2 days ago
If I were Rachel Reeves: Hunt, Zahawi and Mel Stride give their advice
Sir
Lots of people think being chancellor is like being Santa Claus with lots of goodies to dole out. The reality is rather different as both Rachel Reeves and I have found out. As I explain in my new book Can We Be Great Again? the biggest difference between good and bad governments is the extent to which you manage to carve out space for long-term decisions as opposed to daily firefighting. Here are the three crucial things I will be looking out for when it comes to the long term.
First, given the austerity cuts about to be imposed on the police and criminal justice system, are we going to invest in modernising them so they really can deliver better outcomes with less money? Police officers spend up to eight hours a week on unnecessary admin tasks. They are crying out for modern IT systems which are normally the first casualty of any spending negotiations. If we want services to improve, things that unlock greater efficiency should be top and not bottom of a government's list.
Second, when Europe is at war, you cannot commit to a programme that costs 3 per cent of GDP and only provide 2.5 per cent in funding — as the government appears to have done. That is a scandalous and dangerous black hole if ever there was one — not least a fortnight before the Nato summit. I was at the table when Trump nearly pulled the US out of Nato in 2018 so we are taking a big risk. But if we plug the gap, France and Germany are likely to as well. If we don't, and the US pulls out of Nato, it will not be 3 per cent we are arguing over but double that. Keir Starmer has shown he can be an international statesman — now really is the moment we need him to do the right thing.
Finally, we have to avoid the doom loop of ever higher taxes creating ever lower growth. That means longer term supply-side policies to boost our growth rate. But in the short-term the only game in town is welfare reform as I explain in my new book. Getting the working age benefit bill to 2019 levels saves £49 billion — more than enough for 3 per cent of GDP on defence and to avoid tax rises. It would also be far better for people on benefits to be in work. Welfare reform isn't easy for Labour but with a large majority and four years in the mandate, if not now when?
Nadhim Zahawi
Rachel Reeves is in a difficult position. As the only cabinet member with real private sector experience, she should by now understand the difficulties businesses are facing because of the government's actions, not to mention families. Crucial to fixing this is to be able to reduce the tax burden, and that requires getting serious about growth. That will come from getting out of the way, deregulating and allowing supply-side reforms, but it also means attracting investment rather than driving it away.
The closure of the non-doms regime has been a catastrophe for this, signalling that Britain isn't interested in prosperity. A flat-rate charge for wealthy individuals and entrepreneurs, as they do in Italy, would be a smart move, and worth eating humble pie over.
Rome has had 2,200 multimillionaires settle there — raising hundreds of millions in tax and investment for the Italian people. If the chancellor can tempt them to the UK through a mix of a more welcoming tax regime, and a pledge to tackle law and order concerns, we could be back in business.
Even before counting their ingenuity and investment, if we attracted just 3,000 new wealthy residents to Britain, charging them £400,000 per year to have an equivalent of non-dom tax status, she would be able to reverse the winter fuel allowance cut.
Taking this further, and aiming for the sort of numbers America is hoping to attract with their Golden Visa programme, and she could do anything from abolishing the hated inheritance tax, which does so much to destroy family businesses and long-term investment in Britain, to an immediate increase in defence to 3 per cent of GDP or more. These are popular, easy fiscal policies which would unlock so much investment and revenue for the government. All Reeves needs to do is convince Labour not to hate wealth creators, which I grant may be a steep political challenge.
Nadim Zahawi was Conservative chancellor between July and September 2022
Sir Mel Stride
If I were in Rachel Reeves's shoes next week, I would do things very differently. First, I'd level with the public. Our country faces serious economic constraints and Labour's reckless policies are only deepening those problems — high debt, sluggish growth, rising cost of living.
LEON NEAL/GETTY IMAGES
The chancellor will no doubt tell us she is exercising judicious fiscal discipline, without mentioning that most of the new projects and programmes she is announcing are paid for with hundreds of billions in extra borrowing.
I'd focus on what actually moves the dial. Productivity, public service reform and fiscal responsibility. That means rooting out waste, and being clear-eyed about what government can and cannot afford.
And I wouldn't be afraid to say 'no'. Sometimes leadership means doing the difficult thing, not the easy or popular one. The scale of the spending being set out next week was confirmed in March, before the chancellor began being forced into embarrassing U-turns on welfare. We've seen what happens when fiscal credibility is lost — I would never let that happen again.
So if I were the chancellor, I'd offer a serious plan. Rebuild stability, drive growth and restore trust. No gimmicks. Just hard truths and a credible path forward for our country.
