CPS Board member Lord Forsyth of Drumlean writes for The Telegraph on UK debt and the hibernating private sector.
To view the full article on The Telegraph website, click here.
“The chief executive of a successful British food manufacturer told me last weekend that he wants to expand his factory. His problem is that his local authority insists that he first carries out a dormouse survey. As dormice hibernate, this can’t be done until the spring. So now he not only has to put up with the cost and inconvenience of carrying out the survey, he also has to put his investment on hold. Sales and profits must await the dormouse survey. And so too must the new jobs that would have been created.
This illustrates the challenges which must be overcome if the Chancellor is to meet his ambition to “do everything, work with anyone, overcome every obstacle in our path to jobs and prosperity”. For it is only through creating the conditions for sustainable, long-term growth that the Coalition can hope to triumph over the immense difficulties facing us.
We must sympathise with the Prime Minister when he says that bringing debt under control is proving “harder than anyone envisaged”. Of course he is right. No one should pretend that cutting government expenditure is easy. Nor do politicians of any party relish taking the tough decisions on public sector incomes and jobs.
But there is no alternative. For, as David Cameron acknowledges, the problem is that the Coalition is not actually cutting debt. It is increasing it. Forecasts made in this year’s Budget – which now look wildly optimistic – suggested that UK public sector net debt would increase from £900 billion to £1.3 trillion by the end of this parliament. Reducing the deficit is just about cutting the rate at which our debts are growing. This year, the Government will borrow an additional £122 billion – or £5,000 for every household. Debt is increasing. So too is public expenditure. The OECD says that public spending will be more than 50 per cent of GDP this year, the third year in a row that the government will spend more than half of national income.
We know that the public sector cannot deliver sustainable growth. We know that the state is inherently less efficient and less innovative than the private sector. We know that productivity in the public services is low, and falling. We know that ludicrous red tape is the cuckoo in the nation’s nest that threatens our fledgling businesses.
We can’t go on like this, with storm clouds over the eurozone and even Germany failing to sell all its bonds this week. That is why it is essential that in his Autumn Statement next Tuesday, the Chancellor puts forward a coherent and consistent supply-side reform programme for long-term growth. Andrew Tyrie, the chairman of the Treasury Select Committee, has outlined what needs to be done in After the Age of Abundance, an incisive paper for the Centre for Policy Studies. This package of supply-side measures would mean tax cuts for business, vigorous labour market reforms to encourage firms to take people on – reducing unemployment ought to be the Coalition’s top social priority – and an energy policy that enhances the competitiveness of the UK. Add to this the abolition of the 50p tax rate: new research reported in yesterday’s Daily Telegraph shows what many of us have long suspected: it is damaging growth and must go.”
Date Added: Friday 25th November 2011