In a recent speech delivered to an audience at an event organized by the Centre for Policy Studies (CPS), Chancellor of the Exchequer Jeremy Hunt discussed the government’s commitment to growing the economy. Moreover, its focuses on improving productivity growth in both the public and private sectors. Speaking at an organization founded by Keith Joseph and Margaret Thatcher almost 50 years ago. Hunt highlighted the profound impact the CPS has had on shaping the discourse around freedom and enterprise.
Hunt expressed his delight at the CPS’s continued vigour and energy under the leadership of Lord Spencer and Rob Colvile. He stressed that economic growth, along with reducing inflation and decreasing debt. That remains a central priority for the government. He emphasized that sustained growth is essential in proving wrong those who predict an economic decline. As it fosters prosperity through entrepreneurship and instils confidence in the future for families across the nation.
Referencing Rob Colvile’s essay titled “The Morality of Growth,” Hunt underscored the significance of growth and the need for Conservatives and society at large to constantly remind people of its importance. He explained that growth is crucial for increasing living standards. Indeed expanding opportunities through high-wage, high-skilled jobs driven by innovation. Moreover, preventing the private sector from being hindered by an expanding state.
The challenge of balancing economic growth and public spending
Hunt highlighted the challenge of balancing economic growth with public spending. According to long-term forecasts by the Office for Budget Responsibility (OBR), the economy’s projected long-term trend growth rate is 1.6%, while public spending, excluding debt interest, is set to grow by 2% annually. This suggests that the size of the state will increase by nearly half a percent more than the size of the economy each year.
Chancellor Jeremy Hunt noted that similar challenges are faced by other countries, including Germany, Italy, Japan, France, and the United States. Despite varying demographic pressures and economic conditions, these nations also face the need to address increasing burdens on taxpayers due to the growth of the state.
Hunt warned of the consequences of allowing the state to grow faster than the economy, citing higher borrowing, increased taxes, or a combination of both as potential outcomes. The OBR’s analysis suggests that without intervention, the public sector debt could reach 217% of GDP by 2071, more than double the current proportion. Hunt deemed it morally and economically wrong to pass such an immense debt burden onto future generations.
A smarter approach to economic challenges
Contrary to alternative proposals that suggest raising taxes to tackle the problem, Hunt rejected such a path, deeming it a step toward socialism with less freedom, diminished enterprise, and reduced prosperity. Increasing annual tax revenues by £200 billion by 2071, as projected spending pressures would require, would necessitate at least doubling the basic rate of income tax and the main rate of employee National Insurance.
The Chancellor argued that borrowing an additional £28 billion would yield the same negative impact, leading to higher inflation, increased interest rates, and more substantial debt repayments. Such an illusory dash for growth would burden taxpayers, erode confidence in the UK, and pass on unsustainable debt to future generations.
Hunt called for a smarter approach to the challenges faced by advanced economies, with a relentless focus on tackling inflation as the immediate priority. He highlighted that sustained high growth requires businesses, investment, and consumer confidence, all of which are unattainable without low inflation.
Hunt reiterated the importance of productivity growth in driving higher living standards, asserting that GDP