Guido is enjoying the to-ing and fro-ing* between Fraser Nelson and the Fink. Today something Fink said stood out as uncharacteristically crass:
If the Tories were now to cut taxes immediately upon on entering office, what would happen? It would, erm, destabilise the economy, wouldn’t it.
No, Danny it would not.
Imagine, and this will take some imagination, Nick Clegg in No. 10 and Vince Cable in No. 11 the day after the election. They implement their manifesto pledge to raise the tax threshold to £10,000 reducing the Treasury’s take by circa £100 £20 billion. It would cost about one-tenth as much as quantitative easing and be a far greater stimulus. That would be £100 £20 billion injected into the real economy rather than foreign bond investor’s portfolios, benefiting the lowest paid the most. That would inject a colossal boost into the economy, increasing demand on the high street, to manufacturing and to every consumer facing business. The effect on GDP and overall growth would be tremendous, not destabilising
Danny might retort with tales of bond yields rising as a result, but bond traders understand that a growing economy supports their coupon payments, whereas a flat or contracting economy is a greater sovereign credit risk. A growing economy can afford to finance a budget deficit if necessary. An over-taxed, low to no growth economy can’t. High taxes, and Britain is a high tax economy after 13 years of Gordon, destabilise the foundations of a strong economy, driving enterprise into the ground or overseas. Guido remembers when this was ideologically core to Conservative thinking, it was when they won elections…
*If you haven’t been following the debate it starts with Fraser’s lecture to the CPS which Fink responded to. Fraser came back with this and Fink answered here. Then Fraser gave his response. This piece refers to Fink’s latest response.