It’s make or break for the Tory party

Allister Heath
POLICIES to boost growth. That is what the Conservative Party conference, which started last night, must focus on. Growth has ground to a halt, partly because of global forces but also because too little has been done to make the UK once again a competitive place in which to work, invest and operate a business. There has been much rhetoric and very little action – in fact, most of the changes introduced to tax and regulation since last May have actually been damaging for growth. This astonishing situation shows how important it is for George Osborne and David Cameron to refocus.

There is some good news. The coalition has finally agreed that the qualifying period for unfair dismissal claims would be increased from one year to two (from April). Given that this was mooted ages ago, it is hard to fathom why this is taking so long but it will help. Such a move may worry some employees but it will be good for overall opportunities in the economy as it means bosses will be less scared to take on new staff.

Unfortunately, the government is trapped as the result of the dysfunctional reality of coalition. Many of the UK’s problems come from the EU. Yet the Liberal Democrats oppose the renegotiation of the treaties to decentralise even the smallest amount of power. Sometimes, the government – like all of its predecessors since the 1990s – makes a song and dance about resisting one or other especially egregious move. But usually it eventually surrenders, or celebrates a “compromise” that merely delays the blow by a few years.

A combination of the EU’s bulldozer and of the government’s mistakes means that the UK is a worse place to conduct business and especially to hire people today than it was when the coalition was elected. The agency workers’ directive has increased the cost of employing such workers by between a fifth and one third, according to the EEF; the elimination of the retirement age has been mismanaged and will mean an explosion in tribunals; billions of pounds of costs have been added as a result of other new “rights”. Employment is like everything else: if you increase its cost, you cut its demand. The coalition wants more jobs – but it is embracing maddeningly job-destroying policies. Bizarre.

Corporation tax is falling, and entrepreneurs have greater tax breaks. But that’s about it (I’m not including trivial proposals such as getting rid of the need for shops that sell TVs to collect the addresses of buyers). Yet on the debit side needs to be included higher capital gains tax (with no indexation for inflation); a hike in employers’ national insurance; higher taxes on the City; a destructive raid on oil and gas firms; a disastrous energy policy which will push up prices, hitting the poorest hardest, while making UK manufacturing gradually unviable; and numerous other blows. If he wants real ideas, Osborne ought to read the Institute of Directors’ manifesto for growth, commissioned by its excellent new boss Simon Walker.

If one were to conduct a cost-benefit analysis of the coalition’s impact on firms and the economy, the sorry truth is that costs are much greater than benefits. This conference will either mark a turning point – or it will confirm the Tories are content to manage the slow decline of UK Plc. We will soon find out which it will be.
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