Penny Mordaunt will deliver the new economic vision Britain needs
The new prime minister must unveil an unabashedly pro-growth, pro-business economic vision. Based on a credible fiscal strategy that keeps public finances in good shape and reduces the budget deficit over time, as well as a supply-side program that revitalizes small businesses and helps people live well.
It’s a strategy that requires pushing back against Treasury orthodoxy and making sure the Bank of England keeps inflation at bay. Our economic institutions must evolve, do their job and serve the population.
Unfortunately, Boris Johnson’s government failed to have a coherent economic strategy. Under his chancellor, taxes went up – not down. What was promised has not been delivered. An obsession with the budget deficit has developed. This must change. The decision to raise the National Insurance tax last fall was economically unwise and avoidable.
While a new prime minister can take decisive action, that person must also make sure people are realistic about what can be done immediately.
Mr Johnson has broken the Brexit deadlock. Now it’s up to the new leader to take up the challenges and seize the opportunities that come our way. It is a process, not a one-time event.
UK economic growth and productivity slumped after the 2008 crisis. This fueled the Treasury’s view that low growth requires higher taxes, as much of the budget deficit is structural.
Mr. Johnson and Mr. Sunak failed to push away that misplaced thought. It’s like being in a hole and digging deeper. With a margin of error even a year ahead of official budget forecasts, projections of what might happen in the coming decades should not limit the ability to act now.
We face an immediate twin challenge: rising inflation and an economic slowdown that could turn into a recession. Tighter monetary policy is needed to curb inflation.
With confidence collapsing and domestic demand weakening, well-targeted tax cuts are warranted.
I suggested Mr Johnson provide “timely, targeted and temporary” aid to those who need it most. He enacted this essential measure. Low-income people are suffering. Additional assistance of this type will be needed this fall.
But further tax cuts are still needed and can be achieved without triggering inflation, provided they too are timely and targeted.
Further reduce fuel taxes. Cancel the planned increase in corporate tax, while accompanying it above all with attractive investment bonuses.
The rushed medium should no longer be ignored either. The basic income tax rate can be reduced without triggering inflation, but the timing should be aligned with other developments.
The supply side agenda needs to focus on all the I’s – investment, innovation, infrastructure and getting the right incentives, with low taxes and smart regulation. This will help reduce inequalities and should inspire younger people.
The UK has more universities in the world’s top 100 than the rest of Europe combined. We have to take advantage of this. Likewise, our vocational training must be boosted, because it must go hand in hand with the green agenda which can be at the heart of regional policies.
It begs the question of who will be best placed to deliver on this economic vision, not give in to groupthink, focus on growth not debt service charges and genuinely defend the UK in the global scale? For me, it’s Penny Mordaunt.