Written by 7:00 am EU Investment

Truss’s tax cuts are the perfect signal to the world Britain is open for investment

One thing we now know is that Liz Truss means what she says. She said she was prepared to be unpopular, and we were right to take her at her word.

We have been living through a line of successive governments restraining the economy, burdening it with ever higher taxation and then paying out the proceeds with benefits that, in the end, actively served to discourage employment and enterprise.

The one lesson we learned in the Eighties, and then painfully forgot, was that reducing the taxes that constrained enterprise not only resulted in a growing economy but in the medium term actually increased the tax take.

Yes, lifting the cap on bankers earnings will be seen as inequitable by many, particularly at a time when we are facing probably the most difficult winter for decades. But what stronger signal can we send to the world, combined with all the other changes of the Chancellor’s announcement, that we are now open for investment. That we really mean what we say: we are determined to create a low tax, entrepreneurial economy off the shores of a regulation-bound Europe.

When we faced something similar back in the era of Margaret Thatcher, we turned the corner and set the economy on a growth path by openly cutting taxes and regulation. Mrs Thatcher faced down the resulting barrage of criticism from many of the commentators and no less than 365 leading economists in a rather famous, or perhaps infamous, letter who forecast complete disaster, added to the general dismay.

The result over the next few years was an unprecedented influx of investors, joined by nearly all the major American banks not only consolidated London as the financial heart of Europe but was followed by most of the major banks in the world.

Our reducing regulation and lower taxes had opened the door to Honda, Toyota and many of their suppliers to come to set up here and with them came not only employment, but the opportunity for our industries to become competitive again.

Of course the world has moved on, but the same problems return. We left the EU, and we have to thank Boris for that, but he failed to take advantage of the freedoms that being out could give us. Of course he had Covid and a war in Europe to cope with, but now we have a chance to use some of the freedoms of being outside to create a really competitive economy.

Fracking is back and, used sensibly, could make a contribution to our short term energy needs. Of course we have to be careful of global warming, but the sensible use of our North Sea gas assets, burning our gas rather than importing from overseas with all the lack of security of supply that brings, and focusing on building a distributed nuclear energy network, is something we should have done a decade ago.

Let us really level-up by creating real opportunities for incoming businesses to come to the North. Our housing stock is not up to today’s standards, and the resulting boost will help to grow the economy, but also enable many more of our people to have a real stake in our society.

The end goal of this mini budget, and for our new government, is not to try to redistribute wealth, but to set a firm foundation for our future based on a growth rate of 2.5%. With that we can set our nation on a decade of growth to the benefit of all. 

Lord Young was secretary of state for industry and secretary of state for employment under Margaret Thatcher

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