Lord Forsyth of Drumlean was Secretary of State of Scotland between 1995 and 1997. He chaired the Conservative Party's Tax Reform Commission and is a member of the House of Lords Select Committee on Economic Affairs. He is also on the Board of the Centre for Policy Studies which today publishes his new paper (co-authored with Corin Taylor), Go for Growth: Cut taxes now to cut debt, which can be downloaded here.
Whoever wins the next election will be faced with unprecedented challenges. The UK economy is in dire straits. For too long we have living on our seed corn, and now we must consume less, tighten our belts and plant for growth in the spring. Public expenditure is close to half of national income, while tax revenue barely exceeds a third. This is not sustainable.
The Tax Reform Commission report, which was published in 2006, argued that public expenditure and taxation were too high and damaging the economy. It set out a programme over a Parliament to achieve lower, simpler and fairer taxes and stimulate growth.
I remember Ed Balls, then a Treasury minister, rushing round the TV studios denouncing the report as irresponsible and unaffordable. Its £20 billion price tag over the whole of a Parliament would shatter economic stability and put at risk spending on the public services, we were told. His words rang hollow then, but three years on the Government has doubled the national debt and has a deficit this year of at least £175 billion. It is clear that a great opportunity was missed.
The Chancellor’s deficit now has to be tackled if we are to avoid a vicious cycle of higher gilt yields and inexorably rising debt servicing costs.
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