Nick Herbert: encouraging outlook for the economy

This week’s figures showed that the economy grew throughout last year.

Tackling the deficit has not caused the economy to ‘flatline’. And the fastest growing sector of the economy? Manufacturing.

There was equally good news on employment last week, with strong jobs growth.

In the Arundel & South Downs constituency, the unemployment rate is especially low, at just 1.1 per cent, with 246 more people in work than a year ago. But it’s been falling everywhere, and now more full-time jobs are being created than part-time.

Yet, far from reflecting on why they’ve been proved so wrong, those urging higher spending and borrowing - led by the Shadow Chancellor, Ed Balls - have now called for the re-introduction of a 50p top rate of income tax.

But the evidence is that, far from bringing in extra per revenue, punitive rates of taxation can actually be damaging.

The independent Institute for Fiscal Studies has said that cutting the 50p rate may have RAISED as much as £600 million. Reversing this change would, they say “raise little revenue and make, at best, a marginal contribution to reducing the budget deficit”.

So calling for a higher rate is all about political gesture, allowing the attack that the Government is helping the rich and penalising the poor.

But that simply isn’t true. The top 1 per cent of earners pay as much as 30 per cent of all income tax, up from 20 per cent a decade ago.

In fact, the focus of the Government’s tax-cutting efforts has been to help the lowest paid, for instance taking 1 million people out of tax altogether (around 3,200 in this constituency), while freezing council tax and fuel duties.

The Chancellor recently supported an increase in the minimum wage.

We only need to look across the Channel to see the effects of penal taxation.

President Hollande’s wealth tax is widely seen as undermining France’s economic recovery.

Now even this socialist leader is changing his tune, planning to fund a reduction in payroll taxes with spending cuts – something this Government did in its first months in office.

Just as our economy begins to recover and the deficit is brought under control, the very last thing we need is a return to higher spending, higher borrowing, and higher taxes - the same old formula for failure.

If you would like to get in touch with me, please write to me at the House of Commons, London, SW1A 0AA, or e-mail me at nick@nickherbert.com