Sunday, January 26, 2020
Forget the Romans, what has the EU ever done for us?
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

The moment has nearly arrived. Unless something really unusual happens in the next few days, this will be the last column I write here while Britain is a member of the European Union. By next weekend we will be out. And, while there will then be a transition period, at least until the end of the year, from 11pm next Friday, we will be a “third country”, no longer an EU member state.

It is possible, in 10, 15 or 20 years’ time that a future politician will decide that Britain is best served by reapplying for EU membership. But both the UK and the EU will have changed by then, and the current highly favourable terms of membership – including a permanent opt-out from joining the euro – will not be on offer. And I will have long since stopped writing in this slot, should it still exist.

Until the past 3-4 years, EU membership has been in the background, not particularly an issue for the public. Like the weather, it had its good and bad points and, like the weather, it seemed permanent.

But, as we prepare to leave, it is a good time to reflect. The sad death of Terry Jones of Monty Python offers a suitable framing device. In Life of Brian, either the Judean People’s Front or the People’s Front of Judea – readers will tell me which one – ask “what have the Romans ever done for us?” So the question, in tribute to Jones, is what EU membership has ever done for us.

Most people will be aware that the EU is important for UK trade. EU membership, along with successive rounds of world trade liberalisation – broken by the US-led protectionism of recent years - , has made our economy more open, and openness is good for growth.

In 2018, the last full year for which trade data is available, more than 49% of UK exports of goods and over 40% of exports of services went to the EU; a combined 45% or so.

In a clumsy, investment-curbing intervention last weekend, Sajid Javid, the chancellor, said that business should prepare for a future in which UK rules and regulations were no longer aligned with the EU. Businesses, he suggested, had had more than three years to prepare for this.

This is nonsense. Until last summer, government policy was that the UK would be closely aligned with EU rules for trade in goods. And, even if things have changed under the new government, there is a way of doing these things. As one exasperated former cabinet minister said to me, we will be fully aligned with the EU when we leave. “Dynamic” realignment will happen gradually, and over many years. Javid did offer UK business leaders a bit of reassurance in Davos by saying that we will not diverge “for the sake of it”.

Some sectors of the economy will decide to remain aligned to EU rules, whatever the government chooses to do. This will help determine whether there is sharp fall-off in Britain’s EU trade, as some fear, or more likely a gradual weakening.

The government, in seeking to move away from EU rules, appears to have fallen for the myth that its red tape is strangling British business. It is not. When it comes to product and market regulation, the UK is at the flexible end of the spectrum, OECD figures show, alongside other “Anglo-Saxon” economies such as America, Canada, Australia and New Zealand. The red tape that stifles is largely home-grown, in planning, the tax system and domestically-imposed health and safety rules.

As for trade, the former Australian prime minister Malcolm Turnbull put it well the other day when he said a UK trade deal with his country will not be a substitute for EU trade. Indeed, UK exports to Australia are 1.7% of the total. Add New Zealand and it takes it up to 2%. The government hosted an Africa summit last week. Only 3% of UK exports go there. Yes, we sell more to Ireland (5.5% of exports) than Africa and Australasia combined. Some 9% of UK exports go to the Commonwealth, a fifth of the EU share, and the Commonwealth share is lower than it was a few years ago.

The trade picture, perhaps, is familiar, the broader economic record less so. In the aftermath of the Second World War, European countries, including Britain, were in receipt of Marshall aid to rebuild their economies.

Some, the original six of Germany, France, Italy, Belgium, the Netherlands and Luxembourg moved toward closer economic integration in the 1950s, first with the establishment of the coal and steel community and then the European Economic Community (EEC).

Britain responded, in 1960 by being instrumental in setting up the EFTA, the European Free Trade Association. Indeed, it is interesting that if we had stayed with EFTA, and never joined the EEC, we would probably now be facing a closer relationship with the EU than the one we appear to be heading for.

But, and only older readers will understand this reference, EFTA was the Betamax to the VHS of the EEC – the one that did not get widely adopted – and soon it was clear to just about everybody, including business, that in the 1950s and 1960s Britain’s economic performance fell behind European competitors. The clamour to join the EEC followed.

The best overall measure of an economy’s success, and of prosperity, is gross domestic product (GDP) per capita. Growth in Britain’s GDP per capita fell behind the integrating European economies, notably Germany and France, in the 1950s and 1960s. After membership, however, it improved, with the turn occurring in the late 1970s.

Sunday, January 19, 2020
A rate cut now would be a vote of no confidence
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

Things have taken an unexpected turn, which is always interesting. Financial markets have, in the space of a couple of weeks, gone from thinking that there is no chance of an interest rate cut this month to expecting one. January 30 will be the last interest rate decision presided over by Mark Carney as Bank of England governor.

Though he does not hand over to Andrew Bailey until March, who will be in place for the next monetary policy committee (MPC) meeting later that month, markets had expected his final meeting to be, in interest rate terms, a non-event.

That would not be unusual. Carney will, by my reckoning, have chaired 66 MPC meetings when he steps down and on only three occasions – once to cut, twice to raise – have interest rates been changed in that time.

Markets, however, see roughly a 60% chance of a cut at the end of this month. Are they right to expect it? And, as importantly, would the Bank be right to cut rates?
The weeks surrounding Christmas and New Year are traditionally fallow when it comes to new economic data, and harder than usual to interpret. Lord (Mervyn) King, Carney’s predecessor, once said that for retail sales, the true meaning of Christmas only became clear by Easter.

In its last meeting of 2019, on December 19, there were two votes to cut interest rates but the majority on the MPC, the seven voting for no change, declared that the existing stance – a Bank rate of 0.75% - was “appropriate”.

The economy was doing more or less as expected, they said, and while growth was expected to be “below potential” in the short term, it should “rise above it next spring, given the assumed combined support from lower uncertainty, easier fiscal policy and somewhat stronger global growth”.

The lower uncertainty refers to both the December 12 election result and the certainty of Brexit on January 31, while the spring will see the economy gain from Sajid Javid’s planned spending boost and the chancellor’s cut in National Insurance, achieved through raising the threshold at which it starts to be paid from £8,628 to £9,500.

The question for the majority, then, is what has changed over the past month. In terms of hard data, there has not been a lot. Monthly gross domestic product figures showed a 0.3% fall in November, alongside modest upward revisions in earlier months. They suggest that the economy is on course to have stagnated in the final quarter of 2019. Retail sales have done worse than stagnating, falling by 0.6% last month, and by 1% in the fourth quarter.

Inflation is also well below target, dropping to 1.3% in December, from 1.5% in October and November. But, given that the Bank was expecting a 1.4% average in the final quarter of last year, that will not have come as too much of a surprise.

“Soft” data, in the form of surveys, suggests that something is stirring, along the lines that the MPC majority expected. It began with the service sector purchasing managers’ index, an indicator which is set to be prominent again very soon. It showed a stronger reading than the earlier “flash” estimate, and suggested business confidence had been boosted the election result.

An even stronger finding was in the Deloitte survey of CFOs (chief financial officers), a week or so ago, it showed a sharp rebound in confidence and stronger expectations for investment and employment.

Perhaps most impressive of all was the latest RICS (Royal Institution of Chartered Surveyors) residential market survey. For those who do not follow it, I can tell you that the RICS survey has been downbeat for some time. But sales expectations picket up “noticeably” after the election, it said, as did enquiries from buyers and agents’ price expectations. Buyers and sellers are more confident.

If you were looking at the hard data, which is backward looking, and contrasting it with the survey data, some of which is forward looking, you might conclude that there is not much of a case for a rate cut.

Sunday, January 05, 2020
Hoping for the best on Brexit and world trade
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

This is a time for looking forward, not back, but I thought it would be instructive to look back briefly at what I have said in recent years in these new year pieces. This time last year I wrote that the economic outlook depended to a disturbingly large extent on achieving a smooth Brexit but I was also worried about the balance of payments.

I was right to be worried. Though there was an improvement in the third quarter, the current account deficit in the first quarter was an elephantine £37.4bn, 6.8% of gross domestic product, slipping to 4.4% in the second quarter and 2.8% in the third. It remains hefty.

Two years ago, after a good year for the global economy, which had helped cushion the effects of Brexit uncertainty on Britain, the question was whether it would continue. But 2018 turned out to be disappointing, mainly because of Donald Trump’s trade wars. Protectionism, as in the past, had showed itself to be detrimental to growth.

The global economy was also a theme three years ago, when it was possible to look ahead to a brighter period for the global economy, which was helping the economy in Britain. So it turned out. In 2017 America and the world benefited from “good” Trump, the tax-cutting one. Sadly, that version did not last.

Four years ago, and it seems like an age, I wrote that the EU referendum was the biggest cloud on the horizon, as it has proved. The question now is whether that cloud has lifted.

The two themes of the past four years remain the most relevant now. Certainly, I would hope to be writing a lot less about Brexit in the coming year. Will decision makers in the economy put it to one side? If so, could that combine with a better outlook for the world economy, driven by an easing of trade tensions, than last year’s weakest-since-2009 performance, so that things could turn out better?

Most forecasters, it should be said, are maintaining a cautious attitude to the prospect of a meaningful growth revival this year. If I take those which topped my annual forecasting league table last week, their growth predictions, as submitted to the Treasury’s monthly compilation, published just before Christmas on December 18, were still pretty downbeat.

Santander has a prediction of 1% growth for 2020, as did HSBC and Schroders, with Natwest Markets and Daiwa Capital Markets slightly stronger at 1.3%, and Pantheon Macroeconomics 1.4%. The average growth prediction for 2020 was just 1.1%, which would make 2020 the weakest year since the horrible year of 2009.
If there is a health warning to be attached to these forecasts, going beyond the normal note of caution, it is that most forecasters have yet to take full account of Britain’s changed political situation and, for the first time, near-certainty about the date of Britain’s formal departure from the EU.

This opens up a real-life economic experiment. Has it been just the uncertainty bearing down on the economy’s performance? Or is it the predicted economic hit as we move towards a weaker relationship with our biggest trading partner? I would argue mainly that second of these, while not ignoring the uncertainty factor. But we should also remember that, as far as business investment is concerned, as I have long argued, the uncertainty will not end on January 31. The latest Bank of England decision maker panel survey shows that 53% of firms think Brexit will remain a major source of uncertainty, with a significant proportion not expecting it to be resolved until at least 2021.

I am not suggesting, on any scenario, that we should be looking forward to a Boris boom or, as one Tory-supporting tabloid newspaper oddly had it, a roaring twenties (there was a general strike in the last one, and the Great Depression followed it).

The jury is still out on the new government. Its first few months last year, dominated as they were by Brexit and parliamentary shenanigans, saw a lot of talk about the future but very little action. Blue-sky thinking is all very well but it needs to be applied.

Sunday, December 29, 2019
Forecasters were too upbeat on growth but too gloomy on jobs
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

The table to accompany this piece is also in the Sunday Times.

The moment has nearly arrived, not just the end of the year but the end of the 2010s decade. Nobody has yet come up with a good name for this decade, which was never roaring though probably was a long period of convalescence from the financial crisis.

Before coming on to 2019, and how economic forecasters did or did not do, a few statistics from the decade now ending. Growth, assuming a 1.3% outturn for 2019, will on currently available figures have averaged 1.8% during the decade, with the strongest period in the middle.

That 1.8% average, curiously enough, is exactly the same as in the 2000s, strong 2.9% average growth to 2007 being dragged down by the deep recession of 2008-9. For other decades the figures are 1990s 2.2%, 1980s 2.7% and 1970s 2.6%. In the golden age for the world economy of the 1950s and 1960s, growth averaged 3.2% and 3.5% respectively.

Inflation has averaged 2.2% over the past decade, a touch above the official 2% target, despite two separate bouts of sterling weakness which push up import prices and therefore inflation, including a period at 5% in 2011. There was a time when some expected the ultra-easy policies pursued by central banks to lead to very high inflation, failing to recognise that they were done in order to compensate for post-crisis monetary weakness.

The unemployment rate averaged 6.1% in the 2010s, having hit a peak of 8.5% in the wake of the crisis, and could have been very much worse. At the end of the decade, the unemployment rate is just 3.8%, the lowest for 45 years.

What about 2019? The outcome was a curious one for economic forecasters. Most were too optimistic on economic growth, which came in lower than they expected, while too pessimistic on unemployment, which they thought would be higher than it turned out to be. The error was due to an expectation, which was not delivered, that productivity would begin to recover, instead of which it has fallen. Even slow growth without productivity means more people in work.

Forecasters also generally expected inflation to be higher than it has turned out to be. Most forecasts made a year ago were for inflation to end the year closer to 2% than 1.5%. The difference is small, but it matters.

Many also got it wrong on interest rates. This time last year, central banks appeared to be in tightening mode. America’s Federal Reserve signalled that more rate hikes were on the way, while the European Central Bank had halted its programme of quantitative easing (QE). It has not turned out like that. The Fed has instead cut rates and the ECB resumed QE.

Two things have complicated things for forecasters, though the majority got close to the eventual outcome. The big domestic uncertainty was Brexit, and the timing of it.

Most thought that the initial leaving date, March 29, would be honoured. With the first phase of Brexit completed, the Bank would be free to get on with its declared aim of “gradual and limited” interest rate rises. It did not happen. The UK was still in the EU after March 29, and after October 31. Whether this weakened growth, or just made it more volatile between the different quarters of the year, can be debated. There were fears in the run-up to both these possible leaving dates of a no-deal Brexit.

Sunday, December 22, 2019
As well as infrastructure, regions need a shot of entrepreneurial spirit
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

With the passing of the years, I find it increasingly useful to scribble reminders for myself on Post-it notes, as an aide memoire of things that have to be done. I am pleased to say that Sajid Javid, the chancellor, adopts the same approach, or at least he did on his Twitter feed, even though he has an army of officials to keep him on track.

The chancellor’s list of things to do had six items: GBD; NHS, police and schools; an infrastructure revolution; cutting taxes for working people; keeping the economy strong and walking Bailey.

I had to think about GBD for a while, though you will probably have spotted that it stands for getting Brexit done. Walking Bailey is not a reference to Andrew Bailey, the new Bank of England governor, but to Javid’s dog.

As well as his Post-it notes, Javid addressed Treasury staff, telling them: “We are a department that doesn't just think about numbers and spreadsheets and tax and spend we are the fiscal reform, the economic reform department.

“There is much more ambition now. The challenges are bigger, but the ambition is there to try to meet those and we can deliver more. All that energy can now go into thinking about the future and planning for the long-term.”

He knows that he is under pressure to deliver as much as his officials are. The Westminster rumour mill has Rishi Sunak, his deputy as Treasury chief secretary, is a Downing Street favourite and, for some, a favourite for the chancellorship. He featured prominently during the election campaign and supported Brexit in 2016, Javid, meanwhile, ensured that the Tories did not promise the earth, to the detriment of the public finances, in their manifesto. There is a bit of ancient City rivalry between the two too; Sunak was with Goldman Sachs, Javid Deutsche Bank.

Many is the chancellor who, in his pep talk to officials, has stressed the need for the Treasury to look beyond the numbers into embracing the kind of reforms which change people’s lives. Gordon Brown, when he entered the Treasury in 1997, was perhaps the most dramatic recent example of a chancellor being determined to refocus the Treasury as an economic rather than a finance department, dedicated to raising the economy’s underlying performance. It was one reason why he wanted to grant independence to the Bank of England; to get away from the question taking up too much of the time of former chancellors: when are you going to raise or lower interest rates?

That question, together with the ever-present fear of a sterling crisis, persuaded an earlier Labour government, under Harold Wilson, to establish a separate Department of Economic Affairs, tasked with the job of implementing the government’s economic plan. Tucked away in a corner of the Treasury, and lacking in political weight after its first head, George Brown, was moved, it was not a success, though it lived on as a model for pointless government departments in Yes, Minister.

Javid is keeping things in-house, even though he is treading in the footsteps of his predecessors. The question is whether he can succeed or, perhaps more relevantly, do so quickly enough to deliver on the Tory promise to its new voters in the midlands and north to “level up” the economy.

Infrastructure, what he describes as his “revolution”, is Javid’s signature policy; taking advantage of low borrowing costs to spend more. The roughly £100bn extra the government intends to spend over the next five years will do three things.

It, along with the boost announced and partly implement by Philip Hammond, when he was chancellor, will raise capital spending by the government to significantly above its average in recent years (though well below 1970s’ levels, when it was boosted by nationalised industry spending).
It will meet the demands of business groups and think tanks for a more even spread of infrastructure spending across the regions, against the charge, supported by the data, that it has been too heavily concentrated in London and the southeast.

And it will, over time, if spent wisely, rather than on vanity projects and white elephants, deliver improvements in productivity and overall economic performance, narrowing the gap.
But it will take time. However “shovel ready” the infrastructure projects are that the government wants to get done, they will not be built in a day. Their impact will pan out over many years.

That is also true of measures to boost R & D spending through a more generous tax credit, and to raise education and skill levels. They are a long-term response, and arguably all the better for it.

Sunday, December 15, 2019
A big win - now Tories need to reboot the economy
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

The best post-election stories, as far as economic policy is concerned, are those when there is a change of government. There is the hardy perennial of the Tory chancellor Reginald Maudling leaving a note in 1964 to his Labour successor and friend Jim Callaghan, saying: “Good luck, old cock. Sorry to leave it in such a mess.”

More recently Liam Byrne, Treasury chief secretary during Gordon Brown’s Labour premiership, achieved legendary status by leaving a note for his successor in 2010, saying “I’m afraid there is no money”. Byrne, who has been quietly working away as shadow minister for digital, and was re-elected as an MP on Thursday, knows that he will have to go some for that not to be his political epitaph.

There was no need for an exchange of letters this time, unless Sajid Javid penned a note to himself, and the Tories' overwhelming victory has removed the risk of a Corbyn government. As noted here in recent weeks, that had become the big fear for business, and there has been a collective sigh of relief.

Boris Johnson's comfortable victory has not, however,removed the challenges facing the economy which, if not successfully tackled, will mean that Thursday's triumph will be followed by disappointment.

As it happens, the latest official figures went a long way to setting out the post-election economic challenge. There are two ways of measuring the economy’s annual growth rate. The conventional way is to compare the latest estimate for gross domestic product with that a year earlier. On this basis, growth in October was just 0.7%, its weakest since October 2011, when the economy was climbing groggily out of the financial crisis and had just been hit with a big VAT rise.

The other to measure growth is through the year; in other words where GDP is at the end of the year compared with the beginning. On this, the figures tell us that monthly GDP in October was exactly the same as in February, and only a smidgeon, 0.3%, above January’s level.

It would be foolish to deny that uncertainty has played a role in this; two separate bouts of no-deal worries in March and October, and the election itself. But I note that the economy was far less troubled during the election periods of 2015 and 2017, and that the growth slowdown of the past three years, its slow puncture, has now lasted long enough to be regarded as a trend.

How do we revive growth? It is always possible to bump up growth temporarily through higher government and consumer spending. A significant public spending boost for 2020-21, more than 4% in real terms on day-to-day expenditure, was announced by Sajid Javid in September.

There was, you will recall, a short-term boost for consumer spending, mainly in the form of sharply higher retail sales, in the months following the EU referendum three years ago. That has been replaced by today’s phenomenon in which many well-known retailers are hanging on for dear life.

Neither, however, point to sustainably stronger growth, or offer the prospect of lifting the economy’s growth rate much above a paltry 1% next year. The British Chambers of Commerce, whose new forecast for growth next year is precisely 1%, warns that higher government spending will not offset falling business investment and weakening net trade.

There are thus two big challenges. The first is one that has preoccupied policymakers for a long time; the economy’s unbalanced nature. Last week I highlighted figures showing the deterioration in Britain’s net overseas investment position.

Since then we have had statistics showing that, in the 12 months to October, the trade deficit in goods was a whopping £155bn, compared with £136bn in the previous 12 months. Of this, about two-thirds is in manufactures. Until 1982, Britain had never had a trade deficit in manufactured goods. Now it is roughly £100bn a year.

An economy overly dependent on consumer spending does not have to run eyewateringly large trade deficits. Thanks to the peculiarity of the UK industry – we export most of the cars we make here, while importing most of those we buy – trade in cars was roughly in balance in 2017 and 2018. But the writing is on the wall for the model that UK-based carmakers have relied on, frictionless trade with the EU by virtue of the single market, allowing integrated supply chains, which has enabled that peculiarity. UK car production in the first 10 months of the year was down by 14.4% on a year earlier.

Sunday, December 08, 2019
The election's nearly over, but uncertainty will remain
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

The first rule of forecasting is that the closer is an event, the more cautious you should be about predicting the outcome. That will not stop a wave of such predictions in the coming days, and it has not stopped the financial markets from, for example, pushing the pound higher on the assumption of a Tory majority being delivered on Thursday.

I do not need to tell you that the markets, taking their lead from opinion polls as well as bookmakers’ odds, sometimes get it wrong. They did not anticipate the vote for Brexit or Donald Trump’s election victory in 2016, or that Theresa May would fall short of a majority in 2017. Human nature being what it is, people often predict the outcome that they regard as the most palatable.

Let me, however, go with the flow. The polls indeed suggest that a Tory majority is more likely than the next likeliest alternative, which is that the Conservatives are the largest party in a hung parliament.

If the first of these is the case, it will make a difference. Every business person I have spoken to in recent weeks has raised the spectre of a Labour victory. The “Corbyn shudder”, the unprompted reaction of the vast majority of them to the prospect of a Jeremy Corbyn-led Labour government, has become a recognised body language. Removing that uncertainty will provoke a massive sign of relief among businesses.

The question is what else has changed. You have to grit your teeth during election campaigns, when facts have long since ceased to be sacred. Every time a Tory talks about Britain’s strong economy, I am reminded that it has slowed to a crawl, and that the purchasing managers’ index (PMI) for November, at 49.3, was below the 50 dividing line between expansion and contraction.

The PMI was below its eurozone equivalent, which was above 50, and suggests that the pattern of the past three years, in which even the troubled eurozone has comfortably outgrown the UK, is being maintained.

There are other concerns, highlighted by official data. Britain’s external position is pretty poor. The size of the current account deficit, £109bn over the last 12 months, roughly 5% of gross domestic product, would in the past have been enough for a run on the pound.

The seeds of further balance of payments difficulties are being sown. In the past, service-sector earnings and investment income from abroad were enough to keep us afloat. That is no longer the case. Since 2016, the stock of investment abroad by British companies has been exceeded by the stock of foreign investment in the UK, as overseas buyers have snapped up commercial properties and businesses at what for them are bargain basement prices because of the pounds. Britain’s net negative investment position is now almost £112bn. That will be reflected in future in more investment income leaving the country than coming into it.

Sunday, December 01, 2019
More Stoke-on-Trent than Singapore-on-Thames
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

General elections are occasions when political parties can set out their visions for the country, allowing voters to choose between their wares. Labour has done so emphatically, as discussed here last week. We can say, beyond any doubt, that the country would look very different after five years of a Jeremy Corbyn government.

But what about the Tories? They have come out with a manifesto so devoid of content and vision that they might as well have not bothered. If it was intended to be instantly forgettable, it was a great success. Otherwise, instead of the roar of a lion, we had the squeak of a mouse.

Now I know what the politics behind this was. The Tories were desperate to avoid anything that would get in the way of the central message of “getting Brexit done”. The ghost of Theresa May’s 2017 manifesto, and a social care plan hastily put together and presented to voters, and most of an unconsulted cabinet, hangs heavy over Conservative Campaign Headquarters.

Even so, the omens are not good. Readers will remember a time when enthusiastic Tory Brexiteers talked about creating a “Singapore-on-Thames”, a super-competitive, low-tax, de-regulated, enterprise economy after Brexit.

It was the kind of message that provoked concern elsewhere in Europe, and a bit of a pushback from some Singapore people, who protested that it was not the freebooting entrepreneurs’ paradise it was portrayed as. Even Philip Hammond, the former chancellor, talked of adopting a different model for the UK economy. In the immediate aftermath of the referendum three years ago, this newspaper advocated cutting the main rate of corporation tax to 10% to ensure that Britain remained a magnet for foreign direct investment.

Well, looking at what the Tories have in mind for the next five years, it looks like more of a case of Stoke-on-Trent or Stockton-on-Tees than Singapore-on-Thames. Both are estimable places. Stoke was the pottery capital of the world and Arnold Bennett, one of my favourite authors, is one of the city’s most famous sons. Stockton can lay claim to the railway heritage of George Stephenson and the inventor of the friction match. People in both places would also accept, however, that a successful past is no guarantee of a glorious present; far from it.

Under the Tories’ modest proposals, the main rate of corporation tax will stay at 19%, rather than being cut to 17%, as previously planned, so a lot higher than 10%. Beyond the announced rise in the National Insurance threshold to £9,500 next April, there is no obvious room for tax cuts if the party is serious about meeting its fiscal rules.

The starting position on tax is what the Institute for Fiscal Studies (IFS), describes as the “highest sustained level” for the tax burden since the late 1940s, when the economy was being brought down from a wartime footing. Most other European economies have a higher tax burden than Britain, it should be said, and under Labour it would be higher still. But the Tories under Boris Johnson appear to have shed their ambitions to be a low-tax party.