Liam Fox -- Entrega Martes 28 de Febrero.

The pressing case to cut both taxes and spending
By Liam Fox

There is a problem with the British economy. Debt and an inability to compete have been worsened by debilitating regulation and a lack of belief in sound money. And while the so-called “emerging” world has continued to grow apace following the financial crisis, the UK has failed to take advantage. This is true horror of the government’s inheritance. We must assess why and act urgently.
David Cameron and George Osborne have long understood that everything possible had to be done to prevent the interest rate rise that could have pushed the fragile UK economy into the sort of tailspin witnessed by European countries with similar public finances. The coalition government has created enough credibility with international creditors and investors to buy time.

But there are questions that must be answered if growth is to accompany deficit reduction, and there are issues of inflation and credit expansion that will need to be addressed in the longer term.
The UK is a long way behind countries we deride in our ability to sell to the world, and in some cases, behind these countries’ in terms of living standards. Despite a 25 per cent devaluation of sterling, UK exports to Asia in the last three years have grown at a slower rate than those from Greece and Spain. In 2011, per capita gross domestic product in Ireland was greater than that in the UK. Meanwhile, the role of the state in the UK economy has grown and taxes have risen. Inflation is reducing our living standards.

The budget must confidently assert that capitalism works. But it doesn’t work if failure is rewarded as if it was success. That is why proposals such as the benefits cap should be welcomed. Risk, effort and achievement must all be incentivised. A focus on these could have stopped the bank bonuses debate from fostering anti-business sentiment. The real debate should have centred on how, between 2000 and the start of 2012, the return to owners of Barclays shares was minus 9 per cent compared to 23 per cent for the FTSE 100 as a whole. For the Royal Bank of Scotland, the return was more like minus 86 per cent, its total pay increase from 2008 to 2010 was 55 per cent. No one should resent bonuses being paid to those who achieve success for some of our most important financial institutions or those digging them out of their holes. But for years we have been rewarding failure to the detriment of competitiveness and returns to pension savers.
More generally, individual risk and effort is not rewarded when the UK government share of GDP has risen from 38 per cent in 1999 to 51 per cent in 2011, the effective top rate of tax is over 50 per cent, and CPI inflation for the last five years has averaged 3.5 per cent.
To restore Britain’s competitiveness we must begin by deregulating the labour market. Political objections must be overridden. It is too difficult to hire and fire and too expensive to take on new employees. It is intellectually unsustainable to believe that workplace rights should remain untouchable while output and employment are clearly cyclical.

The Left must be given an unequivocal moral challenge: it is utterly unacceptable to condemn a generation of our young to unemployment by maintaining all the rights and privileges of those currently in work. That would be the unavoidable outcome of failing to hold our own in a highly competitive global marketplace.
It also needs to be cheaper for companies to increase the size of the workforce. There is a strong argument for further public spending reductions, not to fund a faster reduction in the deficit, but to reduce taxes on employment. Although the coalition agreement may require the chancellor to raise personal tax allowances (which should be paid for with spending restraint not new taxes) he should use the proceeds of spending reductions to cut employers’ national insurance contributions across the board. If that is deemed impossible, he should consider targeting such tax cuts on the employment of 16 to 24-year-olds, making them more attractive to employers.

There are other fundamental economic issues that will need to be challenged in the times ahead, including the long-term effects of the debauchery of our currency that has occurred over the past generation.

In the coming budget, the chancellor has an unenviable task. Above all he needs to be very frank that the UK economy is undergoing a structural correction that will last a decade or more. But the prize is to rescue the next generation from the economic horrors we have inherited and to provide a springboard for opportunity, prosperity and national resurgence.

The writer is MP for North Somerset and former UK defence secretary