In the latest issue of the magazine, a flock of politicians, commentators and economists
offers George Osborne some advice for growing the economy. There are ten contributions in total, but here are three for CoffeeHousers’ consideration:
Arthur Laffer
Chairman, Laffer Associates
Cut the 50p tax
Reducing the burden which government places on the economy, through tax cuts, is the surest way to promote growth. I have never heard of a country that taxed itself into prosperity. Yet Britain last year raised the top rate of income tax from 40 per cent to 50 per cent. For more economic growth, and more tax revenue, this rate should be lowered immediately.
This paradox — lower rates, but higher yield — has been demonstrated time and time again, the world over. Between 1980 and 2007, the US cut tax rates on every form of income, the highest, the lowest and all those in the middle. The result was that the rich paid more, even if their tax levels were reduced. Let’s take the top 1 per cent of earners. Over this 27-year period, their contribution to the income tax collected in America doubled from 19.5 per cent to 40 per cent. The same dynamics applied in Britain: when the top rate of income tax was lowered to 40 per cent in 1988, the share of income tax collected from the richest 1 per cent rose from 14 per cent then to 27 per cent last year. Raising tax rates on the rich is about as bad an idea for the UK as I could imagine.
The government doesn’t need to do something. It needs to undo much of what it already has done. If you want poor people to do better, create jobs, not welfare — and to do this make
taxes lower, not higher. ‘The best form of welfare,’ in the words of John F. Kennedy, ‘is still a good high-paying job.’
Norman Tebbit
Former Conservative party chairman
Reduce fuel duty
George Osborne is severely limited in what he can do without risking a loss of confidence in the determination of the government to address the problems of the deficit and debt which he inherited in 2010. He should, however, look at the impact of fuel duty. While it is possible to argue that many motorists fail to bother to shop for cheap fuel and pay 6p or 7p a litre more than they need, there is a heavy impact on drivers on low incomes as well as on the CPI, with its knock-on effect on expenditure. He should call next door and tell the Prime Minister that the Cabinet must override the absurd posturings of Vince Cable. It is essential to reduce the risks for employers in taking on new employees by making it easier to reduce staff again if growth fails to increase. He should tell the Prime Minister that he is unwilling to allow financial strategy to be imperilled by Lib Dem demands to veto government policy.
After that, any other tax relief should be concentrated on income tax on the lowest earners. That would help reduce the costs of Duncan Smith’s reforms as well as neutralise Labour’s squawks about his other measures.
Dominic Raab
MP for Esher and Walton; Newcomer of the Year, Spectator Parliamentarian Awards 2011
Make sacking easier
The venture capitalist Adrian Beecroft recently advised No. 10 to replace unfair dismissal with ‘no-fault dismissal’, to allow firms to replace underperforming staff with greater ease. It was vigorously opposed by the unions and some Liberal Democrats. But can’t there be a compromise? One solution might be to introduce the option of ‘no-fault’ dismissal, but retain the right to claim unfair dismissal. The law should be changed to help employers defend unfair dismissal claims, by widening the concept of ‘fair dismissal’ to include inadequate performance. (At the moment, it’s just inherent inability or neglectful incompetence.) That would safeguard claims with merit, but shield firms from the costs of defending weak ones.
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