Political Crossfire Forums

[Lord Hargreaves]

A great comment piece in The Business today on how the 'Europeanisation' of the British economy is almost complete, and how the Tories are just plain ignoring it.

Quote: IT’S official: Great Britain is no longer a low-tax economy. For the first time in recent history, Germans will pay less tax than the British this year, signalling the end of an era and Britain’s 15-year dalliance with economic liberalism. It is a hugely significant milestone in Britain’s renewed economic decline but one which predictably has gone completely unnoticed by Westminster and the economically-illiterate media that covers it.

One of the longstanding concerns of this newspaper is that the once healthy gap between euro zone tax-and-spending rates and those of Britain is being slowly and stealthily eroded, thanks to Chancellor Gordon Brown and a belated recognition from euro zone economies that they had to slim their bloated states to survive in the global economy. Now our worst fears have come to pass.

There is always a lag between policy changes and results so it will be a few years yet before the true cost of Mr Brown’s reckless and retrograde policies are fully felt by a still largely unsuspecting British public; but continental-style growth and unemployment rates will be the most painful change and the current economic slowdown provides a taste of things to come.

For those who still think Britain a relative tax haven and Germany a paragon of socialism, the figures are shocking, painting an economic map which most will not recognise and the government has successfully hidden. As we report on page 1 today, the share of tax and non-tax government receipts in Germany has eased significantly from 46.7% of gross domestic product (GDP) in 1999 to an expected 42.1% in 2006, according to internationally comparable and reliable figures from the independent Organisation for Economic Co-operation and Development (OECD). In the UK, the share of tax and non-tax government receipts in GDP has risen from 40.7% to a forecast 42.4%. From a gap of six percentage points in the British taxpayer’s favour just six years ago, the advantage has now swung dramatically to Germany, albeit by just 0.3 points of GDP. Mr Brown’s highly-suspect Treasury figures paint a rather different picture; but unlike those produced by the OECD they are not internationally comparable.

A similar trend is true of public spending, as the OECD figures also reveal. German general government outlays have fallen from 49.3% of GDP in 1996 to 46.8% in 2005; and between 2000 and 2005 the UK share jumped from 37.5% to 45%. For 2006, the OECD expects the German share to fall to 45.7%, within striking distance of the UK’s 45.4% share. In 2007, the OECD even sees German government expenditure (45% of GDP) moving below that of the UK (45.7%), an equally significant milestone. Thus is the Europeanisation of the British economy is almost complete.

The British people may reject the euro, the European constitution and the harmonisation of income tax but the eurosceptics have lost the real battle. When it comes to tax and spending, Germany and Britain are now the new Tweedledum and Tweedledee of the global economy. The German labour and product markets remain more rigid than Britain’s, but even here Britain’s lead has been significantly reduced, partly because the British government has wrapped business in so much of its own red tape since 1997 and partly because most laws with an impact on business now come from Brussels and are the same across the European Union (EU). It was always, of course, a fallacy to argue that Britain’s status as a freer and more successful economy than Germany was somehow part of the natural order of things, an inevitable consequence of Britain’s “Anglo-Saxon” heritage. The reality is that at the height of Germany’s wirtschaftswunder (economic miracle) in the 1950s and 1960s, Germany was a far more liberal economy than Britain. The foundations for Germany’s success were laid down by Ludwig Erhard (who later became Chancellor) in 1948 when he pushed through one of the most radical and fastest liberalisation programmes ever to be introduced in a non-communist economy. Even though there are no Erhards in Germany today – unfortunately for Germany’s legions of unemployed workers – Britain has no God-given right to a lower-tax economy than Germany.

Britain and Germany’s convergence towards social-democratic centrism goes a long way to explaining the collapse in British competitiveness, productivity growth and private-sector job creation of recent years. It also helps to explain why the German economy, while still in a terrible state, is gradually improving. Last year’s 1.7% British growth rate was about 0.8 points below the consensus forecast of a year ago, the biggest shortfall since 1992; Britain did worse, relative to expectations, than all other major countries or regions, an analysis from Citigroup shows. The number of people claiming unemployment benefit has now risen for 10 months in a row, the worst run since 1992. Despite slowing pay gains, inflation overshot expectations and was higher than GDP growth for the first time since 1992. Business investment as a percentage of GDP in 2005 was the lowest for 40 years.

The British economy has grown by 24% since 1997, against 17.5% for the euro zone; but in two of the past three quarters, the euro zone has grown faster than Britain; so has Germany. Compared to the other English-speaking countries, British growth has been even more dismal. The New Zealand economy is up by around 30%, Canada has grown by 31%, Australia by 32% and Ireland by 70%. It is not an accident that, since 1997, each one of these countries has cut its tax burden.

One of the most striking results of the huge increase in tax-and-spend has been the public sector recruitment binge of the past few years, which was further highlighted by new figures last week from the Office for National Statistics (ONS). Those regions with the largest percentage growth in public employment experienced the lowest percentage growth in private employment – and vice versa – demonstrating that state jobs are crowding out private jobs.

Between 2000 and 2005, public sector employment rose by 556,000, an increase of 10.5%, according to the official statistics from the ONS, which drastically under-estimate the actual importance of the public sector by excluding consultants, GPs and employees of Network Rail. Over the same period, private sector employment rose by 625,000, an increase of only 2.8%. In reality, a significant minority of these new, supposedly private sector jobs, also depend on government spending for their survival.

Most worrying of all ,London – Britain’s economic powerhouse – saw private sector jobs increasing only slightly every quarter, up by just 20,000 since the first quarter of 2002, a very weak performance, against a rise of 31,000 in the public sector. Given that London is home to most of Britain’s high value-added financial services, this bodes ill for Britain’s future prosperity. Private-sector jobs are even in decline in some regions. In the West Midlands, they declined by 5,500 in the most recent quarter; in the East of England, they have fallen for three quarters in a row. Even in the South West, they fell by 2,000 in the most recent quarter.

In fact, private sector job creation would have been even weaker (especially in London) had net inward migration to the UK not surged. It hit a record high in 2004 of 223,000 people (0.37% of the UK population). The net inflow in 2005 was almost certainly even higher, led mostly by large numbers of workers from Eastern Europe taking jobs that the British will not do. In their absence, many vacancies would have remained unfilled and the job figures would have looked even grimmer.

Yet there are no calls for radical change from any of the main opposition parties. The Liberal Democrats’ leadership battle, now pitting four candidates against one another, has yet to offer anything that could be described as economic liberalism. The behaviour of the Conservatives is even more distressing. Following a breathless series of U-turns by David Cameron, the new Tory leader, the positions of the Labour government and the Conservative opposition on the economy, health and education are now almost indistinguishable. Both parties accept a steeply rising tax burden in this Parliament.?The Conservatives have spoken of a “slightly lower” tax burden; but this ambition will almost certainly be impossible given their new-found commitment to a wholly tax-financed National Health Service and greater equality of incomes. Both parties oppose the two key elements of education reform, which are crucial if standards are ever to be raised: allowing parents to use the funds provided for their children’s education in any state or independent school; and giving schools freedom of management, including over admissions.

Mr Cameron’s attempt at portraying himself as a centre-left candidate means that he has lost all interest in waging a cultural war in favour of market liberalism and globalisation and against the Europeanisation of the British economy; it is not even clear that he understands the issues involved. In November 2005, at a time when he was wooing right-wingers, Mr Cameron spoke warmly in favour of profit-making and even called for a “campaign for capitalism” to fight “the intellectual and cultural battle for open markets”. Less than two months later, safely ensconced in Tory Central Office, his praise promptly turned to criticism: “Words like communism, socialism, capitalism and republicanism all conjure up one image in my mind: extremism. For politicians to stick rigidly to an ideology is to court disaster.” Mr Cameron also hinted to the BBC that he would be ready to introduce new regulations on business.

Mr Cameron wants to change the Tory image and eliminate some of the negative characteristics (such as greed or cruelty) with which the brand is now associated. But the best way to do that would have been to use his charisma and charm to rephrase the debate in terms of offering people more power over their lives and play on their distrust of remote politicians. Instead, Mr Cameron has dismissed the case for reform and adopted wholesale all of the Left’s assumptions about public spending and taxes, making it very difficult to oppose the British economy’s gradual transformation into a euro zone social democracy.

The intellectual bankruptcy of the Tories is breathtaking: at a time when British tax rates are poised to overtake Germany’s and the economy is at a symbolic turning point, the Conservatives are utterly devoid of a rational intellectual framework to analyse the world and come up with an alternative. Instead, according to the new Gordon Brown-David Cameron-LibDem consensus on the economy, there is nothing wrong with a British economy where taxes are higher than in Germany, a proposition which would be laughable if it were not so serious at a time of intense globalisation, technological change and footloose capital. Not for the first time, the British political establishment is proving scandalously incapable of responding to the most important challenges of the era.

I gave David Cameron a couple of months to see what he was made of, but now i'm coming out and saying that i'm throwing in the towel with him and the Me-Too-Tony-Tory Party. If I vote Conservative at the next election it will probably be in the same style as most people for voted John Kerry in 2004: out of sheer contempt for the incumbent. Otherwise I'll vote for the local loon in the funny hat or stay indoors.

Its not difficult to see that at this rate the next UK General Election will be the most bland, dull and unimportant in living memory.

[tiger_j000]

So you suggesting that it will be a lower turnout than the 61% or so that it was on 2005.
What do you think should happen in order for this percentage to rise.
Compusory voting perhaps.

[johnz]

:-D ^^^ askoxford.com wrote: disillusion

• noun disappointment from discovering that something is not as good as one believed it to be.

• verb cause to experience disillusion.

[thefranzkafkafront]

Tories, Labour, Lib Dems. Diffrent parties with essentialy the same politics.

[Robin Hood]

Quote: So you suggesting that it will be a lower turnout than the 61% or so that it was on 2005.
What do you think should happen in order for this percentage to rise.
Compusory voting perhaps.

Compulsory voting?!?!?!?! Absolutely not. No-one is going to force me to vote for the morons running for the next election. I can not put my name down for anyone, unless - the orange book liberals get leadership and a lot of lib dem policies change - in which I'll vote for them...so you can see that a party representing economic liberalisation would increase voter turnout.

[bury]

Quote: I gave David Cameron a couple of months to see what he was made of, but now i'm coming out and saying that i'm throwing in the towel with him and the Me-Too-Tony-Tory Party. If I vote Conservative at the next election it will probably be in the same style as most people for voted John Kerry in 2004: out of sheer contempt for the incumbent. Otherwise I'll vote for the local loon in the funny hat or stay indoors.

what ever happened to

Quote: Heres to a Conservative government at the next election, so help us.

can the honeymoon be over already?

[Lord Hargreaves]

bury wrote: Quote: I gave David Cameron a couple of months to see what he was made of, but now i'm coming out and saying that i'm throwing in the towel with him and the Me-Too-Tony-Tory Party. If I vote Conservative at the next election it will probably be in the same style as most people for voted John Kerry in 2004: out of sheer contempt for the incumbent. Otherwise I'll vote for the local loon in the funny hat or stay indoors.

what ever happened to

Quote: Heres to a Conservative government at the next election, so help us.

can the honeymoon be over already?

whoa yeah, did I write that? :shifty: :!oops:

But it still stands pretty much, I'd still toast a Conservative government, anything is better than Labour :tu:

[johnz]

Lord Hargreaves wrote: bury wrote: Quote: I gave David Cameron a couple of months to see what he was made of, but now i'm coming out and saying that i'm throwing in the towel with him and the Me-Too-Tony-Tory Party. If I vote Conservative at the next election it will probably be in the same style as most people for voted John Kerry in 2004: out of sheer contempt for the incumbent. Otherwise I'll vote for the local loon in the funny hat or stay indoors.

what ever happened to

Quote: Heres to a Conservative government at the next election, so help us.

can the honeymoon be over already?

whoa yeah, did I write that? :shifty: :!oops:

But it still stands pretty much, I'd still toast a Conservative government, anything is better than Labour :tu:

for sure

[Sparse1]

thefranzkafkafront wrote: Tories, Labour, Lib Dems. Diffrent parties with essentialy the same politics.

Yes because there's only one way that the increasingly outrageous demands of the British electorate can be met, and that's through gigantic government and high taxes.