Things cannot continue as they have been. The test of democracy in the UK is whether this reality is acknowledged and options for improvement are discussed. One might imagine that this is the purpose of a general election. But political commentators often seem to agree that this is naive: voters do not want to hear the truth and would not be able to understand it if they did. They must be kept in the dark and fed with fertilizer like mushrooms. That is what seasoned political gurus advise. The result? Disappointment. Any political system, especially a democracy, needs to deliver results.
Has it happened? Here’s a simple answer: According to the International Monetary Fund, the UK’s real GDP per capita fell by 0.2% between 2019 and 2023. Among major economies, only Germany (down 1%) and Canada (down 1.4%) were worse off. . In the long run, the country suffers from a pernicious combination of relatively high inequality and relatively weak economic growth, as the Resolution Foundation’s Ending Recession report, published last year, showed.
It would be naive to expect the government to realise how difficult things are, or the opposition to admit how difficult the road ahead is. Instead, what is happening is what the Institute for Fiscal Studies calls a “conspiracy of silence”. Both main parties are committed to the same tax rules. The target of reducing net public debt (excluding the Bank of England) in the fifth and final year of the forecast shared by both parties will probably only be achieved through a sharp tightening of public spending or tax increases. The latter is already on the government’s agenda, given its decision not to change the inflation threshold. Rishi Sunak has been highlighting the potential rise in employment tax a lot. But his government is secretly committed to a form of taxation.
A fair political process begins with the recognition that taxes must be raised if the country is to deliver the public services it promises. In practice, the choice is simple: raise taxes or cut spending. At the very least, there should be an open discussion about what spending can be cut and what taxes can be raised.
It is also essential to discuss clearly the extent to which reforms can mitigate the harshness of choices, increase the quality of services or the amount of revenue required. This discussion should also cover the core elements of the growth strategy.
That debate won’t happen now. But some good ideas might emerge, even after the campaign, based on the principle of “pas devant les enfants” (not in front of the children, in translation). Here are three that would make a lot of sense. And there are more, including getting closer to the European Union.
First, liberalize planning restrictions. Yes, this will cause negative reactions. But the country’s inability to build anything is not just embarrassing, it’s shameful. Building infrastructure is much more expensive, in time and money, than in comparable countries.
Second, reform property taxes and planning restrictions together. Suppose local authorities were encouraged to allocate land for development, and allowed to tax property on the basis of the much higher land values that would result. This would stimulate rapid development. The resulting revenue increases could be used to fund new local infrastructure and reduce local taxes. A land value tax could also replace council tax, which is not only highly regressive in its current structure, but is based on valuations that are more than three decades old.
Third, encourage a significant increase in pension savings, which are currently very low. This is particularly true for the self-employed. But even employees in existing defined contribution pension plans save very little. Thus, there is a mandatory minimum contribution level of 8%, of which at least 3% must come from the employer. This is too low to guarantee a decent pension. In a country where the national savings rate is very low, the case for increasing the mandatory level becomes even stronger. This could be done through automatic annual increases, say by one percentage point over a period of years.
My assumption is that it would be easier to implement radical ideas if they were in a manifesto. We will soon see whether there is an appetite for that. But suppose, as the polls suggest, Labour wins a large majority. And suppose the Conservatives immediately engage in a battle over how reactionary they are. That could present a wonderful, perhaps unique, opportunity for reform.
The election campaign may remain a depressing event, but the country cannot afford an equally depressing government later.
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