Cameron takes first step in the right direction

Tentative, hesitant, nervous, and forced step, perhaps, but a step nonetheless.  And, proud moment, I was there when David Cameron’s political balls finally dropped.  Goodness knows how long I, as a Conservative, have waited for the magic words, but Cameron uttered them this morning:

That means reducing planned government spending growth, and not matching Labour’s spending plans.

And thank fuck for that, because it could hardly get worse than Labour’s spending plans.  They are drivel based on superstitution and nonsense, lies based on miscalculation and misdirection, gobbledegook built on balderdash and piffle.  Simply, they don’t work.  And not only do they not work, they aren’t designed to work.  They’re designed to leverage as many of our sparse pennies out of the pocket of the taxpayer as the Chancellor can get his money-grubbing hands on.

I’m not about to fisk Cameron’s speech (full text on conservatives.com).  I’m sure people whose party sympathies lie counter to David Cameron will do a better job than I would.  But I will point out a single error that still remains in his judgment.

We must build a low tax, low debt, low interest rate economy for the long-term. We will achieve it through the long-term fiscal strategy that George Osborne and I have consistently set out. This is that over the economic cycle, you hold down government spending so it grows slower than the growth in the economy.

All very good and well.  It’s about time that we had a hard and fast definition of ’sharing the proceeds of growth’, but you’d have to be talking very long term for it to make a difference.

We can’t wait for the state to reduce its own size over time by ’sharing the proceeds of growth’.  Let’s say the government increased spending by 2% a year whilst trend growth was 2.75% (both accounting for inflation).  That means it would take twenty years of Cameroony ‘growth-sharing’ just to reverse the last eleven years of Labour spending increases (to 37% of GDP).  It would take forty years to reduce the tax burden to Australian levels (32%).  It would take a hundred years to turn the tax burden clock back to before the Second World War’s spurt in socialism (20%).  In essence, it would take twice as long to undo our mess as it takes to create it.  Not bloody fast enough when there’s a Chinese dragon and Indian tiger on your arse.

I suggest a new rule: no above-inflation per capita spending increases in peace time.  At all.  Productivity should* increase naturally to keep wages of public sector employees in line with the private sector, so state education, defence, and so on will improve naturally in line with technological progress.  Keeping hard-and-fast spending constraints will also incentivise government to shift OUR tax pounds from paying people for being unemployed to paying for essential services (by which I mean law enforcement, defence, primary education, and so on - not all the white noise the government creates).

Result: if the Tories had another 18 years in power as under Thatcher and Major, tax would fall to 26% of GDP - or the lowest in the OECD.  By the time today’s new graduates are hitting their earnings peak (at the age of 42, if you’re desperate to know), government spending would be below 21% of GDP.  I’m convinced that’s what David Cameron meant by a long-term low-tax solution!

Also note it doesn’t include anything radical like cutting the £101bn of waste or getting taxpayer value for money.  It assumes Labour’s levels of record-low productivity.  It assumes the continued monolithic NHS and state school system.  It assumes the welfare subsidy state untouched and unfettered.  It even assumes that growth will remain constant even as tax falls (of course, it will speed up).  If we realised savings in spending, and the economy took off, we could cut taxes lower and faster than anywhere in history.  Now, that’s something worth telling your grandchildren about, Dave.

Hopefully the Conservative leadership will speed up our transition back from a socialist economy to the liberalised economy when this country was truly great.  We are in an epidemic of government spending.  To quote Hippocrates, the best way to fight an epidemic is First Do No Harm.  That doesn’t necessarily mean slashing and burning, although some substantial forest clear is clearly needed.  It does mean that tax rises have to stop: now and until we have our freedom back.  That is surely the direction the country needs and the Conservative Party must pursue.

* But won’t, because government productivity is low and falling, whereas private-sector productivity is high and rising.  Now explain how Keynesianism works.