Tuesday, May 28, 2024
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The high-speed track to economic ruin


THERE’S a meteorological metaphor between the return of rain and the shift in the government’s standing as evidenced by the Chesham and Amersham by-election result. Bozo might not yet have reached his winter of discontent, but he’s certainly had a harbinger of what will come if he continues on his current course.

Of course the local issue of HS2 was important, but HS2 is an exemplar of this government’s malaise. The economic case was always thin. I know no one to whom shaving 20 minutes off a train ride to Birmingham is worth the £1,500 per head that HS2 is currently forecast to cost. Now that we have Zoom, is a fast train necessary? And now that we’re committed to net-zero, does it make sense to have high-speed trains? Slower ones use less energy and don’t need new tracks. Yet our Fat Controller has made this a plank for his grammatically challenging (and economically much harder) slogan of levelling up.

And of course, the Covid disaster – perhaps the government’s greatest achievement has been to turn a disease that, like most diseases, kills the old and infirm into a debt that will be carried by my as yet unborn grandchildren, in the same way that part of my early tax payments went to clearing the UK’s debts from World War Two. 

In 2019 we were purportedly offered a choice between free market capitalism and state socialism. Bozo’s majority was an emphatic rejection of that. But now, on the flimsiest of grounds, he has created a regime that has centralised, massively. The Bank of England is printing money (cunningly disguised as ‘Quantitative Easing’) like a tinpot dictatorship. As night follows day, we now face inflation as serious professional economists have been saying for some time. (By professional economists I mean those who are paid for their work by the private sector, not a government-funded functionary with an index-linked pension determined not to bite the hand feeding him with our money.)

Younger readers won’t have experienced inflation, yet. One of the least understood part of economics, it kills wealth by destroying the value of money, which pushes prices up as people try to recover their previous wealth through pay rises in a debased currency. The rising prices are, by definition, inflation. It tends to get out of hand quickly. There is only one cure, which is to raise interest rates and cut government spending on scales not seen since the early 1980s. Both destroy employment, so only strong governments (or those in hock to the International Monetary Fund) can do it. UK inflation was 25 per cent in 1975 – that means £1 on January 1, 1975, had the purchasing power of 75p by December 31, 1975. To fix it interest rates had to rise: the Bank of England rate was well over 10 per cent for most of the period 1978 to 1987. That is 100 times what it is today. How many could afford a mortgage if their interest payment increased one hundredfold?

A prudent government would be acting to prevent this. Instead the one we’ve got is seeking to eliminate a minor virus and, at an as yet unprojected cost, change our entire society though eliminating CO2 emissions, which may prove to be harder than eliminating Covid.  This is the road to economic ruin, and none of us voted for that. 

Very few are confident that the government system is working. The Lib Dem win in Chesham was a protest vote, but the Lib Dems are part of the statist, government machine that is the problem. If ever there was a time for a new party to change politics it’s now. The Reform Party, or some other vehicle, need to get busy.

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Patrick Benham-Crosswell
Patrick Benham-Crosswell
Patrick Benham-Crosswell is a former Army officer who has spent the last 30 years in commerce. He is the author of Net Zero: The Challenges, Costs and Consequences of the UK's Zero Emission Ambition. He has a substack here.

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