Forget small ideas for big challenges: This is the economic manifesto Britain needed
Distance sometimes gives you a better perspective. What became clear to me abroad last week was that, in an age of big economic challenges, the ideas in the parties’ manifestos are very small. In fact, we’re seeing a depressing resurgence of misguided giveaways, interventions and price controls.
We’d hope a politician would be handsomely rewarded for clearly articulating how he or she would reduce the deficit, or for explaining why these quick fixes won’t work. But politicos know their industry. There appears to be no honesty premium in politics, so we get the governments we deserve.
But it’s worth considering what an ideal non-populist economic manifesto might entail. For starters, it would transparently set out the cuts necessary to deliver a balanced budget and get debt-to-GDP on a downward path. Rather than salami slicing, it would end state involvement in certain areas entirely – like most childcare interventions and non-emergency foreign aid spending. It would also rationalise departments, closing some and merging others.
It would recognise that the long-term driver of our debt is demographics, and hence spending on pensions and healthcare. It would therefore abolish the state pension triple-lock and return to simply linking it with prices, while accelerating increases in the state pension age and scrapping the current raft of non-means-tested pensioner benefits. A Royal Commission into NHS funding and productivity is probably the only politically sane way forward for healthcare.
A decent economic manifesto would acknowledge that productivity growth – not redistribution – delivers better living conditions. Fostering the conditions for innovation is crucial: encapsulating everything from infrastructure investment to education and skills. Politicians must humbly recognise that most innovation has nothing to do with them.
Rather than HS2, investment in transport would be re-oriented to high return schemes. Large roads would be privatised, and road pricing developed to improve incentives against pollution and congestion. We’d acknowledge that there’s a shortage of homes primarily because of tight planning constraints in desirable areas like London, Oxford and Cambridge. Relaxing the green belt and devolving more tax and spending powers to the local level would encourage development and allow experimentation according to an area’s needs. The “post code lottery” would instead be a discovery process for best practice.
Pro-growth tax reform would broaden bases and lower rates, while reducing taxes on work and returns to investment and raising them on land values and consumption. Universal Credit would be morphed into a negative income tax through integration of the tax and benefit system – such that, subject to allowances, someone is either a taxpayer or a credit recipient, not both. This would reduce the disincentives to work.
Labour market flexibility would be celebrated, not lamented. It’s the reason unemployment here (5.6 per cent) is lower than Spain (23 per cent). Pay in the public sector would be decentralised to the level of the individual school or hospital rather than determined nationally. Given the public wants restrictions on immigration, this would be done through charging for visas rather than governments picking winners through points systems or capping numbers.
Energy policy would be overhauled, abolishing green levies and mandates and replacing them with a simple carbon tax. There’d be a range of trial cities for exciting new technologies such as driverless cars, and we’d allow the private sector to build new airport runways, subject to an appropriate compensation framework.
I don’t pretend that this is a complete manifesto, nor that it would be “popular”. But its results may well be, and it should provide a useful guide for the big economic issues the politicians should be addressing, but aren’t.
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