Author: johnredwood

Most governments want higher productivity, or say they do. most grasp that if you get people to produce more goods or services in a working week you collect more revenue and can share that with employees.

Seeing that is not the same as selling it to those who need to deliver. Understanding it does not mean you can do it. Selling it requires explaining to people that the country can only afford more real pay if it produces more for people to buy with it. If you pay more money but there is no increase in goods you get inflation.

You then need to reassure people that you not saying they have to work harder or longer hours to raise their output. You want to help them work smarter. They  may need training to add more value, or need more automation to speed their tasks.

Government Ministers can urge this but they need to show they can do it in those parts of the public sector they directly manage. The truth is the public sector has been particularly disappointing for productivity growth. Ministers now tell us they can slim the civil service. They should have a comprehensive ban on external recruitment to allow natural waste age to cut numbers. This gives employees more promotion opportunities. ministers could authorise external appointment where there was no suitably skilled person in the current civil service.

It was a strange idea that in the Red Wall seats Labour voters had lent their votes to the Conservatives in 2019. It was an even stranger idea that that meant those voters wanted a Conservative government to behave more like a Labour one.

A vote is a vote. People mean it at the time. They will change at a later election if the party or person they voted for lets them down. In 2019 Conservative voters voted for Conservative ideas and abilities. They wanted levelling up tory style, where government gives people more chances to earn a good living, keep more of their own  money, buy a home, get training and education to help them get on in the world. They look for a hand up  not a hand out. They did not vote Conservative to have a bigger bureaucracy, more government or higher taxes.

Today in the aftermath of a couple of bad by election results the soul searching by Conservative Ministers should be easy. They should ask why haven’t they yet delivered the lower taxes, the greater freedoms, the better opportunities to start a business, grow a company, own a home and all the other features of a successful growth and prosperity strategy. Why are taxes going up and why is the economy slowing down?

The way to recover is not to double down with Treasury austerity, new taxes and higher taxes. The way to recover is to live the dream, restore the brand – being a Conservative is all about backing people to succeed, getting out of the way of those who can do well and offering appropriate help to those who want to follow them.

The Treasury tell us that imposing a windfall tax and raising taxes to tackle a budget deficit is exactly what Mrs Thatcher did, so they should do the same again. What they do not go on tell you is Mrs Thatcher only followed that Treasury advice for the first two years. It is true she inherited inflation that was far too high and very weak state finances from a spendthrift Labour government.  When she took the Treasury measures  it helped put the UK into recession, took the Conservatives to 23% in the polls  and needed a change of policy to sort the economy out.

She and the Chancellor shifted policy to relax the squeeze and then embarked on a series of cuts to Income tax, taking it down from 30% to 25%. Various smaller taxes were abolished. The economy started to grow again, which was much needed both to bring the deficit down as revenues picked up, and to cut unemployment which had been far too high in the 1970s.

The latest figures show that Treasury austerity has badly slowed the economy this year compared to the world leading growth of last. Just as last year faster growth meant the borrowing kept on undershooting Treasury/OBR forecasts by a large margin, so now we see borrowing in excess of their forecasts. Let me try and explain again. The amount of borrowing, the gap between spending and tax revenue, is  very sensitive to the growth rate. If you grow faster you get more tax revenue in and have less money going out on benefits to the unemployed and low paid. If you sandbag growth there will be less tax revenue coming in and more people need financial support.

So Treasury, give us a growth strategy, not more austerity.

We have the inflation. It is important to avoid the recession. It looks as if we will see peak inflation this autumn as the official forecasts now concede. The delayed increases in domestic heating bills will adversely affect the inflation numbers then and hit people’s budgets again at the next increase.

Next year inflation should come down. It is difficult to believe the prices of the basics could go up again by the magnitudes of the increases this year. Money policy this year is a lot tighter, whereas it was too loose last year. The economy is being slowed by the Bank’s policy and their higher interest rates, and by the big hit to real incomes caused by soaring fuel and food prices. Many  people are responding by having to cut back on some discretionary spending to afford the basics. The reduction in demand from these measures will help cool prices.

It does not need a wide range of tax rises on top of the forces slowing the economy. VAT cuts on energy would  be helpful, both by cutting the prices of some of the dearest items in budgets, and by returning a bit of cash to people who otherwise have to pass the money to the fuel companies, suppliers and government energy taxes.