Polly Toynbee stumbles into a good idea - then fluffs it, of course
So, what are we going to do about the state eating everything?
Who in their right mind would want to be Rachel Reeves right now? Her spending review out next week will feel like austerity all over again. Even if, in reality, it’s not a cut but more spending, as the Institute for Fiscal Studies emphasises. After an uplift in everyday spending at the budget, here comes a much-needed capital slab of £113bn. Yet whatever the numbers say, painful cuts to most things will be the story and the feeling.
If you want to try your hand, the IFS has just put its “Be the Chancellor” gadget up on its site. Strap yourself into Reeves’s fiscal straitjacket and attempt a Houdini-like escape, as you decide on levels of borrowing, taxing, spending and debt. One thing it illuminates is how much even mere slivers of growth improve your position immensely.
Well, quite. As we’ve noted a number of times before there is no new money to do anything new with. Because we’ve already promised ourselves things with all the money that the current economy can finance - and more. All those future budgets for health care, pensions and on and on assume that there will be at least some modicum of economic growth between now and then. If the growth doesn’t arrive then we cannot have all the things already promised. Typical politics in fact - spend the …. out of everything and make some dodgy assumptions about the future and spend that too. Spending is, after all, more fun than taxing.
So, yes, we need growth. Not just because growth is good, growth is something humans like, but because we’ve already assumed that we’re going to have growth and have spent all the money as if we’re going to have growth. So indeed yes, we need growth. To provide that bounteous flood of more tax revenue to pay for what we’ve already promised ourselves (note that the marginal tax collection from extra GDP is higher than the average tax collection from all GDP. It’s that if there’s extra economic activity then everyone has already used up their tax free allowances).
As we’ve also noted a number of times before growth is people doing new things, or old things in new and more efficient manners. We’ve built an entire parallel state which denies people the ability to do new things - or old things in new ways. That denial therefore reduces the speed of economic growth - taking longer to do new things, old things newly, is by definition slower economic growth.
The task is therefore to kill that parallel state that denies so that growth can happen. So, the Town and Country Planning Act 1947 and successors - kablooie. Natural England, Afuera! Endless consultations - nope, just get on with it. The point is not to save money by not doing these things. The point is to clear the landscape so as to allow people to make money that can then be spent.
Essentially, we must eviscerate, gralloch, that section of the metropolitican haute bourgeoisie that prevents economic growth.
Which is the correct answer to the point Polly makes. Given that this is Polly she fluffs it of course:
Wealth tax is not as difficult as claimed: Liam Byrne’s book Inequality of Wealth shows the top 1% have multiplied their wealth by 31 times more than the other 99% since 2010. Arun Advani, director of the Centre for the Analysis of Taxation, says a tax on assets of 1% from those with more than £10m would yield £10bn, which would nicely eliminate the worst poverty: End Child Poverty this week reports one in three children in the UK are living in poverty. Making all forms of income pay the same tax, earned or capital gains, rents or self-employed, pays out £12bn, says the economist Prof Richard Murphy.
One of us, when giving evidence to a Commons committee, described Mr. Advani’s suggestions as tantamount to theft. Liam’s book fails to recognise that now real interest rates are positive again that wealth bubble is deflating. Describing RJ Murphy as an economist is a category error.
But, still, we suppose credit must be given to Polly for having bumped into the very beginnings of the truth even if rather in the manner of a shinbone finding the coffee table in a darkened room.
Tim Worstall