Magazine article The Spectator

By George, He's Got It!

Magazine article The Spectator

By George, He's Got It!

Article excerpt

George Osborne has not been a complete disappointment as Chancellor. He has, it is depressing to note, ended up giving Britain a leisurely ten years to get back in the black while the national debt soars. He has a worrying enthusiasm for finding new ways of hawking underpriced debt to business and homebuyers.

But the British recovery is now gathering pace, Britain has more jobs than ever, and if you trawl the small print of his Budget statements, you can find a number of things that Osborne is getting right.

He has stuck to his plan to shed hundreds of thousands of public sector jobs. And what Ed Balls dismissed as a right-wing fantasy has come true: two private sector jobs have been created for every public sector job lost.

Osborne has also cut the top rate of income tax from 50 per cent to 45 per cent; and the share of tax collected from the richest has jumped to a new high: the best-paid 1 per cent now contribute 30 per cent of all income tax collected.

Just as Mr Osborne said, the 50p rate raised no money. His tax cut squeezes the rich far more effectively. His single most radical act has been to reduce corporation tax from 28 per cent to an eventual target of 20 per cent - the lowest in the G20. He is right to argue that since Britain is in a global race, countries must compete with each other for businesses (and people). When he first proposed this measure, Treasury officials assumed it would cost several billion pounds: as an institution, it had been programmed by Labour to assume that a tax cut meant less money for ever. It was blind to the chief insight of conservatism: that lowering taxes encourages companies to take more risks and make more money.

Slowly, Mr Osborne is reprogramming the Brownite machine that he inherited. He has made the Treasury produce a study on corporation tax, to be published alongside his Autumn Statement this week. It finds that the corporation tax cuts have indeed stimulated the economy to a striking degree. The Treasury's conclusion is that it has clawed back two thirds of the cost of the tax cut. This is probably an underestimate. Lowering taxes, it seems, is not so expensive after all.

Encouragingly, Osborne is introducing what the Treasury refers to as a 'state of the art' way of calculating the effect of tax rises and cuts, a system that takes expected change in behaviour into account. …

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