The UK faces an economic crisis. Rising inflation and interest rates are hitting the pockets of individuals and businesses alike to an extent not seen in decades. Productivity remains down and long-term illness is keeping a record number of people out of work.
Fourteen years into Tory dominance of Downing Street, the party historically associated with economic competence and sound governance is doing anything but that. Economic conservatism, which the Tories purport to embody, should focus on tax cuts, small government, privatisation and reducing Government debt.
In fact, the UK is experiencing stealth income tax hikes, a creeping involvement of the government in people’s everyday lives, the renationalisation of utilities and net debt rising to £2.6trillion, reaching more than 100 per cent of annual national income for the first time since the 1960s.
Amid clear economic and social turbulence, it is unsurprising that the Conservatives are trailing in the polls behind Sir Keir Starmer’s Labour Party. More than a decade of economic mismanagement, tax rises and false promises has taken its toll on the patience of the nation and looks set to usher in the first Labour Prime Minister since Gordon Brown.
What would this mean for the economy? While a succession of Conservative chancellors from Osborne to Kwarteng and Javid to Hammond have struggled to control the impact of macroeconomic shocks such as the 2008 financial crisis and the Covid pandemic, it would be a mistake to think that a government led by Starmer and Rachel Reeves would be any more competent.
The UK’s shift to the left when it comes to economic policy would accelerate under Labour. Despite rumblings of tax cuts and minimal intervention, the party’s characteristically uncosted and detail-free plans should not fill anyone with hope.
Starmer’s shadow cabinet have nailed their colours to the mast of a green economic revolution, promising a ‘sustainable’ programme that will generate widespread energy, jobs and growth to take the country from the brink of recession.
Fundamentally, however, the plan appears to be uncosted, and it doesn’t get to the heart of the nation’s economic problems. While the Labour Party have moved away from the radical proclamations of the Corbyn years and appear to be more pro-business and pro-free market, their policy platform is still underpinned by the concept of higher tax and higher spending.
What needs to be done? Any good business leader will tell you that within a company economic sustainability and financial viability is paramount. For all the wonderful initiatives your organisation can claim to be doing, unless it makes enough money to sustain itself and survive, there is no point in it existing.
It is vital that the next government, whether that be another five years of Conservative rule or a switch to Labour, must address the root cause of our issue as a nation: that we spend above what we can afford and don’t promote enterprise.
High income tax, VAT and corporation tax stifle the entrepreneurial mindset of the UK, and in turn reduce productivity within the workforce and also when compared with other nations. The answer is clearly not the economic mismanagement and stealth taxes imposed by the Tories since 2010, and neither is it the chaotic spending spree that a Labour government would impose. What we require is an entrepreneurial spirit in the heart of government, one which understands that to improve growth and productivity it must incentivise through low taxation and not go beyond its means.
The hopeless economic mismanagement of Covid which led to unprecedented measures – the printing of untold billions, enormous waste, paying people to stay at home, closing small businesses – are what has led to the high-inflation-low-productivity environment the UK is now in.
The painful truth is that the economically sound measures which need to be taken – including lower intervention and regulations, reducing tax and cutting government spending – are not palatable to the bulk of voters. Conservative or Labour, both parties are following the same disastrous path in a bid for election and therefore power, but not what is good for the country.
My fear is that things are going to get a whole lot worse before they get better.