Rachel Reeves plans to create a “British Silicon Valley” between Oxford and Cambridge. Forgive me if I don’t get excited. Economic growth doesn’t come from Ministers talking about it on breakfast television. It happens when people aren’t shackled, taxed, and bossed about by a bloated state apparatus.
The idea of a “Silicon Valley” in a country weighed down by some of the highest taxes in the developed world is laughable. Add to that the endless web of regulations that make it easier to give up than to open a business, and you can see why this is doomed from the start. And let’s not forget the absurd net zero policies that have made electricity so expensive that anyone trying to run a server farm or an AI lab would have to be mad—or already bankrupt. But at least the billionaires in the City of London casinos are doing well, trading carbon credits and green bonds, and pocketing subsidies for wind farms that barely spin.
Reeves and her colleagues seem to believe that government decrees can create innovation. They can’t. Economic growth arises organically when people are free to take risks and reap the rewards of their efforts—not when they’re taxed into submission and micromanaged by bureaucrats who wouldn’t know a profit margin from a pie chart. The Labour Ministers will only enable this process of organic growth that benefits ordinary working people by downsizing itself. Scrap the taxes that strangle small businesses. Cut regulations that make everything slower, harder, and more expensive. Slash the green policies that line the pockets of a few insiders while driving everyone else into poverty. In short, they need to cut taxes by at least three-fifths and let people breathe.
But, of course, they won’t do that. Instead, they’ll pour billions into white elephant projects, hiring consultants to “develop a roadmap” and holding endless press conferences to talk about “strategic investments.” Nothing will come of it, except perhaps a few more office parks and overpriced cafés that no one will use. If this Government really wants to help the economy, the Ministers should lock themselves in their offices and spend their days watching Pornhub. At least then they wouldn’t be actively making things worse.
Britain doesn’t need some Potemkin “innovation hub.” It needs a radical reduction in the size of the state. Until that happens, Reeves can talk about Silicon Valleys all she likes—it won’t make a scrap of difference.
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[…] Keith Preston on January 30, 2025 • ( Leave a comment ) 30 January, 2025 Sebastian […]
Good essay, but let me share my reservations.
c.f. (Devil’s advocate?) – We did have a high tax economy prior to Thatcher, and until the 1970s, Britain was a stable and reasonably prosperous society (albeit with lots of problems).
Is it really that high tax is the problem or is the issue more about who is being taxed? Equity demands that those who earn more should pay more because, (i). they have the greater ability to pay, and, (ii). their economic activity relies on infrastructure that has to be funded somehow, and (iii). their success is on the basis of the labour, efforts and consumer habits of people who earn less (a symbiosis we call ‘society’).
I cannot help but think that the low tax argument is really an anti-tax argument in disguise. It’s made by people who just don’t really want to pay and deny there is a symbiosis in existence. Where do I sign up? I don’t want to pay either, and I’d love to live like Daniel Boone, but does it work? Doubtful. It is a sort of special pleading for people who actually want a laissez-faire arrangement in society and use tax as a populist battering ram. After all, who amongst us wants to pay more tax? Hands up? I mean more tax out of your own pocket. It’s a bit like proposing that old grannies should be left to freeze to death. You will meet with universal objection.
It’s only when you examine the people behind dogmatic low tax proposals that you realise that the case is intended to benefit only some in society, some of whom even deny that society exists at all. I am not in favour of high taxes per se, but the normative arguments rest on one’s view about equity and who creates wealth, which ultimately is an ideological battle between statist pro-capitalists and statist-socialists.
Capitalism cannot exist without a state in some form, even if in only soft form; see my previous debates with Neil Lock on this point – I take the view that the political state is an ontological construct and inexorable at any level of social complexity, Neil thinks the state need not exist. I don’t believe Neil’s view can work in practicality. Imagine a situation of voluntary societies that still seek to enforce property laws. This implies pluperfect voluntarism resting on near-absolute freedom of contract, but in reality such an arrangement cannot be purely contractual. Nothing is, not even contracts are purely contractual because they rely on the state to enforce them in an ultimate sense, otherwise a large body of people would disregard them and render legal and commercial obligations unenforceable in effect. Thus, Neil’s meta-utopia would most likely translate into an organised system of compulsion. The idea amounts to nominalism: a rearranging of words to create a fictional world. In reality, you would have courts and a bureaucracy, and mechanisms for enforcement, thus an emergent state.
If the state has to exist inevitably, then we must have taxes in some form. We could maybe call it something else. Let’s call it a Membership Fee. Let’s also put out a glossy brochure in which we include a Mission Statement from Dr. Gabb, in which he is pictured in a dusty library at some august institution of learning, and promises Business Plus Members that they will enjoy first class arbitration services, with independent input from Dr. Starkey. Perhaps Dr. Starkey could have a photo in the brochure too, looking suitably relaxed and academic? But it’s still a tax system because it has to be compulsory to work, just as the anti-statist argument is really ultimately a nominalist fallacy.
What is my real point here, in all this? That this is not an honest discourse. I want Amazon and McDonald’s and Tesco and all these other companies and their executives to pay more tax and I also want them to pay their workers more, and if they can’t manage it or refuse, then they should be shut down so that new jobs can be created by businesses that will at least pay people well and pay high taxes. We seemed to manage that way fine enough for 30 or so years after the War.
Dear Tom,
Thank you for your thoughtful response to my article, “Silicon Fen? More Like Silicon Fantasy.” I appreciate the opportunity to engage in this discussion and address the points you’ve raised.
You mentioned that “we did have a high tax economy prior to Thatcher, and until the 1970s, Britain was a stable and reasonably prosperous society (albeit with lots of problems).” It’s true that during the post-war period, the UK maintained higher tax rates and experienced economic growth. However, it’s important to note that while many countries enjoyed rapid economic expansion during that era, the UK’s growth rate lagged behind its peers. This disparity suggests that our economic management may not have been as effective as elsewhere.
Regarding taxation, you ask, “Is it really that high tax is the problem or is the issue more about who is being taxed?” You argue that equity demands higher earners contribute more, given their greater ability to pay and their reliance on infrastructure funded by taxes. While I acknowledge the principle of progressive taxation, it’s crucial to consider the broader economic impact. Excessive taxation, regardless of its target, can impede economic growth by discouraging investment and innovation.
You also state, “I cannot help but think that the low tax argument is really an anti-tax argument in disguise.” My position isn’t necessarily anti-taxation. Rather, I advocate for a tax structure that fosters economic vitality. High taxes can stifle entrepreneurship and burden businesses, particularly small and medium-sized enterprises that are vital to our economy.
In the post-war period, despite higher tax rates, the regulatory environment was less intrusive, and energy costs were among the lowest globally. Today, we face a more complex regulatory framework and higher energy costs, which can further dampen economic activity.
You mention that “capitalism cannot exist without a state in some form.” I concur that a certain level of governance is necessary to uphold property rights and enforce contracts. However, it’s a matter of balance. An overly expansive state can become counterproductive, leading to inefficiencies and stifling individual initiative.
In conclusion, one doesn’t need to be a free-market anarchist to recognize that an excessively large and intrusive state can hinder economic well-being. A more streamlined state, with a focus on essential functions and a tax policy that encourages growth, can lead to a more prosperous society.
Thank you again for your insights. I look forward to continuing this dialogue.
Best regards,
Bryan