Our new Prime Minister, Liz Truss, seems to have reduced the complex science/art of macroeconomic management to two dimensions: tax cuts and deregulation, which she believes will stimulate economic "growth." The first is based on a false premise and is potentially counter-productive. The second is likely to reduce the quality of life of the over-whelming majority of us, whatever difference it might make to the monetary measurement of growth
Truss's reasoning appears to be that high taxation is holding back the "animal spirits" of our entrepreneurs. Cut taxes and, lo and behold, adventurous entrepreneurs will invest like billy-ho, creating jobs and increasing output of all sorts of products (whether we actually need them or not.)
But we are not a high tax country, as anyone who bothers to "research" via Google can find out. See:
The percentage of GDP taken in tax in the major developed countries with which we like to compare ourselves is:
It is true that, for the moment, the US economy has grown by 2.6% above pre-pandemic levels, compared to Italy (1.1%), France (0.9%), and Germany not al all. (Guardian 1st October). Were there a correlation between taxation level and growth we should expect to see the UK placed somewhere between Italy and the US.
In fact, not only is the UK not in this position, we are the only G7 economy to be still below (by -0.2%) our pre-pandemic level.
So whatever it is that's holding back UK growth it is not too high a level of taxation. That is not to say that there isn't ample scope for re-organising the UK taxation system, in particular towards taxing "bads" such as the use of fossil fuels rather than "goods" such as employment.
Given the present dire inadequacy of our Health and Care services, the impoverishment of our Education System, and the perceived need to increase expenditure on defence, it is plainly obvious that the level of taxation needs to rise rather than fall. The increases should be on those areas which impact least on current activity (eg wealth, inheritances and land)
M/s Truss's policy, giving shedloads to the already wealthy and a pittance, if that, to the low-paid, creates resentment rather than the level of wiling co-operation from one and all which would be a feature of a much fairer economy where the wealthy paid their share rather than evaded it.
Regarding M/s Truss's second dimension, it beggars belief that, in the wake of the recent scandal of the discharging of raw sewage into our rivers and on to our beaches and the Grenfell Tower disaster, which took over 70 lives in horrifying circumstances, both the result of entrepreneurs cutting corners to increase their profits, this suggestion could be put forward by any government claiming to have the people's welfare at heart.
These are just two examples. I'm sure there are plenty more: not least house builders evading their responsibility to build a reasonable percentage of "affordable" homes becasue they make more money out of so-called "executive" mansions.
Regulations are required to protect us from exploitation by con-men (and women), chancers and the amoral.
It is just possible that deregulation might raise the monetary level of GDP by increasing the incomes of the wealthiest at the top through reducing restrictions on their ability to exploit scarce resources (eg green belt land) and vulnerable people (the very low paid). Their increased wealth could raise the average, hence giving the appearance of success whilst actually lowering the living standards of the majority.
The so-called "bonfire" of EU regulations is also counter-productive. If we agreed to observe them we would have unrestricted access to the vast EU market. If we don't then there are harmful obstacles to the free-flow of trade. Surely we now realise that the promise of "cake-ism" was a blatant lie. We don't have all the advantages of membership with none of the costs.
Miss Truss has embarked on a doctrinaire gamble unsupported by any of the evidence.
Yes the UK economy, and our constitution, need to be reformed, but by serious politicians after serious consultation and discussion, with the support of the majority of the people. Let's hope that her government is short-lived and is replaced by one prepared to work constructively for a better future for us all.