A New Economic Model: Part 5

A New Economic Model: Eight Benchmarks for Britain.

This is my analysis of George Osborne's economic policy should the Conservatives win the next election.

4 Make Britain open for business

It is clear the only way to pay off the national debt is to increase tax revenue, and the only sustainable way to do that is to boost business. However, the vital point is how do you do this? The Labour policy is to support and nurture the economy until it can grow. Remember that Gordon Brown was a debt cutting Chancellor, during his time in the Treasury he cut the national debt, and under Brown the UK finally paid off its debt to the United States (the Lend Lease scheme that financed the UK's war effort). The alternative, proposed by Osborne, is to cut the national debt by making swingeing cuts to public services and the stimulus to the economy, and hope that business will recover on its own. This plan will surely sink the country into a double-dip recession but at least it will give Cameron the smaller state that he's been calling for ever since he became Conservative leader.

The details:

"We will improve Britain's international rankings for tax competitiveness and business regulation."

"Because we believe in low taxes, we will ensure that by far the largest part of the burden of dealing with the deficit falls on lower spending rather than higher taxes."

Tax cuts and cuts in public spending. Tax cuts benefit most the rich. Public spending cuts affect the poor the most, but they also affect significantly the middle classes. Osborne's plans are to hammer the middle classes and to hammer them hard.

"we will cut the headline rate of corporation tax to 25p or lower and the small companies' rate to 20p, funded by reducing complex reliefs and allowances."

This is another tax cut, but this time it is costed. You have to ask: how many of the middle classes or working classes own companies? Such tax cuts are aimed to benefit the rich who own corporations. According to LeftFootForward this tax cut will cost "£3.2 billion in 2011-12 and £3.7 billion in 2012-13". LFF explain that the cuts will be paid by "abolishing the £50,000 annual investment allowance; reducing general plant and machinery capital allowances to 12.5 per cent; and reducing long life plant and machinery capital allowances to 6 per cent" and they say that this will have a catastrophic effect on investment in businesses, and investment is the key to boosting the economy.

"We will make the UK a more attractive location for multinationals by simplifying the complex Controlled Foreign Companies rules … we will consult… we will consult…"

In other words all consultation, no action

There are also pledges to cut red tape ("one in one out"), and to make it easier to set up a company (and presumably more difficult to track rogue directors). However, the figures given by Osborne on red tape appear to be made up. If this is so, then who can trust a Chancellor who does not understand figures?