City A.M. article: The key to turbocharging growth is dynamism, not more spending

This article was first published in City A.M.

As Thomas Jefferson may or may not have said, the price of liberty is eternal fiscal vigilance. And that liberty, that freedom to be, is vital.

Here in this country, we have seen under this government a flourishing of economic freedom.

By enabling people to keep more of their own money, by making it easier for firms to take on staff, and by making Britain the easiest place in the world to set up a company, we have enabled a culture of thriving enterprise.

Last year we saw twice the investment in tech than the previous year, and Britain’s enviable startup culture is admired across the world.

By giving more space to enterprise and people to make their own decisions and shape their own futures, we are generating tax revenues and getting the country back to black.

Next year we will reach the vital turning point of debt falling as a proportion of GDP. And the share of national income the state consumes will have reduced from a whopping 45 per cent under Labour to 38 per cent – and falling.

There are those who argued that the way to generate a turnaround in Britain’s economic fortunes was to spend even more public money, further plunging us into debt and higher taxes.

Now that the turnaround has come, these people are saying again that we should turn on the spending taps and splurge our hard-won gains.

They were wrong then, and they are wrong now.

It is not true that the government is underspending. We continue to spend more money on defence than any nation in Europe. We support a welfare state worth nearly £100bn so that those most in need can access the support they require.

We spend more than the European average on health and social care, and more on schools per student than Germany and Japan.

The next spending review will take place in 2019, setting a path for public spending for 2020 and beyond. You can tell, because there is already a queue of people starting to line up outside the Treasury.

Now is the time we must remain vigilant, and, as the chancellor laid out in the Spring Statement, ensure that we generate growth before we commit to more spending.

We cannot put the spending horse ahead of the growth cart. Doing so would inevitably lead to higher taxes or higher debt.

High taxes are a drag on economic growth. They mean less money in people’s pockets, less cash to invest for business, and a squeezing out of private enterprise by big government. It means taking economic power from people. And it is not the wealthiest in society who suffer most, but the hardest working families.

Similarly, increasing debt, which is already at a 50-year high, would be a continued millstone around our nation’s neck. Not only does high debt sap enterprise – it also means that we would be in trouble if there was an unexpected shock.

The way to turbocharge growth is not to spend money we don’t have. It is to increase the competitiveness and dynamism of our economy.

By breaking down the barriers to new entrants, making it easier to build houses and factories, and being open to new technologies we can outperform our growth forecasts. We will use this dynamism and these ideas to get better value for money from our public services. The results will be taxes kept as low as possible, and great public services long into the future.

So let’s break the British habit of reaching for the sweetie jar just as the diet is working, and instead stick to the avocado toast so we are fit for the future.

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