Politeia Director Jonathan Isaby has today joined a number of leading economists, academics and businesspeople in signing an open letter to Chancellor Rishi Sunak to highlight the policies he ought to be considering in order to create the conditions for economic growth.
The signatories – also including Politeia authors Professor Tim Congdon and Professor Patrick Minford – draw on new research by Neil Record, Chairman of the Institute of Economic Affairs, which identified the period from 1993-2003 as one of high productivity growth, national income growth and growth in government revenues, during which the policies pursued by the governments of the day included:
- A top rate of income tax of 40%
- The highest rate of Stamp Duty on residential property being no more than 4%
- A light regulatory burden on all productive sectors
The call – covered in The Times today – argues that looking at these and other policies which have a proven track record of economic success should inform the decisions being made now about how to boost our economic recovery following the covid-19 pandemic.
The full text of the open letter and its signatories are as follows:
In this open letter, we seek to spotlight historical evidence of successful economic and fiscal policies drawn from UK data.
The Chancellor and his colleagues at HM Treasury face two major and very difficult-to-resolve issues: highly-stressed public finances, and a lack of labour productivity growth (leading to stagnant real wages and living standards). There are other pressing economic issues, but these stand out as secular, rather than exclusively Covid-19 related.
Conditions for growth are not a mystery: we have seen them in the UK in the recent past. In the last 40 years, the highest period of growth of government revenue was 1993-2003. This coincided with a period of strong GDP per capita and productivity growth.
The conditions that pertained at the time make a convincing case for the policies needed to stimulate and sustain our economic recovery. They were, in summary:
- A top rate of income tax of 40%;
- Corporation tax ranging from 33% to 19%, falling throughout the period;
- Highest rate of Stamp Duty on residential property of no more than 4%;
- VAT rate of 17.5%;
- Capital Gains Tax rate at the same as income tax rate, but Taper Relief (from 1998-99) reducing the rate on shares by up to 75% (i.e. giving a top rate of 10%);
- A light regulatory burden on all productive sectors: less financial regulation, less labour market regulation, more targeted health and safety regulation, less energy sector regulation.
Governments have choices. This government may not choose to adopt some or any of these successful policies. At the very least, however, this evidence should weigh heavily on any decision-making.
Full list of signatories:
Andrew Allison, Head of Campaigns, The Freedom Association
Steve Baker, Member of Parliament for Wycombe
Professor Christian Bjørnskov
Douglas Carswell, Former Member of Parliament
Professor Tim Congdon
Alison Cork, Founder, Alison At Home
Professor Kevin Dowd
Martin Durkin, Chief Executive, Wag TV
Professor Anthony Evans
Suzanne Evans, Director, Political Insight
Chris Gibson-Smith CBE, Former Chairman, London Stock Exchange Group
Lord Hamilton of Epsom
Dan Hannan, Former MEP
Laurence Hollingworth, Vice Chairman, JP Morgan
Jonathan Isaby, Director, Politeia
Julian Jessop, Independent Economist
Matt Kilcoyne, Deputy Director, Adam Smith Institute
Dr Ruth Lea CBE
Graeme Leach, Chief Executive, Macronomics
Andrew Lewer, Member of Parliament for Northampton South
Mark Littlewood, Director General, Institute of Economic Affairs
Tim Martin, Founder, Wetherspoons
Professor Catherine McBride
Professor Patrick Minford
Terence Mordaunt, Co-owner, Bristol Port Company
John O’Connell, Chief Executive, TPA
Alexandra Phillips, Former MEP
Neil Record, Chairman, Institute of Economic Affairs
Matt Ridley, House of Lords
Professor Stan Siebert
Greg Smith, Member of Parliament for Buckingham
Professor James Tooley
Dr Radomir Tylecote