Thread by @NeilDotObrien

Here's the argument of my new paper in graph form.

First, after 9 years of difficult decisions, debt is set to fall from 83 to 73% GDP. If we reduce it more slowly or even keep it flat, that unlocks up to £190 billion to cut tax or increase spending over the next 4 years (1/)

But we can't go crazy. We just had a big increase in debt. Britain is an ageing society. Financial repression doesn't cut debt 3-4% every year as in the postwar years. As OBR has pointed out, borrowing costs are more likely to go up than down. OBR debt projection looks scary (2/)

Hence the suggestion in the paper of an expert-led Commission on Sustainable Public Services, running over the next SR period. The solutions to our long term debt problems have been discussed for years, but haven't landed. 2017 election showed how not to do it. (3/)

Some fiscal headroom gives space to invest in public services. We should take real school spending per pupil back to its 2015 peak and keep it there.

We should invest in the police and our prisons to keep crime down... They are relatively small budgets. So you could make a big difference.

NB Police = £14 billion (E&W) and prisons £4 billion respectively, out of total spending of £840 billion (5/)

The big conversation we're not having at the moment is about growth. Lets learn from countries that have turned themselves around. Take Ireland, once the poor man of Europe. Since 1990 their income per capita has soared from 25% below the UK level to 45% above it. How? (6/)

As %GDP, Ireland attracted four times more inward investment than the UK. All those new factories and offices have transformed productivity, putting rocket boosters under Irish wages. Ireland’s low rate of corporation tax, at just 12.5%, has been a magnet for investment. (7/)

Fixed investment in Britain has been lower than the OECD average in every year but one since 1960, while rising countries like South Korea have nine times more robots per manufacturing worker than the UK, making them much more competitive. What could we do about to fix this? (8/)

Britain’s tax treatment of investment is the least generous of any G20 country, helping explain why investment and productivity in Britain are so much lower than competitors. My report calls for a 50% increase in capital allowances to drive up investment (9/)

There’s a double whammy from a tax system hostile to investment: it is particularly bad for poorer regions, because they are more reliant on manufacturing, which requires twice as much capital investment per worker as the rest of the economy. (10/)

While manufacturing accounted for around a quarter of productivity growth nationally since 1997, it provided 40-50% of productivity growth in poorer regions like Wales, the West Midlands and North West. More generous capital allowances could help poorer areas grow. (11/)

The evidence is clear that more balanced economies are stronger overall. There are no large countries which have a more regionally imbalanced economy than the UK and are also richer than the UK. (Hence my title - "Firing on all cylinders") (12/)

It's clear why. In an unbalanced economy resources like land and infrastructure are overloaded in some parts of the country, and underutilised in others. People don't simply leave their homes in the face of local economic problems, so there are probs matching people to jobs (13/)

The most effective rebalancing policies attract high-skill private investment to poorer areas. We should learn from the way that Mrs Thatcher used investment tax breaks to lure Nissan to invest in Sunderland, transforming wages locally, and indeed a whole moribund industry (14/)

So we should cut the tax on investment even further in poorer regions, to attract inward investment there. We should give the department of trade (DIT) a new mandate to drive inward investment to poorer places, and rebalance the government’s most growth-enhancing spending. (15/)

The SR must also cut tax for the low paid. With income tax personal allowance now at £12,500, compared to a National Insurance threshold of just £8,600, raising the threshold for National Insurance would help more poor households than raising the personal allowance. (16/)

Families with children are twice as likely to be poor. So helping working families with children on low incomes should be top priority. Until the 1970s we used to recognise children in the tax system, because having children reduces your ability to pay tax. (17/)

Focussing tax cuts on:

-Threshold not rate
-NI not income tax
-Families with children

Makes a huge difference to how much poorer groups are helped. Compare the distribution of a cut in the IT rate with a NI threshold increase for families with children (poorest on left) (18/)

Let's cut tax further for poorer working families with “UC Plus” - dramatically increasing UC Work Allowances & creating a separate work allowance for 2nd earners, so people keep more of what they earn. Increasing Work Allowances is much better than changing the taper rate (19/)

UC Plus would increase incomes for working households by up to a further £4,300 for those who benefit most. (20/)

For want of a better phrase, need a One Nation Spending Review:

-> Funding good public services.
-> Backing business, but in a way that helps poor areas.
-> Supporting family life,
-> Helping those on low incomes to earn more, and keep more of what they earn.

(21/)

I'm more convinced than ever that strong economies are built on broad foundations: more geographically balanced economies are richer; and economies where all groups see the benefits of growth have higher employment. A strong economy is one that is firing on all cylinders. (22/22)