Rejecting Fatalism – a six point plan for Britain.

I’ve been giving talks for months on ‘Rejecting Fatalism’ in a brand sense as much as a social or indeed national one.  It’s also something that the great Dave Hieatt and the Do Lecture crew are into, as discussed at the recent – and excellent – Best of Britannia.

Meanwhile, to bring things bang up to date, the always deeply insightful FraserNelson has just put this up on the Spec blog and I agree with every word – so suggest you take a look. But for a preview, here you go:

‘We are already in a Japanese-style lost decade.

Osborne is a formidable talent; just last week he snatched Mark Carney from under the nose of the Canadian government to be our Bank of England governor. His tax cut stopped an election in 2007. He is a politician of flair, imagination and resolve, and even he will realise Britain’s on a road to nowhere.

So what to do? Here’s my six-point plan:

1) Reject the fatalistic idea that Britain is doomed – that, just because the Eurozone is in the mire, there’s not much we can do. If tiny Estonia can grow in these circumstances by adopting different policies, then so can Britain.

2) Focus on youth unemployment. Yes, Britain’s jobs market has done okay but most of the rise in employment is accounted for by foreign-born workers. A million young people are on the dole, and this is a huge waste of young talent was well as money. This ought to be treated as a national emergency.

3) Focus a growth policy on helping the low-paid. The Swedish experiment found that if you make sharp tax cuts to low-paid workers, it can have a stunning effect. Research from the OECD suggests that tax action on low-paid workers is the single more effective form of stimulus for countries with generous welfare states. This can be done many ways: reducing National Insurance, cutting employers contribution or even German-style mini jobs.

4) Be careful about cutting those tax credits World over, people are proving more sensitive than you might think to work incentives. The Swedish tax cut that I’m so fond of citing was transferred via an Earned Income Tax Credit. It made then 8pc net better off a year, allowing the government to say “You now get the equivalent of an extra month’s salary every year”. A message strong enough to have the Conservatives re-elected for the first time in Swedish history. My colleagues at the CPS spotted the potential of this in 2006.

5) Fund the tax cuts from savings in still-huge state spending It’s not even 3 per cent lower than its peak – the same government machine that grew by 61 per cent under Labour. And the £26,000 welfare cap can be lowered, if it helps the low-paid and tilts the bias back towards work.

6) Make it a cross-party mission. Helping the low-paid should be the ideal coalition task, as the Lib Dem manifesto promises action on the lowest-paid workers. The most influential economists on the left, such as Jonathan Portes and David Blanchflower, also back tax cuts for the low-paid. A consensus is fast taking shape.

Youth unemployment is becoming a national issue. Two years ago, it looked like it was enough for Osborne to tinker with the Brown model. No longer. He has about four months until his next Budget – and he has a choice. To give in to the above graphs, or to reject them. To shape our economic future, or grimace and say there’s nothing he can do (except dream up ways to be rude to Ed Balls). It isn’t much of choice. The OBR’s pictures of Christmas Future leave us in little doubt about what awaits Osborne – and Britain – unless he comes up with something good soon.

*Footnote: A key aspect of Osbrownism is the leisurely deficit-cutting timetable. Rather than cut ‘too far, too fast’ Osborne is going gently — which may yet cost us our AAA rating. One method of spinning the progress is to say ‘we have got rid of 25 per cent of the deficit’ — focus groups like it (they hear ‘debt’). But it’s worth remembering that Brown’s plan involved cutting the deficit by 33 per cent by now.The two deficit plans are below. Yes, Osborne is facing stronger headwinds. But I’m not sure ministers should expect applause when they use the 25 per cent figure now, given that they so loudly booed Brown for a more ambitious deficit plan’.

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