The new prime minister must make known an economic vision that is favorable to growth and without apologies in favor of companies. Based on a credible fiscal strategy that keeps public finances in shape and reduces the budget deficit over time, as well as a supply agenda that revitalizes small businesses and helps people live well.
This is a strategy that requires stepping back against the orthodoxy of the Treasury, as well as ensuring that the Bank of England keeps inflation at bay. Our economic institutions need to evolve, do their job and serve the people.
Unfortunately, the Boris Johnson government did not have a coherent economic strategy. Under his chancellor, taxes went up, not down. What was promised was not fulfilled. An obsession with the budget deficit developed. That needs to change. The decision to raise the national insurance tax last fall was economically unwise and avoidable.
While a new prime minister can take decisive action, that person must also make sure that people are realistic about what can be done immediately.
Johnson broke the stagnation of Brexit. Now, it is up to the new leader to solve the challenges and offer the opportunities that lie ahead. It is a process, not a one-time event.
UK economic growth and productivity fell after the 2008 crisis. This fueled the Treasury’s view that low growth requires higher taxes, because much of the budget deficit is structural.
Mr. Johnson and Mr. Sunak couldn’t push back that wrong thought. It’s like being in a hole and digging deeper. With the margin of error of even a year in the face of huge official budget forecasts, projections of what may happen decades in the future should not limit the ability to act now.
We face two immediate challenges: rising inflation and an economic slowdown that could turn into a recession. Stricter monetary policy is needed to curb inflation.
With the collapse of confidence and the weakness of domestic demand, rationally focused tax cuts are justified.
I suggested to Mr. Johnson that he provide “timely, specific, and temporary” help to those most in need. He enacted this essential measure. Low-income people are suffering. More help will be needed this fall.
But other tax cuts are still needed and can be done without causing inflation, as long as they are also timely and specific.
Reduce fuel taxes even further. Cancel the planned increase in corporation tax, although, above all, accompany it with attractive investment bonuses.
The compressed medium should not be ignored either. The basic rate of income tax can be reduced without causing inflation, but the timeline should be aligned with other developments.
The supply agenda must focus on all IS: investment, innovation, infrastructure and getting the right incentives, with low taxes and smart regulation. This will help reduce inequality and should inspire younger people.
The UK has more universities in the top 100 in the world than the rest of Europe combined. We have to take advantage of that. We also need to boost our professional training, as it must go hand in hand with the green agenda that can be central to regional policies.
This begs the question: who will be better off to offer this economic view, not give in to group thinking, focus on growth rather than debt service costs, and really stand up for the UK globally? For me, it’s Penny Mordaunt.