It's time Prime Minister Theresa May's Tory government dropped the gimmicks and got serious about growth

 
Julian Harris
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Conservative Leader Theresa May Addresses Party Conference
Theresa May, pictured during last year's party conference, could face a leadership challenge (Source: Getty)

In just over a month the Conservative party will gather in Manchester for its 2017 conference.

Rumours of a dramatic leadership challenge are already circling throughout Westminster and the City’s trading floors – pretty much as they have done ever since Theresa May’s pitiful showing in the June General Election.

Bigger picture

But while political gossip and the complexities of Brexit will inevitably take centre stage, the Tory government must not lose sight of the bigger picture. Their party’s pitch for power has long rested on a claim to be the most reliable guardians of the economy, the side that understands people’s ambitions and provides a path for such aspiration to be realised.

This promise depends, critically, on economic growth and how it can be channelled to allow Brits throughout the social spectrum to improve their lot. David Cameron understood this and one can argue his strong performance in the 2015 election rested on the economy’s surprisingly healthy growth and the tax cuts it enabled.

GDP continued to expand healthily throughout 2015, and last year defied Cameron’s own warnings of a downturn following the referendum. Indeed, Britain recorded the fastest growth in the G7 – “despite Brexit”.

Changing outlook

This year, however, the picture has changed, and the UK has dropped from the top of the G7 to the very bottom. Amid high debts and falling real wages, household spending has plummeted to a two-and-half year low, while there is little sign that a weaker pound has led to any significant rebalancing of the economy

A model created by analysts at UBS sees growth falling “close to zero in the near future”, while other banks are advising clients to avoid stocks especially exposed to domestic UK demand.

Dire situation

This situation is dire. It may be partly influenced by Brexit, in which case the government must heed business groups’ warnings and approach negotiations in a manner that ameliorates nervousness in UK boardrooms. However, it should also look beyond Brexit and focus all its extra energies on growth. Rather than conjuring up an entirely futile “name and shame” register for highly-paid bosses, for example, the government should be prioritising regular workers’ pay packets and asking how productivity can be lifted to deliver real wage hikes.

With Jeremy Corbyn leading the Labour party, it should be easy for the Tories to position themselves as the so-called natural party of government. But to do so they must drop the gimmicks and rediscover their economic faculties and sense of purpose.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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