Taxes hinder recovery

IEA members co-sign letter to the Daily Telegraph

The below letter was printed in The Daily Telegraph on 8 July 2011:

SIR – Last Sunday, some 50 academics signed a letter warning that the economy was too fragile to withstand the Government’s planned spending cuts (report, June 6).

Only a minority of the signatories are practising mainstream economists, which might explain why they criticise the Government’s “break-neck deficit reduction plan” and propose higher taxes, more regulation and another “green deal”.

In reality, the Government is shaving just 0.7 per cent a year off real expenditure over the next four years and will still be running deficits a full seven years on from the financial crisis. And the academic evidence suggests that cutting deficits will not harm growth in highly indebted developed countries with floating exchange rates – like the United Kingdom.

Furthermore, existing “green” measures will already raise energy prices by 30 per cent at a time when companies are struggling under the weight of a government sector that absorbs over half of the nation’s income.

Tax, regulation and expensive, ill-designed “green” measures will not cure our problems. Indeed, the economic evidence suggests that they are strangling our recovery.

Dr Eamonn Butler
Director, Adam Smith Institute

Professor Philip Booth
Cass Business School

Professor Niall Ferguson
Harvard University

Professor Timothy Congdon
Lombard Street Research

Tim Knox
Centre for Policy Studies

Mark Littlewood
Institute for Economic Affairs

Miles Saltiel
Fourth Phoenix Research

Terry Arthur
University of Buckingham

Keith Boyfield
Leriba

Tim Ambler
London Business School

Ruth Lea
Arbuthnot Banking Group

Jim Bourlet
Economic Research Council

Dr Tim Evans
Cobden Centre

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