Rishi Sunak must grow – not tax – us out of this economic crisis

The only way to recover is to liberalise and incentivise people and businesses to invest, innovate and allocate capital freely

The Government has taken crucial steps to slow the transmission of Covid-19 and provided support packages for workers that have been some of the most generous in the world. But it’s vital we remain vigilant about the promises we made to the electorate just under a year ago.

Back in December, we promised to “level up” and bring opportunity to the so-called “red wall” seats in the Midlands and the North, as well as many other places with areas of deprivation that we wish to see transformed.  

Getting our economy open and taking full advantage of the freedoms available to us outside the EU is crucial for people in these places. If we fail to grasp the seriousness of the economic challenges presented by the post-Covid world and rise to them with creative solutions, their and the wider country's, futures will be put at risk.

After all the efforts we’ve made to bring the deficit down to manageable levels, the Government has already borrowed more this year than at any point since Second World War. The Institute for Fiscal Studies has projected that government borrowing is set to reach £350 billion (or 17 per cent of GDP) this year, which is the highest level in peacetime in more than three centuries.

And the UK now has a higher national debt than the size of our economy for the first time since 1963.  

The only way to recover from an economic calamity of this magnitude and support jobs sustainably is to liberalise and incentivise people and businesses to invest, innovate and form and allocate capital freely. We have to start by resisting the temptation to raise taxes.

The last thing our constituents need after battling through lockdowns and economic restrictions is the prospect of the Government dipping into their pockets and taking more of their hard-earned money, or restricting their and their employers' ambitions. It will only hinder our economic recovery.

Now of course politicians on the Left will go bonkers when they read this. It is anathema to them. Conservatives campaigned during the General Election against their interventionist tax and spend ideologies, which were among the most egregious the electorate had ever faced. And today’s Labour Party still cannot imagine a world in which allowing businesses and the private sector the freedom to flourish is a good thing.

But a strong, liberated economy focused on private sector growth is what drives the tax receipts that fund the vital public services, such as the NHS, that we all value.

By giving people confidence in our future based on proper incentives and tools for growth, innovation and capital formation, the talent in our people can be unleashed. This is what will generate the income our country and our public services need, and be plain to the rest of the world.

When Britain is a strong, open and confident trading nation, we will also be more able to help the world’s poorest economies. For them, trade with the rest of the world and key consumer nations like the UK puts them on the pathway to stability and prosperity.  

The UK is about to embark on its future as a newly independent state, able for the first time in decades to chart its own course to pursue opportunities with fast growing parts of the globe. It would be a serious mistake to jeopardise the chance to encourage economic recovery and engage those opportunities by hiking capital gains tax. 

This would simply send the wrong message to the world, that Britain is an unfriendly place for businesses, innovation and investment. What’s more, signalling big tax rises like this, instead of liberalising reform, would damage confidence, reduce growth and be highly unlikely to raise more money for public services and investment than when the rate is lower.

My new Economic Growth Group seeks constructive ideas from across the spectrum to help government make the argument that we cannot tax and spend our way out of trouble.

Reform that keeps taxes low or reduces them, and simplifies them and keeps capital flowing and being allocated freely, is the key to incentivising investment and innovation and raising the UK's potential to grow productively out of the economic predicament we find ourselves in.

Only this way can we sustainably invest in infrastructure, spur the industries of the future, and find our way back to safety and prosperity.

So let's send a message to the world that Britain is open for business. Let's turn the UK into one of the most competitive economies in the world, one that welcomes investment from all sources, and incentivises it at home.

Increasing the range of opportunity this way is the best approach to narrowing the chasm in our public finances.

To make sure our economy does not falter but survives and thrives in the post-Covid world and delivers for people, we must reject tax rises, seize the global opportunities before us, and free up our future.  

Marcus Fysh MP, Chair of the Economic Growth Group