RUTHFULLY YOURS

https://www.telegraph.co.uk/business/2019/05/31/britain-should-take-lesson-trump-slash-taxes/

When President Trump arrives on Monday, he will encounter a broken prime minister and an economy stuck in a growth rut. Tory leadership contenders would do well to listen to him, for Trump’s economic policies have achieved what current chancellor Philip Hammond has not.

Look at the contrast. In the first quarter of 2019 the British economy grew at an annualised 2.0pc – the US expanded by 3.2pc. Since 2016, the US economy has grown at 2.55pc a year – the UK averaged 1.6pc. If current rates are maintained, the US will have opened a 4.6pc cumulative growth gap by 2020. What Americans get in four years, Britons will wait seven for.

Leadership election promises of world-class schools and hospitals are a dead letter unless accompanied by fresh thinking to revive economic growth. That requires answering the productivity puzzle: why productivity growth has dwindled to virtually nothing since the crisis. Over the last four years, growth in output per worker in the UK averaged a dismal 0.6pc a year and output per hour actually declined in the last two quarters. Ten-year productivity growth from 2007 was negative for the first time in almost a century.

Weak economic performance demands bold policies. Trump’s explicitly set out to maximise employment, production and purchasing power by, in the words of his 2019 Economic Report, “providing maximum scope for the efficiency of free enterprise and competitive market mechanisms”. It’s the kind of free market language that hasn’t been uttered by a Conservative chancellor since the Eighties.

Trump has pushed through a huge package of personal and corporate tax reform and issued 22 deregulatory actions for every new rule. It helped trigger $26.4bn (£21bn) of additional business investment, saw the creation of 301,000 manufacturing jobs and spurred the highest wage growth since the recession. Averaging a mere 1.0pc a year in the bulk of the Obama years, US labour productivity doubled in 2018. Trump has solved the puzzle.

But Mrs May and her chancellor have not met a tax they didn’t like. Britain’s tax burden is the highest for 50 years and heading higher. Rather than being about growth and addressing weak productivity, taxes are now a tool of environmental policy, the latest wheeze being a tax on non-recycled plastic.

Stamp duty remains unreformed. Income tax contains hidden cliff edges with marginal rates rising to 60pc, which the Institute for Fiscal Studies says contain some of the most damaging work incentive effects of the British tax system.

Nowhere is the gap between Britain and America more glaring than energy. Trump is unapologetic about America’s energy abundance: thanks to fracking, output of oil and natural gas is at a record. British output of oil and gas peaked at the turn of the century and has fallen by 65pc and 63pc respectively. The moratorium on fracking was lifted six years ago but there are still only three trial sites.