THE COALITION announced a raft of new policies yesterday in a desperate attempt to get the economy – and their poll ratings – back on track.
But critics said ministers’ infighting and U-turns were making matters worse, creating extra uncertainty for businesses while failing to come up with any meaningful solutions to the double-dip recession.
Prime Minister David Cameron acknowledged he has failed to slash the red tape holding back the economy, and pledged to try again to remove planning restrictions that have stopped private sector construction from really growing – despite opposition from within the governing parties when this was tried a year ago.
That is also expected to be accompanied by the announcement of schemes to help first-time buyers onto the property ladder, replacing the stamp duty exemption that expired in March.
Meanwhile chancellor George Osborne announced plans for a state-backed business bank, and said that legislation will be introduced this week to put in place infrastructure guarantees to boost building.
That could see the government give firms a total of up to £40bn in guarantees on projects like private road building and power generation. The Treasury has been approached by over 30 firms already, looking for support of up to £5bn for their projects.
And the chancellor said a Heathrow extension could be a possible solution to Britain’s air-travel capacity problem – putting him at odds with transport secretary Justine Greening who opposes any such plans.
Business secretary Vince Cable continued to push for the wealth tax proposed last week by deputy prime minister Nick Clegg, in the hope that he can keep momentum behind the idea building in the run up to the Autumn Statement and the budget – despite opposition from Conservatives and the City.
The Liberal Democrats believe they were close to seeing the mansion tax implemented in the last budget, and hope an extra push while the Conservatives are under pressure could see the policy implemented.
And the government is coming under attack from prominent backbenchers, with David Davis telling the government it is time for a radical supply-side agenda to downsize the size of the state and introduce flatter taxes.
The chaos in the coalition comes ahead of a government reshuffle, expected as soon as tomorrow, which is widely expected to see deficit hawk David Laws return to the front bench – he resigned just days into the coalition’s rule after being caught up in the expenses scandal.
Conservative party chairman Sayeeda Warsi could face the chop in the front bench shakeup.
Brian Binley MP called for Osborne to take her role so he can focus on party strategy and winning the next election, arguing Osborne’s dual role currently means he is failing in his mission to properly control the public finances.
Instead, Binley told the Mail on Sunday that Philip Hammond should become the next chancellor, moving from his current role as defence secretary.
Labour’s shadow business secretary Chuka Umunna told City A.M. the new policies and inter-party rows are damaging the economy.
“Businesses are calling for more certainty and stability, but the situation is more uncertain in the wake of ministers’ comments yesterday,” he said.
“A new planning framework was introduced in March which local authorities have been busy preparing for – now they are shaking it up, amending the process further.”
“Justine Greening said a third runway was firmly off the table, and now George Osborne says all options should be considered – all we see is more uncertainty here.”
WHAT IS PLANNED?
■ A new business bank will be set up, backed by the state to try and help fund small firms and entrepreneurs
■ Infrastructure finance guarantees will be put in place to transfer some of the risk of big projects from companies to the government
■ First-time buyers will get more support to buy a house, after the last scheme – exemption from stamp duty – expired in March
■ An extra runway at Heathrow could be built to give the UK more air capacity, but no decision has been taken on what to do
■ Firms may face fewer regulations to employ people for just a few hours a week, helping to cut unemployment – inspired by German “mini-jobs”
■ Planning laws will be loosened to allow private firms to increase building, filling the gap left by falling government construction projects