The Conservative government has strayed so far from the principles on which it was elected that it is scarcely recognisable as the party most people voted for.
Its colour on the political spectrum has undergone a blue-to-red shift with welfare-for-all at the top of its economic agenda regardless of affordability or its wider consequences. The Treasury’s panacea for every economic ill is to throw money at it – not real money representing real wealth, of course, but counterfeit printed to order by a central bank whose governor is losing not only the plot, but also members of his Monetary Policy Committee who understand where his addiction to ceaseless money-printing leads.
Instead, our leaders are besotted with populist catch-phrases such as “levelling up”, while completely failing to understanding why parts of the country differ in terms of productivity and resources – economic differences that explain what caused regional inequality in the first place. This ignorance is fundamental and costly, and it means you can expect billions to be spent on transport infrastructure and other misbegotten outlays that would fail any cost-benefit analysis.
All this posturing skirts the real objective of promoting growth by liberating the supply-side of the economy. But that can be accomplished only by sweeping away the proliferation of stultifying regulations and gesture-taxes that distort the market and compromise the exercise of free choice.
“Taxation without representation is tyranny”. Remember?
The total UK tax burden, measured as an average over the past 5 years, now stands at a 70-year high. Yet imposts are insidiously woven into the fabric of everyday life as never before – whether as higher tariffs, late-filing penalties or business rates. You name it: be sure there’s a tax lurking in there. Because it’s rife, we scarcely register that it’s happening. Yet the PM and Chancellor continue to splash the cash like high-rolling spendthrifts who just won the lottery. No wonder tax-raising has become desperate. Examples?
Enlarging the areas of congestion-charging in inner cities; configuring parking meters to extract penal charges; installing Stasi-style cameras at every junction to punish transgressions invented on the hoof; amending thresholds so that taxes bite on lower income; air passenger taxes; insurance premium tax; road and vehicle taxes; customs and excise charges on imports; taxes on “unhealthy” food, sugary drinks, alcohol, tobacco – all inflicted by nanny-state bureaucrats on the assumption that we can’t possibly make up our own minds on matters of everyday personal choice. And they are only “warming up”. Just wait for the new range of carbon taxes to save a planet that’s becoming less user-friendly by the day.
The irony is that so little state-squander is actually paid for by taxes: after all, this bunch of misfits can manufacture money out of thin air by just printing it!
By contrast, a conservative administration would know that letting people spend their own money, rather than doing it for them, is more likely to cure the problem of wasted resources. Such an administration would know that a flourishing private sector is where people, businesses and investors collaborate and compete to generate the wealth in which lies the seedcorn of next year’s innovation and growth. The notion of a “wealth tax”, as espoused by fantasists at Oxfam, inverts reality. It’s a “tale told by an idiot, full of sound and fury, signifying nothing”, to quote Macbeth. Treating the electorate as credulous dimwits is no way to get them on your side.
To pay for birth-to-death dependency, the state relies on the existing array of misnamed regulars like “value-added” tax (actually a sales tax that has absolutely nothing to do with the economic concept of value-added); “PAYE income tax” (a pernicious tax on employers who commit the sin of employing people); “NHI” (another tax on employing people, and bearing no relation whatsoever to either health or insurance); “capital gains tax” (a tax on government-induced inflation that renders the “gains” illusory); and “inheritance tax” (a punishment for the sin of looking after your family’s future with savings already taxed as earnings, now represented by overvalued assets – again due to government-induced monetary inflation).
To label this government “conservative” is a linguistic travesty. Conservatism in politics connotes policies favouring free markets, low taxes, sound money and free trade, while confining regulation to functional essentials rather than politically motivated intervention. Instead we have conservatism’s polar opposite – for which Covid provides standard justification.
The economic fundamentals remain
Yet the ravages of the pandemic have not changed economic fundamentals. We should not find ourselves saddled indefinitely with debt created to provide “temporary” assistance. It’s dead money that does nothing for recovery or growth. Ultimately the cost of public spending falls on taxpayers – and, due to the stupefying sums involved, on generations unborn.
The initial effect of the money-shower is to employ the Keynesian trick of stimulating aggregate demand. It may encourage spending, but undermines incentives to work. Yet, few citizens realise this flush-phase cannot last. What must follow is an inexorable rise in prices that punishes families, while businesses are unable to produce reliable production schedules in the face of so much uncertainty, especially when wages and interest charges rise. Bullied citizens are not fooled by government pressure to return to work when only one in five civil servants are back in the office, despite the government’s claim to be “leading by example”.
It was ever thus! Families finding it difficult to meet the cost of their weekly ‘shop’ are not especially interested in having their gas boiler replaced by a heat pump to meet net-zero energy targets – whether now or in 2035. Or in having to find £35,000 to replace their trusted old Renault diesel with a new electric version. Or in supporting a government whose spending priorities favour shiny white elephants like HS2 rather than anything that might improve the lives and productivity of more people.
The denouement of all this folderol will lie at the intersection of far-off aspirational politics with the downright expediency of the “now”.
But the sheer hypocrisy is galling and will not be overlooked in voting booths up and down the land.
The Goodnight Vienna Audio file