Aha! We have the secret of the next budget!

This is excellent news:

One Treasury source said they expected the OBR to “kitchen sink it” – making a significant downward revision to productivity forecasts in one go rather than taking a more piecemeal approach.

Reeves will respond by pointing to the long-term weakness of productivity in the UK economy and promising to tackle it with a programme of investment.

There are two issues here. Productivity increases when people do new things, or old things in new ways. That’s definitional. For if people simply do more of the old things in the old ways yes, that’s economic growth but it’s not productivity growth - it’s production growth instead. So, to improve productivity growth we need to scrap all the rules which stop people doing new things or old things in new ways. Great, that’s near all of the regulatory state to go and absolutely all of planning law. What wonders, eh?

The second is that if we desire more investment we must increase the incentives to invest. As wealth, indeed “unearned incomes”, are the result of having invested successfully we therefore need to tax those more lightly. Say, abolish corporation tax for a couple of decades, set dividend taxation at zero, capital gains tax similarly and really stomp down on those idiocies about a wealth tax. That’ll all help.

We desire to increase productivity. Therefore our policy prescription is simple. Go all Sicilian Vespers on the bureaucracy and gralloch the taxation of the amassing of, or returns to, capital.

Which, therefore, are the things which will be done in this next budget, right? For we’ve the adults back in office. You know, adults, those capable of connecting the desired outcome to the necessary policies to achieve it?

So that’s our prediction then for late November. After all, we really do have the adults back in office - they keep telling us so.

Tim Worstall