To achieve economic growth, British policy needs its own 'Great Reset'
The current cost of living crisis and stagnating growth highlight the importance of a re-examination of our approach to tax, trade and business, writes John Longworth.
During the pandemic, conspiracy theorists loved to talk about the "great reset" that would be orchestrated by the Davos-loving global elites. If the events of the past two weeks is a reset, the elites surely could not have predicted a major European war, conducted by a country armed to the teeth with nuclear weapons.
Amongst the horror and tragedy of all this, is irony. The famous "Project Fear" of the anti-Brexit establishment contained dire predictions of what would result from a vote to leave the EU and Brexit once it came around. The actual results have often proved to be the reverse, particular in areas such as employment and wages.
The irony is that since Brexit in January 2019, entirely unrelated to it we have nonetheless seen pestilence and now war, leaving just famine and death amongst the four horsemen of the apocalypse. What we haven't seen is the long predicted cataclysm of "global warming", rebranded as the deity of "climate change". The rebranding, of course, was a consequence of an inconvenient truth, the lack of consistent warming. A bit like Brexit and self-fulfilling COVID-19 lockdowns, the reality did not fit the narrative and the longer normal life goes on, the starker the discontinuity becomes. So much for the over hyping of "experts".
The relevance of all this is that Putin's war has had the effect of a reset, even if it wasn't the expected one.
Suddenly all of the ephemeral obsessions of the left-liberal, BBC narrative have evaporated in the face of reality, of a real crisis on our doorstep. The decades of soporific government in the UK – and even more in the EU – have been brought up sharply as if Putin had tugged violently on the bridle of his apocalyptic horse.
The truth is that having security matters. All of a sudden the CND brigade look very silly. Let us not forget that Ukraine gave up its nuclear weapons for guarantees of security from Russia, America and Britain; they have now been brutally invaded by a nuclear power. One future challenge of this lesson will be to uphold non-proliferation.
Similarly, the folly of an 'Alice in Wonderland' energy policy, peddled by successive virtue-signalling governments and creating the most expensive route to net zero, has left the UK exposed with unaffordable energy bills and rising inflation.
There are predictions of average energy costs for households of up to £4000 per year by the end of 2022. These have been exacerbated by Russia, but were already highly inflationary, as bills started to incorporate the uneconomic costs of renewables, on top of which taxpayers are contributing to green subsidies.
With no cap for commercial contracts, businesses will be severely impacted. With energy bills doubling and along with wider price rises, CPI inflation may reach as much as 15 per cent and RPI inflation even higher. With the Bank of England raising interest rates and the Treasury raising taxes, what we are potentially facing is inflation coupled with a downturn in the economy – 'stagflation' – along the lines of the 1970s.
Don't worry about energy, we're told. Yet we have heat pumps that don't work, inefficient turbines, solar which is unviable most of the year and geothermal which appears to cause earthquakes. Meanwhile we have to find a home for millions of toxic car batteries and non-recyclable wind turbine blades. It is a policy disaster.
The UK could be 100 per cent green and, at just 2.6 per cent of global GDP in PPP terms, not move the dial. Meanwhile Russia has reputedly supplied 140 million tons of coal to China and India and Germany is burning lignite.
We are starkly reminded by all this that relative economic performance really matters. Average world GDP growth has been around three per cent per annum; we have been satisfied with one to two per cent. Settling for this will lead to our relative economic decline. Over time our children will be relatively worse off; services such as the NHS will continue to suffer from inadequate funding; and ultimately, we will not be able to afford the food, goods and services others enjoy. We can only afford defence spending if we have growth and prosperity.
It is the most pressing issue for government. In order to achieve at least three per cent growth per annum we must boost enterprise and investment. Taxes must be cut to stimulate growth, not increased. Business must be freed from red tape and the dead hand of the planning system requires urgent reform. We must seize the opportunities of Brexit and not be held back by the 'poison pill' of the Northern Ireland Protocol.
Britain needs to look to the world for trade and partners, but certainly not those who are a threat to our way of life: our values of freedom, democracy and the rule of law. Certainly not Putin's Russia and Xi's China.
Vitally, we need to have energy security. We have beneath our feet enough gas to cut bills to a fraction of those at present and to provide energy for many decades to come. We have the technology to develop over time a domestic nuclear industry, one in which we once led the world, in order to move towards net zero.
In the last fortnight we have had a wakeup call akin to the 1930s. Britain can only prosper and have the freedom and lifestyle we cherish and desire if we have wealth creation and economic growth. Everything else comes after. This may require new thinking and it may be uncomfortable for some. We certainly cannot continue to treat our country as a living museum. If we do, we will face a future of relative poverty and, potentially, servitude.
