The Chancellor will deliver his Budget today against a backdrop of economic anxiety. The danger is that concerns about short-term growth obscure the even more troubling signs that Britain is slipping down the international league. In too many areas, the Government is lacking ambition in its growth strategy and lacking courage to make politically difficult choices.
One increasingly important constraint on growth is the limited capacity at London’s hub airport. The Government is showing more enthusiasm for the idea of a new airport in the Thames Estuary and David Cameron this week signalled that ministers would listen to arguments for a third runway at Heathrow in the review of airport policy. But it is the habit of postponing such critical decisions until a politically more convenient time that has left Britain with woefully inadequate infrastructure.
In terms of industrial policy, ministers talk of their commitment to an activist approach that focuses on areas where Britain is strong. But the impact on the ground falls short of the airy rhetoric.
Ministers also seem dismissive of the threat to Britain’s financial services industry from the combined regulatory zeal of Brussels and our own, increasingly busybody, Financial Services Authority. In other countries, the possibility that a company as successful as Prudential might move to Hong Kong would surely prompt a bit more action. And after the Pru, HSBC? The Government needs to decide whether it wants London to be a financial and professional services capital for the world. If it keeps meddling, the banks will go elsewhere and Britain will be poorer for it.
The Chancellor yesterday proudly unveiled a new scheme to subsidise bank loans to smaller companies. But it is hard to believe that offering a one percentage point reduction in the interest rate on loans to enterprising businesses will do much to help them. This measure is a small step in the right direction, but much too small.
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If this Government wants Britain to compete, it should be committed to lowering taxes. Further reductions in corporate taxation would boost sluggish business investment and the Government should be looking to reduce income tax at both ends of the scale. A reduction in the 50p top rate of income tax would be politically unpopular. But it would be right. An initial cut to 45p would cost little but it would be an important signal of Britain’s determination to remain an attractive place to do business. And, over the course of this Parliament, Mr Osborne should be aiming to bring taxes down further still.
The Government is rightly trying to lift the tax burden on those at the bottom end of the income scale. The Liberal Democrats have generally been a nuisance in this Budget process, but raising the tax threshold is their idea and it is a good one. To do this, money has to be found elsewhere. Withdrawing child benefit from higher rate taxpayers faces formidable practical difficulties. But this is the right approach and it should be extended to other universal benefits such as the winter fuel allowance.
In terms of paying for the 50p cut, the focus should be on the international rich, who enjoy the benefits of living in London but pay a trifling amount of tax in return. A determined campaign to close loopholes, such as the avoidance of stamp duty on house purchases, is long overdue.
Mr Osborne has made the right call for this country in tackling the deficit and has matched that commitment with sturdy determination to rein in government spending. But there remains the unanswered questions of growth and Britain’s competitiveness. This country needs a Chancellor who is more than just rhetorically pro-business.
We have heard enough about austerity. It is time to be ambitious for Britain.