It’s been a day of competing economic prescriptions from two doctors: Vince Cable (‘debt’s so cheap it’d be rude not to borrow more!’) and today Liam Fox, who has delivered a speech to the Institute of Economic Affairs. Here are Dr Fox’s main points.
His main proposal is a freeze on state spending, so it would not rise with inflation (right now, it’s rising by just under 1pc less than inflation each year). This would set Britain on a far faster path of fiscal consolidation: the high road, if you like, versus the current low road where there is no longer a published plan to balance the books.
It’d mean the government spending about £90bn less. You can see the Labour war room calculating — as it did with Oliver Letwin in 2001 — £90bn of cuts! Armageddon! Fox confronts this head-on. The choice is not between government spending or hunger and destitution, he says. It’s a question of who spends money: government, or the people? Debt is nothing but deferred tax. In a way, debt is a worse tax because it allows one generation to have another pick up its bills.
Lower state spending means lower tax – this, he says, means not only a wealthier but a more socially-cohesive society. So yes, it’d be £90bn less state spending. But..
‘as a Conservative, such a commitment doesn’t scare me. I believe that the country will be at its best when the Government is small and people are left to enjoy the fruits of their own labour. I believe that in leaving money in people’s pockets, economic activity will follow. People will buy houses, invest for their future or just go shopping.