Britain is in the middle of the deepest slump in our modern history. What can be done? The best idea we seem to have is one which Danny Alexander drew up on the back of an envelope. When advising Nick Clegg, the now Chief Secretary to the Treasury came up with the idea that no one paid below £10,000 a year should pay income tax. His short-lived predecessor, David Laws, reprised the idea this week, calling for the policy to be financed by cutting higher-rate tax relief on pensions. The Liberal Democrats are rightly exploiting one of the more worrying gaps in British politics: the vacuum where a Tory growth agenda ought to be.
George Osborne performs many roles in the government. He is the chief strategist and the arch-fixer. But he has yet to demonstrate a knack for effective economic policy. Britain’s national debt, now at the £1 trillion mark, will hit £1.4 trillion within three years, and the growth prospects are evaporating.
We at least know what the Lib Dems propose: a £7 billion tax cut, funded by a pensions raid. As they know, Mr Osborne can hardly feign outrage about stealing pensions. His Quantitative Easing experiment has so far reduced the value of British pension funds by a staggering £119 billion, according to industry estimates. This QE pensions raid may end up being as costly as Gordon Brown’s much-reviled assault on retirement schemes.
The Chancellor often points to his slow-motion corporation tax cut, from today’s 26 per cent to 23 per cent. But that has been accompanied by a raising of other business taxes. The Centre for Policy Studies recently laid out a proposal for an immediate cut in corporation tax to 20 per cent — but the idea has aroused little interest from the Treasury.
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