Features

How red tape is strangling the UK economy

The booming world economy has never had it so good, and yet the UK is struggling. Rising taxes and political interference are to blame.

During last month's budget, Gordon Brown portrayed Britain as "performing manfully in a tough global environment", as David Smith points out in The Sunday Times. Yet according to the IMF's chief economist, Raghuram Rajan, the world has "never had it so good". It is enjoying its most protracted boom for over 30 years: global growth should reach 4.9% in 2006, eclipsing 4% for the fourth successive year.

Growth is continuing in America, major emerging economies are exceeding expectations and even the eurozone has been recovering. Indeed, against this backdrop, Britain's recent performance is hardly inspiring, with growth slumping to 1.8% last year and tipped to make a mild recovery to 2.5% this year. Given the global boom, why aren't we doing better?

Last year's slowdown, along with a gradual upswing in unemployment, suggests "we may have picked up some of the slow-growth bug" from the continent, thanks to our close ties with the region, says Smith.

Higher taxes and red tape have hardly helped matters, says James Frayne in The Business. The British tax burden will overtake Germany's this year, and whereas the UK once boasted one of the lowest rates of corporation tax in the OECD, it now has one of the highest. Red tape has proliferated amid EU regulations and "political interference", which explains why we have slipped from second to eighth in the Economist Intelligence Unit's league table of competitiveness. Furthermore, Britain suffers more graduate emigration than any other developed country, according to a recent World Bank report, which hardly augurs well for competitiveness.

Britain has joined the decline of Europe, says The Business. Gordon Brown placed a dynamic economy "firmly into the mainstream of European tax-and-spend levels, with consequent sclerotic levels of European-style growth".

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