The Express, April 9, Professor Patrick Minford
In his generally excellent recent Mais lecture, the Chancellor set out his vision for the UK economy. He aims for freeing up markets, improving regulation, and cutting taxes to incentivise investment, training and R&D. So far so good. But he argued that in the short term it was right to raise taxes to reduce debt. He said that Mrs Thatcher’s government did this before cutting taxes later and cites this as a supportive precedent.
But on this he is totally wrong, as is obvious to his backbench MPs and to Boris. Raising taxes now is a horrendous mistake which, if not reversed, will damage growth and yes the public finances too, which depend hugely on growth.
The situation in 1981 when the Thatcher government raised taxes was entirely different. Inflation was running close to 20 percent and interest rates were around 15 percent. There was a lack of credibility over the ability of monetary policy to control inflation. There was a particular worry that the government would print money to avoid borrowing.
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