Saturday, September 1, 2012

Why we need a Business Plan for Britain

When there is a war, the parties in this country quickly find it in themselves to unite, quite rightly, behind our national interest.   But the long-term success of 'UKplc' is still, sadly, a game of political football. 

Of course, this is bound to be the case.  The economics of a country is bound up with political questions of public vs private, tax vs spend and the distribution of income across classes and regions.  But other countries manage to have long-term economic strategies - so why, in reality, shouldn't we? 

So what's in a Business Plan for Britain?   As the Olympics showed, this is still a great nation.  We use the global language.  We sit bang in the middle of world-time zones.   Culturally we are incredibly influential - our 'soft-power' is still high.   We are a creative nation with great innovators and excellent 'batch' specialist manufacturing.   We are outward-looking and, in London, have what is still one of  the world's top three cities.  Finally, we have world-class universities, research and, despite recent problems, a world-leading financial services sector.   Overall, the quality of life here is good and there are fewer safer, freer or more civilised places to invest, live or set up in business.

Of course, we have massive problems too:  Large parts of our country are in permanent recession.   Millions of our people are under-educated and economically behind their peers in Europe and beyond.  There seems to be a structural problem in getting our young people into high quality jobs.  Our economy and political system have been shown wanting in recent years.   Our ability to create a proper environment for genuine wealth-creation has been exposed by the recent recession which, now, looks to be in for the long-term.    Compared to our better neighbours, the Germans, we look like a nation of accountants and lawyers more than a nation of entrepreneurs and 'makers'.  Finally, our public sector remains unreformed.   It continues much as ever in a twilight world of low-productivity, monopoly and incremental change, often entirely unconnected with the digital age and the needs of its citizens.

So, what do we do?   Essentially, it needs to be a combine the supply-side measures being proposed by the Tories with some of the more interventionist ideas of the centre and left.   At the moment, the debate polarises into one of 'small state/deregulated market versus big state, / heavy state intervention'.   Few people seem to consider that we need elements from both approaches.  Here are just five from both sides which I think are vital: 

From the right we need to adopt the following:

1.  Employment law reform.  This is an unaffordable sham and there needs to be reform of employment law that makes it easier to remove unsuitable people from their jobs.   It should also take 2 years to acquire ANY employment rights.
2.  Planning law reform.   While it is important that we protect green-space we have to accept and plan for development and growth.   New towns, such as Cambourne in Cambridgeshire, represent the way forward.  This allows historic towns, such as Cambridge, to remain within their current footprint and for them to be sustainable from a transport and quality of life perspective.
3.  Lower taxes for SMEs.   Small and medium sized businesses are the engine of the UK economy and should be taxed less than they are now.   Firms operating in deprived areas should pay very little tax at all in order to incentivise them to invest there.  
4. .    No NI for SMEs on any new hire for the first two years of employment.   This will incentivise job-creation in smaller firms.
5.  Market-reform of the public sector.   This means the end of national pay settlements, the dissolution of union-power in the public sector as was done in private sector and the creation of a plurality of providers in most public service markets - including health-care, education and most public services outside the armed forces - all under close regulatory supervision to protect the public interest.

From the 'left' we need to do the following:

1.  Set up a bank specifically aimed at 'real economy business'.   We all know of decent businesses that are going to the wall because of cashflow difficulties and disinterested banks.   We need a German-style banking system and a big new bank that operates in the way the German banks do to support the 'Mittelstrand'.
2.  Pick winners.   This doesn't mean the state owning car-firms or coal mines - it means that we acknowledge our broad strengths internationally - creative industries, specialist engineering, aerospace, higher education, research - and we make massive amounts of capital available to these sectors through state-backed angel and early investment funds.
3.  Big infrastructure spending.  This will add to deficit and debt but the country's infrastructure is in dire need and so is the short-term economy.   Reviving Building Schools for the Future, New Towns widening the A14 & A11, improving the rail network, sorting out Heathrow (not necessarily a new runway, just a better airport) - all these are strategically vital projects.
4.   Anti-trust legislation, US style.   There is now popular recognition of 'bad capitalism' and 'good capitalism' and those elements that have created a financially-oriented economy - rather than a balanced economy - need to be brought to order.     We must also unearned wealth.   Most people accept the logic of this.  This is widely defined and differentiates genuine wealth-creators & entrepreneurs from the rest.  
5.  Regional policy.  London and the South-East are outpacing the rest of the UK.   We need to decentralise powers to the cities and counties outside of the South East so that they can make their own way in the world.   It should be essentially free for foreign companies to invest in the North and Midlands.    Companies relocating to the regions should be rewarded by paying little tax or NI for the first ten years of their operations.  

Of course, these are only headlines.  But, at the moment, one set of approaches is put forward in opposition to the other.  The truth is we need both.   To get out of the position we are in, we all must pay the price - including the poor and including the wealthy.   The public sector has to work within lower limits of national wealth and there has to be a sense of national unity about what we're doing.   

Any politician who can pull this together deserves to win, whichever his or her party. 

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