revenue raised.
Is it any surprise that money taken by force by a bureaucracy and then spent according to political priorities will achieve less value than people choosing to spend their own hard earned cash?
Other people spending other people's money is no recipe for value added.
And I have to say that the saintly Vince Cable, our Business Secretary, should look to Gladstone, who said that money was best left to fructify in the pockets of the people. And after listening to the excellent speech by Arthur Laffer this evening, George Osborne should insist that the new Office of Budget Responsibility has a dynamic model for assessing the impact of tax changes in the economy, and the Treasury should do the same - a commitment which he made whilst in opposition.
Now this is not just some theory of academic interest. It’s central to the survival of London as one of the world’s leading financial centres. The Inland Revenue, HMRC themselves, did a survey of businesses recently and they found, astonishingly enough, that one in five large businesses are thinking of relocating for tax reasons. And two in three feel the burden of red tape has increased. This is unacceptable.
All ships rise on a rising tide. There are limits to the good which government can do, but almost no limits to the harm. You cannot make the poor rich by making the rich poor. These were the mantras of the much maligned 80s. They are as true today as they were then. Thank you TaxPayers’ Alliance for reminding people of these mantras. There is a huge well of support out there amongst hard working people and businesses. These are the people who will rescue our economy and rescue our country given the tools to finish the job.
Thank you very much.