Growth forecasts and lack of ambition point to a bleak economic future

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Thursday, March 24, 2022 9:42 a.m.

For all the pageantry of yesterday’s spring statement, the truth is that only one thing really matters: the drastic and deeply concerning downgrade to UK growth forecasts. There are only a limited number of political sleight of hand any chancellor can pull off to hide the fact that unless the UK finds the secret sauce to sustained economic growth, we may soon heading us into a period of economic stagnation that would make Japan’s lost decade feel like a bump in the road.

The UK faces a myriad of challenges to its current operating model. It is impossible to maintain the level of public spending currently envisaged by governments of all stripes with the expected level of economic growth. It is not possible to imagine the necessary economic growth emerging in an environment that demands a tax burden at its highest level in seven decades. Backbench MPs cheering behind Rishi Sunak yesterday may not have noticed that the tax drag will all but eliminate the benefits of a dime cut in income tax or the rise in National Insurance will eliminate most of the increased thresholds.

Where are the free market conservatives going? Where are the supporters of a smaller state with lower business taxes going? For reasons better known only to bureaucrats, it takes a long consultation with businesses to decide, by the fall, on a tax program to encourage business investment. The sheer audacity of a government asking for thanks for such a program that raised corporate taxes by several percentage points, turning profits that could have been reinvested in more productive businesses into band-aids on a state unreformed.

If that sounds like a call for a 21st century version of a Reagan rebellion, that’s because it is. UK demographics cannot support the state that all political parties seem to have tacitly agreed upon. The Conservatives promised transformation when they won in 2019. So far, they are wasting not just a majority, but a crisis. It’s time for reform.

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