MARGARET Thatcher’s economics adviser has described the tax-cutting plans of Tory leadership candidate Liz Truss as “credible” and “vital”.
Patrick Minford, now professor of applied economics at Cardiff Business School, Cardiff University, has been cited by Ms Truss in recent speeches. He was asked today if he thought her tax policies were credible.
And in a boost to the Truss campaign, the economist who first came to public prominence in 1981 in the depths of the recession triggered by Thatcher’s monetarist policies exclusively told GB News: “Yes, they’re not only credible, they’re vital.
“Because if that Corporation Tax increase goes ahead and also the rise in National Insurance contributions, they both reduce supply and they have an effect on growth and Corporation Taxes paid by the vast majority of small and medium sized businesses and in Britain, which are the main engine of the economy, and putting it up would damage growth and innovation by these by all these entrepreneurial companies.
“That’s the key point really, while also the National Insurance contributions will push up wage costs, by reversing this she puts growth first.
“All this talk about recklessness and fairy tale economics is absolute nonsense because the basic point is that debt and borrowing is an instrument of government policy.
“We are a major nation and we borrow in the world at very low interest rates because we’re regarded as a safe haven for debt, and that’s something we can use for our policy.
“All this talk about these fiscal rules that the IFS mentioned, they’re nonsense.
“What matters is your long term solvency and whether over the long term you can cut your coat according to your cloth and make sure that you can pay your debts over in the end and bring the debt ratio down to a safe level.
“And that’s the key point – not short term fiscal rules. So all this talk about headroom and well, the £30 billion in the kitty at the moment, is really a complete side issue because we are able to borrow as a big nation with this reputation and wealth markets.
“That’s an instrument of policy which allows us to keep taxes to support growth and do spending as we need to support growth to and the economy and what we need to do over the long term is balanced the books but that’s a long term issue, not a kind of an issue of balancing the books over the next year or so that’s a complete irrelevancy.
He told Liam Halligan during On The Money on GB News: “The Treasury has captured Rishi Sunak with this orthodox view which is embodied by these silly short term fiscal rules, which are really a way of embedding Treasury’s power to kind of keep control of everything.
“I am in favour of the Treasury having power to control spending over the long term but it should be carried out intelligently allowing us to have a competitive tax system.
“When the Treasury spent £500 billion on Covid, because obviously it had to, it then turned around and said, but you can’t spend any more in the coming years then that we’ll put up borrowing because we can’t do that sort of thing, of course, transparently.
“That is nonsense. Having spent £500 billion on Covid in the way of borrowing it’s obvious transparent nonsense that you can’t borrow to prevent taxes being put up and destroying growth in the economy.
“So yes, the Treasury orthodoxy has been put in place. It sort of started after the financial crisis with the austerity programme, which was a big mistake as we know in retrospect, because it put all the job of keeping the economy recovering on the Bank of England and quantitative easing and the buying of bonds in the in the financial markets, which has been another very successful policy, it’s driven interest rates start to zero.
“That’s what we need to get away from today. The Treasury orthodoxy that started after the financial crisis has been a disaster for the British economy.
“And of course, it goes back further with the EU regulation and the gradual drift upwards in tax rates has been allowed to happen under the Treasury’s regimes over this period- all of this has damaged growth and needs to be firmly put into reverse.
“Much as Mrs Thatcher challenged the Treasury orthodoxy in her day, they oppose monetarism, which was needed to bring down inflation and today they’re imposing sensible tax policies that will be in favour of growth.”
