The Route to Virtuous Growth

Britain now enters a period of severe political instability. People will pay a heavy price, if the politicians don’t sort themselves out quickly.

The General Election in May promises to create deadlock, with neither the Tories nor Labour securing a popular mandate to govern. Horse-trading with the Scot Nats and/or Ukip is creating the uncertainty which investors hate.

There are growing fears of another election later this year – and then a referendum next year to determine whether the UK remains within the EU. All of which is forestalling investment, as risks rise, which means protracted uncertainties in the labour market.

And this is on top of geo-political uncertainties, such as blasphemous Muslim murderers hunting people in Europe and a Russian president thinking himself back into the good ol’ days of the Cold War.

There is one route out of this mess: revitalising the economy.

Take the case of Scotland. Major investors are reluctant to risk venturing into that country, for fear of what the nationalist government might do next. Infrastructure and real estate will suffer, according to the Financial Times (January 19: “Fears of new Scottish poll spook investors”).

But the Holyrood parliament is being offered a gift on a plate. Westminster is devolving further powers over tax. In particular, the Scottish government will have full control over the income tax. So what should they do with that power?

Within five years, Scotland could begin to phase in the abolition of that tax. At present, it raises £11.5bn within Scotland. The losses attributable to the distortions caused by that one tax are of an equivalent order. If, therefore, the revenue was raised, instead, by collecting the land rents which the people of Scotland create co-operatively, Scotland would transform its prospects.

The addition to annual income would exceed £11bn. That’s more than enough to pay for all the nurses and teachers that the SNP Government says it wants to employ. It’s enough to fill in all the potholes in the roads, and move the economy to full employment.

The bonus: Scotland would build an immune system against the land-led boom/bust cycle which repeatedly drags the UK into recession.

Now, that’s a prospect that investors would love! If people really believed the SNP’s intentions, enterprise north of the border would soon flourish on a sustainable basis.

At present, SNP politicians do not have a credible alternative model of High Finance to the one employed by the Westminster cliques which they so hate. If they really want to create independence for the people of Scotland, they can do so within the UK: by getting rid of the bad taxes that constrain the economy and impoverish their communities.

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