How to Save Britain From a Doom Loop of Decay, Decline – and Default

The Sunday Telegraph has published a summary of the argument in Jon Moynihan’s forthcoming book, Return to Growth, about how to restore growth to the British economy. In a nutshell, he argues that growth has been suffocated by a bloated public sector, punitively high taxes and too much red tape. Here’s how the piece begins:

Without economic growth, our country cannot succeed. No growth means, axiomatically, that no one in society can get a real-terms salary increase without someone else being paid less.

It means that aspiration is crushed and our society becomes dog eat dog. Capital that must be accumulated to start up new businesses won’t be accumulated. Businesses that don’t grow will wither and die because they don’t accumulate the resources to beat their competition (particularly from abroad).

And a no-growth economy isn’t static; it sooner or later shrinks, because the unceasing demands of voters at each general election, never strong on deferring gratification, mean that politicians who want to be elected promise (and as often as not deliver) more money, more stuff; and in the absence of growth to pay for this largesse, put taxes up, higher and higher.

Growth (and particularly growth per capita, the most important metric) has collapsed in the UK and the European Union, while countries in other parts of the world have motored ahead, with much higher growth rates than ours. Why? Because social democracy, their chosen political approach, is inimical to economic growth.

The key, growth-destroying features of the social democratic experiment are bigger government, higher taxes, and an ever-shrinking private sector to get those taxes from. It’s a pattern with only one eventual outcome: national bankruptcy. For most of this century, the UK has been increasingly drawn into that doom loop.

It’s hardly groundbreaking to point out the importance of economic growth; indeed, the political weather has changed so much that the three most recent prime ministers, facing the reality of a lamentable lack of growth in the past few decades, have each said that growth is their number one goal. Yet the policies each has proposed to achieve that growth are quite different from each other and it is a racing certainty that at least two of those growth policies have got it wrong; the policies they proposed would destroy, not create, growth.

So how is growth created? And will the current Government’s policies lead to economic growth? If not, what should it change? As I show in my upcoming book, Return to Growth, most of Labour’s policies are, with a few exceptions, growth-destroying.

This means that over the next five years, our economy is going to take a sharp turn for the worse. While Labour’s policies are bad, in many ways they are just a continuance of a social democratic experiment that’s been pursued by successive governments, including Conservative ones, over the past 30 years.

Unless we turn our back on that failed approach, we face ever-increasing hard times. The experiment has seen the state grow inexorably, ratcheting up the tax burden on everyone, particularly on the growth-producing parts of the economy. It has also created a regulatory thicket that has made it harder and harder for anyone to set up, or expand, a successful business.

The challenge for whoever wins the Tory leadership race – whether it is Kemi Badenoch, Robert Jenrick, Priti Patel, Mel Stride, James Cleverly or Tom Tugendhat – will be escaping this trap and charting a course back towards the free market model that made Britain a historic success.

Worth reading in full.

This piece is spot-on in my view and I would thoroughly recommend Return to Growth, which I’ve been sent an advance copy of. You can order a copy from Amazon here.