Coalition deeply confused on growth

 
Allister Heath
IT is hard to understand what the coalition is playing at. Britain’s economy is stagnating, GDP appears to have shrunk in the last three months of 2011 and yet the government exudes no sense of emergency, no impression that it realises that we are in a national crisis and that radical, drastic and unpopular action must be taken. The mood music remains deeply imbalanced and dangerously anti-capitalist and hence anti-growth; rhetoric matters as it helps set the zeitgeist. What is needed now more than anything else is to kick-start the corporate sector to encourage it to hire and invest in the UK, rather than accumulate cash and invest abroad; instead, we get incessant calls for wealth taxes, more green taxes, more restrictions and red tape, all of which will merely convince businesses and entrepreneurs to sit on their hands. The 52p tax rate, seen internationally as a reason to avoid the UK, will stay indefinitely.

It is of course right to tackle problems (such as rewards for failure) but wrong only to focus on these kinds of matters or to constantly seek to outflank the Labour party from the left. How many more navel-grazing, pseudo-philosophical and pointless speeches about the nature of capitalism must we be subjected to? It’s madness: people need jobs and growth, and these will only come from profit-making private companies. Yet listening to the rhetoric, the only kinds of business people the coalition like are young, small wannabe entrepreneurs (who are indeed great) – but all other (also very valuable) categories are constantly criticised, told they are all abusing the system or lectured that their true market worth is far below that of a footballer. There are of course plenty of abuses and problems, some of which are reported in today’s City A.M. – but listening to the coalition and our political class, abuse is all that there is. That is utter tripe.

The endless banker-bashing persists, even though the coalition desperately needs a reformed City to start growing, hiring and exporting its services again. The government should be pursuing a pro-market, anti-handout, pro-competition and anti-corporatist policy – but doing that doesn’t mean reinforcing anti-business prejudices or waging war on the very people who need to be convinced to start investing and hiring again. It’s a question of balance, of emphasis.

It’s also about real, tangible action, rather than gimmicks, announced, re-announced and re-re-announced. There have been no substantial, epoch-defining changes to the regulations and red tape that cripple the labour market. Speeches on getting rid of health and safety excesses turn out to be about trivial tweaks. The Beecroft labour reforms have been diluted out of all recognition. Continuously hitting the City while saddling manufacturing with expensive energy policies and slapping an ill-thought out tax on North Sea oil and gas companies that has led to a drop in production is stupid. No wonder it sometimes seems as if the UK is being rebalanced – from growth to stagnation.

The Prime Minister’s speech to the Council of Europe yesterday calling for reform of the European Court of Human Rights was eloquent; it was also pointless. Reform won’t happen.

The coalition thinks it is prioritising growth. It isn’t – not even remotely. The spending squeeze is right and necessary, and must remain intact. Apart from that, the coalition needs to tear up its policies and start again.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath