Election question: what does ‘growth’ mean and how is it to be funded? ’

[DazedAndConfused2024]

I’ve named changed for this - it’s a sincere question. I’m very sad at the current state of the country but feel utterly disenfranchised.

What I don’t understand is how all parties now seem to be united on the concept of ‘growth’ as a necessary way forward. Also that the current levels of taxation on the squeezed middle class and working class (working poor) are too much.

But where is the ‘growth’ and cash going to come from?

There is currently a small percentage of net contributors funding the balance sheet.

You can only squeeze people so much before it tips the balance and actively works against encouraging people to be aspirational.

Where is the growth and the funding coming from?

If not general taxation - then what?

Commentators here have suggested an internet tax - but others have pointed to how it hasn’t worked elsewhere.

Land tax? (Land is cgt free) wealth tax?
Inheritance tax? What?

The whole point of "growth" is that it increases revenue to the Treasury without having to put taxes up. We can't afford to fund our public services properly at the moment, but people are already paying a lot of tax at the moment, so the theory is that having a slice of a larger overall pie will be the solution.

Where it is coming from is a different question. The government could borrow to invest in stimulating growth. They could legislate to change stuff that currently blocks growth, like the planning regulations etc. Truss's approach was to cut taxes in the hope that people would spend more, but that obviously didn't have quite the desired impact.

There are valid questions about the type of growth that is desirable, particularly in light of climate change etc. And whether we can realistically expect to just keep growing the economy forever.

Growth means increasing private sector activity (more new businesses starting / existing businesses getting busier and making more money). In theory that means more tax is generated allowing the government to spend more on public services. Win win.

However it is obviously easier said than done.
The main problem being we live on a planet with finite resources so infinite growth is impossible.

To stimulate growth Buisiness also needs governments to make things easy to them so a healthy plentiful and skilled workforce, good transport systems, good trading relations with neighboring countries. The Tories have not been doing this lately which is why growth has been poor.

Covid, wars, climate change etc also play a big part.

Yep, agree. I suspect just by having a closer relationship with Europe and aligning with their rules on imports/ exports ( which the Tories won't do because of their ERG lobby) will increase GDP. I think you need long term investment in infrastructure, and sustainable decent growth through investment industries like sustainable energy, and a decent technical education, not trying to chase Chinese manufacturing industries who are far more efficient than us, but things like the creative industries, which we are world beating. But it will take money we don't have because no maintenance has been done, and austerity has mean long-term lack of investment and led to no resilience in the system to deal with shocks like covid. Someone needs to really take the bull by the horns and cause a massive shakeup, but we have an ageing population and a younger population that is not in a healthy state. I'm not an economist so my argument coukd probably be picked apart in 10 seconds, but that's how I feel, so I would appreciate someone telling me if I'm wrong. If not though investment in the future I can't see how we will not be in anything but a slow decline.

Growth is the reason Labour’s been cosying up to business. A government can aid growth by providing an environment that encourages investment. A closer relationship with the EU, tax incentives for investment, planning laws that encourage building. There are lots of levers a government can use to improve the prospect of investment in the UK and encourage the injection of cash into the economy.

You might find this helpful @DazedAndConfused2024

https://x.com/TheIFS/status/1797613540804894907

To me, growth is...

Unnatural. Nothing continues to grow forever without either stopping or shrinking.

Growth is a way of putting business over the planet and life on the planet. It is the wrong thing to focus on.

Growth is a way of focusing on the wrong thing and will continue to make people sad and heart sick.

The entire Capitalist system requires continuing economic growth to operate. We seem to have a degree of consensus that the UK is a broadly capitalist mixed economy. OP seems to think growth would come from tax rises or new taxes - it is more usually achieved via stimulus such as tax incentives on investment.