Whoever moves into 10 Downing Street after Boris Johnson is fully open, only one thing is clear: he or she will cut taxes. Tax reductions is the order of the day, and all the prime ministerial candidates have committed themselves to them. They promise an economic policy in the spirit of Margaret Thatcher and present themselves more or less as the Iron Lady reincarnated. The debate about Johnson’s succession is characterized by nostalgia, a nostalgia big for the supposedly good old days. So, post-Brexit, there is a renewed danger that the Tories will be guided by ideology rather than what the country really needs: pragmatism.
Pragmatism is a virtue the Tories claim as their own. Some say that pragmatism is not only typically British, but deeply conservative. Well, if that’s true, there’s been no sign of it for a long time. The Tories have had three prime ministers since 2010. All three are responsible for the biggest economic disruptions in the country’s recent history: Brexit.
The consequences of leaving the EU will determine the term of the next prime minister, as will the consequences of the pandemic and the Russian invasion of Ukraine. It won’t be easy. That is the most pressing problem Cost of living crisis. As everywhere else in Europe, the cost of living has risen sharply in Great Britain. At 9.1 percent, the inflation rate is significantly higher than in Germany or France. In the autumn, the Bank of England expects an increase of eleven percent. In other respects, too, the kingdom fares poorly in international comparisons. The OECD expects growth to slow in the coming year. Accordingly, only one of the G-20 countries has a worse prognosis: Russia.
Johnson’s successors identified tax cuts as a recipe against the coming recession. This is politically understandable as there are still few popular figures among the Tories. At the heart of Thatcherism is the promise of a lean state that will do whatever is necessary to allow citizens and businesses to thrive. As US President Ronald Reagan reformed A determined woman Their country in the 1980s was based on a neoliberal school of thought. The point is that the ideas of Friedrich August von Hayek and Milton Friedman led to conflicting conclusions. Reviving the economy was possible, but at the cost of growing social inequality and dramatically increased government debt.
Where will the money come from when the next prime minister cuts taxes?
So the question is whether this economic policy makes sense in the current situation, especially with tax cuts. Such a move is highly questionable from an economic point of view. Because anyone who lowers the tax burden on citizens and corporations knows that it will increase consumer demand. This leads to an increase in prices, which further fuels inflation.
“Dare More Thatcher” is not a good idea, especially since Great Britain has grown up in the spirit of the Iron Lady over the last few decades anyway. In European comparison, the country has a moderate tax burden. Deregulation is more pronounced than in Germany, for example. Instead of pushing this further, a new prime minister should think carefully about the level of digitalisation and the expansion of climate-friendly energies – i.e. future growth.
In addition, the epidemic revealed once again: the inequality of living conditions. An ailing health system is more overburdened in the poorer north than in wealthier London. It was not without reason that Johnson embarked on a “stabilization” agenda to strengthen economically disadvantaged areas. There, in former Labor strongholds, the Tories won the last election. If they don’t want to lose the next one, the government should invest there. But where will the money come from when the next prime minister cuts taxes?
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