Stalled economy, stalled thinking about the economy.

The deficit reduction measures don't seem to have cut the deficit. The plan to curb public debt will massively increase it. And the growth strategy has produced no growth.

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Is the economy running on empty, or just stalling?
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Douglas Carswell MP
On 17 October 2011 08:49

The deficit reduction measures don't seem to have cut the deficit. The plan to curb public debt will massively increase it. And the growth strategy has produced no growth.

The money certainly ran out under the former Labour government. But the current administration's response also seems to involve printing more of the stuff - and hoping something turns up.

Simply carrying on with what Alistair Darling started is not enough. What ought a Conservative administration do to turn the flagging economy round? Here are my thoughts;

1. Live within the tax base: failure to do this landed us in this mess. For too long government has worked out what it wants to spend then set taxes and borrowing to enable it to do so. A Conservative government ought to do it the other way round.

2. Simpler taxes: once you start living within the tax base, you start to see taxes as a means of raising revenue, rather than a tool for engineering various outcomes. That allows you to actually simplify taxes - not just make speeches about doing so. Flat taxes, not fat taxes.

3. Turn off the debt tap: for all the talk about austerity, the government continues to rack up enormous debts - particularly the off-balance-sheet PFI kind. When it comes to PFI, we haven't even turned off the tap. We need to do so.

4. Stop printing money: all that extra QE money sitting inert on the balance sheets of the banks will seep out. And it will mean even more inflation. Stop it now. Likewise, how are low interest rates helping the recovery? Perhaps after a while low rates simply encourage more debt - and too little saving.

5. Let zombie banks die: not every financial crisis can be fixed by politics. Ministers can't legislate to change the laws of maths such that 2 + 2 = 5. We need to allow badly run banks to go bust. Ditto the Eurozone. No more bailouts.

6. Quit the Keynesian thinking: if you think raising demand makes the economy grow, you won't want to turn off the debt taps. You'll also be wary of Ed Balls attacking you for not spending even more.

But increasing demand does not make the economy grow. It is a growing economy that makes demand increase. How to achieve that?

7. Get government out the way: neither the industrial revolution, nor China's economic take off were planned. Indeed, these great surges in human productivity came about because government stopped getting in the way.

We don't need more SW1 talk about "regulation impact assessment" and "cutting red tape". Instead make it a general principle that wealth creators should no longer need the permission of officials to create wealth.

Much of the Mandarinate thinking in the Treasury and the Bank of England may, I fear, turn out to have all the credibility of a Greek bond. It is time for a new Conservative approach on the economy.

Douglas Carswell is the Conservative Member of Parliament for Clacton. His articles are cross-posted on The Commentator with permission. Follow him on Twitter @DouglasCarswell.

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