Magazine article The Spectator

The Road to Recovery

Magazine article The Spectator

The Road to Recovery

Article excerpt

The most heartening part of George Osborne's Budget was perhaps one of its least glamorous proposals. In his speech, the Chancellor started to bemoan the regional disparities within Britain. Ten jobs in the private sector are created in the south for every one in the north, he said - all too true. One was braced, next, for some doomed proposal for a new Silicon Valley in Teesside, or a harebrained attempt to incubate green energy forms in the Welsh valleys. But no: he would cut the taxes of companies starting up in these areas. And that was it.

It was wonderfully refreshing. Rather than pour yet more taxpayers' money into parts of the UK where spending has already reached Soviet levels, why not just kick government out of the way? Such a formula has transformed Hong Kong and has made wealth spring from the deserts of Dubai - so why not Dunstable? Mr Osborne's regional tax cut was modest, but the philosophy was sound. All he needs to do now is apply this fiscal medicine more widely.

The Chancellor cut no more, and no less, than had been expected. There was nothing ideological about the level of the cuts, and his critics in the press missed several points. First, had Mr Osborne not made the extra cuts Britain would be facing a sovereign debt crisis - or another IMF bailout.

There was no other route. The markets will not lend to an irresponsible government, as the Greeks have found out. Next, the coalition government is not cutting total state spending - it is rising from £697 billion to £757 billion, broadly in line with inflation.

The cuts are necessary because of the soaring costs of debt interest payments - the shameful legacy of Gordon Brown.

Had Labour been in power, the cuts would have been only slightly less sharp.

The plans Mr Osborne inherited showed that unprotected departments would have to be cut by about 20 per cent under Labour's plans. Under Mr Osborne it is now 25 per cent. Are we really to believe there is a gaping ideological divide between these two figures? The bond market would have forced any Chancellor down the road to fiscal sanity. This Budget is not a gamble. It is, by some margin, the surest route back to stability.

The truth is that Britain is emerging from, rather than entering, a period of ideologically driven government. Over the past decade, Gordon Brown embarked on an unfunded spending binge, expanding the state at a faster rate than any other country over any other decade. A Prime Minister, mistrustful of the people and what they might do if left to spend more of the money they earned, funded this expansion through debt, which will (according to one of the more sobering Budget graphs) take 30 years to undo. …

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