Five years on from the start of the recession, with GDP still 2.5 per cent lower than it was then, it speaks volumes about the feebleness of the economy that today’s announcement of meagre growth last quarter was greeted with relief. But it’s not just the overall level of growth which is worrying, the dominance of Government growth is also a major concern.
GDP was up a paltry 0.3 per cent compared to the previous quarter, and up 0.6 per cent on the same quarter last year. Compared to 2008, it was down 0.5 per cent. But Government was up 0.5 per cent on last quarter, up 1.2 per cent on the same quarter last year and up 6.9 per cent on 2008. Our bloated and still growing Government might give the economy some short term relief from adjusting to new circumstances. But five years on, we’re not in the short term anymore.
Instead of a shot of ‘spending hair-of-the-dog’ at every budget, what we needed was a fiscal detox: tougher spending cuts to pay for the targeted tax cuts which would have strengthened the economy by boosting incentives and long term tax reform. The Government chose to allow spending to rise, hiked taxes and put substantial reform on the back burner.
It also failed to take the necessary steps in other areas, too. Instead of getting a third runway, Heathrow gets a report due in 2015. Instead of ending Sunday trading laws, we got a temporary reprieve during the Olympics so we wouldn’t seem so primitive while the world was watching our capital city. Instead of undertaking serious reform to roll back the planning restrictions that are stopping Britain from building the homes we need to end the housing crisis, we are getting a slight relaxation of the rules on single-story home extensions and on converting offices into homes.
But it’s not too late. The TaxPayers’ Alliance constantly identifies wasteful spending, not least in our How to save £50 billion (and still win an election) and our Research Fellow Mike Denham's book Burning Our Money. We also published The Single Income Tax, which sets out reforms to specific taxes to make the whole system simpler, fairer and more pro-growth.
If The Government wants the the economic numbers to be less awful this time in 2014 and 2015, they need to act now and cut regulation, cut spending and cut taxes.