Andrew Griffith has put his finger on one of the fundamental economic truths that Labour always seems determined to forget: before government can spend money, somebody has to create it.
In a wide-ranging interview with The Telegraph, the new Shadow Chancellor makes the case for an economy built around enterprise, lower and simpler taxes, cheaper energy, flexible employment, less regulation and, crucially, rewarding rather than punishing the people prepared to invest their money, build companies and take risks.
He is spot on.
Because there is something profoundly wrong with a political culture which talks endlessly about how wealth should be distributed, but increasingly seems embarrassed by the people who create that wealth in the first place.
Businesses are not an inconvenient cash machine for government. Entrepreneurs are not a problem to be managed. Profit is not a dirty word.
And aspiration should never become something for which people are expected to apologise.
A prosperous country needs prosperous businesses. It needs people prepared to take risks, put their savings on the line, employ somebody for the first time, invent something, open a shop, build a factory, develop new technology or turn an idea scribbled on a piece of paper into a company employing hundreds of people.
Those people need confidence.
They need to believe that if they work hard, invest and succeed, the state will not simply arrive demanding an ever greater share of the proceeds while simultaneously making it more expensive and complicated to employ people.
That is why Griffith’s argument matters.
You cannot have a strong state without a strong private economy
There is a basic economic reality underneath all of this which transcends party politics.
We want good hospitals, excellent schools, strong Armed Forces, decent roads, effective policing and support for those who genuinely cannot support themselves. But all of these things have to be paid for.
Ultimately, a government cannot indefinitely spend wealth which the productive economy has failed to generate.
The latest public finances demonstrate the scale of the challenge. The Office for National Statistics says Britain borrowed £18.3 billion in August alone, £3.5 billion more than the Office for Budget Responsibility had forecast. Borrowing during the financial year to August reached £77.3 billion, £8.1 billion above forecast, while public sector net debt stood at almost £3 trillion. That should concentrate minds in the Labour Party.
There are ultimately only so many places government can go for money: tax it, borrow it, or create the economic conditions in which businesses and individuals generate more taxable wealth.
The third option is the one Britain desperately needs.
Britain needs its risk-takers
One of Griffith’s strongest points is his warning about allowing highly productive people to leave Britain.
He describes driving away major contributors to the Exchequer as a disastrous mistake which risks hollowing out the tax base.
Exactly.
There is a peculiar strand of the Left’s politics which appears to imagine that wealthy people, entrepreneurs, investors and internationally mobile businesses will simply sit still while governments pile on taxes and regulations.
They won’t. Capital can move. Entrepreneurs can move. Investment can move. Businesses can decide that the next office, factory, laboratory or technology company will be established somewhere else.
And sometimes a business owner does not dramatically announce that he is leaving Britain. He simply decides not to expand. He does not take on the extra employee. He does not open the second shop. He does not invest in the new machinery. The aspiring entrepreneur looks at the costs and complications involved and decides that perhaps starting the company is not worth the risk after all.
Those decisions rarely make newspaper headlines. Collectively, however, they can suffocate an economy.
Eventually it becomes easier to close shop than grow one. That is the danger Labour never seem to understand.
Government cannot legislate prosperity into existence
Griffith knows something no-one on Labour’s front bench does: what it is actually like to operate at the top of major businesses. In fact of any business.
Before entering Parliament, he spent eight years as finance director of Sky, subsequently became its chief operating officer and later chaired Just Eat.
His observation about business finance ought to be printed above the door of the Treasury.
Every organisation has more things it would like to do than it can afford to do. Businesses understand this because reality forces them to. If costs continually exceed revenues, a private company cannot simply issue a press release blaming its predecessor, announce another spending programme and carry on indefinitely. Eventually the numbers win.
Government is not identical to a household or company, of course, but fiscal constraints are real. Britain is already seeing borrowing running above the official forecast, despite government receipts continuing to rise. The answer cannot permanently be another tax.
At some point Britain has to grow.
Make Britain the easiest place in the world to build something
Imagine instead that Britain’s economic mission was beautifully simple.
If you want to build something, Britain wants you here. If you want to employ people, Britain will encourage you. If you have invented something, Britain wants you to commercialise it here. If you want to establish the next great technology company, manufacturer, engineering business or financial enterprise, Britain will compete for your investment.
If you succeed, we will celebrate you rather than treating your success as evidence that you have somehow taken too much.
That is how confidence begins to return.
And confidence matters enormously because economies are driven not simply by today’s balance sheets but by expectations about tomorrow.
An entrepreneur employs somebody because he believes there will be enough business next year to pay that person’s salary. An investor commits capital because she believes the potential reward justifies the risk. A company builds a new factory because its directors believe Britain will remain somewhere worth doing business.
Destroy that confidence and the damage can take years to repair.
Welfare must remain a safety net
Griffith is equally willing to address another uncomfortable subject: welfare.
His argument is that incentives matter and that the welfare state should remain a safety net rather than becoming detached from an expectation that people who are capable of working should work.
There must always be compassion for people who genuinely need help. Of course. A civilised country looks after the sick, disabled and vulnerable. But compassion and economic responsibility are not opposites.
A successful welfare system should protect people when they fall while, wherever reasonably possible, helping them regain independence. Work provides not merely tax revenue but skills, independence, opportunity and the possibility of advancement.
And every pound spent by government ultimately has to come from somewhere. Nothing is free. The taxpayer has to pay for it.
Growth changes everything
Perhaps the most important part of Griffith’s argument concerns growth.
He points out how different Britain’s prospects would look if the economy could sustain growth of 2 or 2.5 per cent rather than remaining trapped in persistent sluggishness, particularly for younger generations seeking opportunity. That is the prize.
Growth means more businesses. More businesses mean more jobs. More jobs mean more taxpayers. More taxpayers mean stronger public finances.
Stronger public finances create greater scope to fund defence and public services without continually reaching deeper into everybody’s pockets.
Economic growth is not some abstract obsession of accountants. It means a young person getting their first job. It means a family opening a new business. It means somebody receiving a pay rise. It means an entrepreneur deciding to invest. It means Britain producing more of the resources required to pay for the country we want to be.
There will inevitably be arguments about precisely which taxes should fall, which regulations should disappear and how quickly public spending can be reformed. Those are legitimate political debates.
But the underlying principle should be beyond dispute.
There can be no sustainably prosperous public sector without a prosperous private sector behind it.
Britain needs wealth creators. Britain needs entrepreneurs. Britain needs investors. Britain needs people with the courage to take a chance on an idea.
And Britain desperately needs a government which understands that its job is not to stand over those people with an ever larger rulebook and tax demand, but to create the conditions in which they can succeed.
Andrew Griffith understands that argument.
The question now is whether Labour is finally prepared to listen. Of course not.
The sooner this dreadful Labour government is gone, the better.
By Claire Bullivant
