Wednesday 24 June 2020 4:26 am

Business didn’t get us into this mess, but with the right reforms it can get us out of it

Sajid Javid is former Chancellor of the Exchequer
and Nick King
Nick King is head of business policy at the Centre for Policy Studies

Back in March, City A.M. announced that it was suspending its print edition — partly due to concern about the drop-off in advertising revenue, but mostly because it seemed futile to distribute newspapers around London when workers had been told to stay at home. 

Recently, this paper’s editor made the welcome announcement that its print edition will return later this year.

In doing so, he reminded us of how many businesses, large and small, are straining every sinew to bounce back from the worst impacts of the coronavirus pandemic.

Read more: Sajid Javid: Slash taxes and ramp up spending to fuel UK recovery

But to do so, they need the government’s support. Indeed, the only way that we can get our economy back on its feet, make up the shortfalls in GDP and wider economic activity, and return to growth is if the government puts its full weight behind the private sector.

That belief — that it is businesses and businesspeople who will drive our recovery — is central to the report we published this week, entitled After The Virus

This paper by the Centre for Policy Studies (CPS) think tank is a blueprint for the steps the government should take to give our economy the very best chance of making up the ground it has lost in recent months. 

This report starts from first principles — ones which the CPS has espoused for many decades. We should support free enterprise; our country should remain open to ideas, people and investment; we should avoid distortive or unduly high taxes; and we must maintain a stable monetary environment. 

With these principles in place, we have come up with a set of ideas and recommendations to turbocharge economic activity. We have no expectation that they will be adopted wholesale. But we hope they will help ministers as they move from coping with the pandemic’s immediate impact to getting the economy moving once more.

The report covers issues ranging from business taxation, infrastructure, planning, jobs and employment, to business investment, the openness of our economy, skills and regulation.  With more than 60 recommendations, there are far too many ideas to cover here, but one thing that struck us in the researching and the writing of this report was how many of the problems we need to overcome are not new ones. 

The Covid-19 pandemic has most severely affected those parts of the country with low-skilled, low-wage labour, which have historically low levels of public and private investment. The need to level up our economy was already pressing — but has become all the more urgent in recent months. 

Similarly, we have had to call into question whether our planning system, and UK regulations more generally, are flexible, dynamic and business-friendly enough to help us out of this quagmire. There was already a case for reform — that case looks far more open and shut now. 

Whether it is in terms of our low levels of productivity, lack of business investment, poor record on infrastructure, distortive tax system or inadequate approach to skills, this pandemic offers an opportunity to reflect, respond, and recover. 

Take the taxation of jobs, for example. At a time when unemployment is rising and the numbers are likely to grow as the furlough scheme is gradually withdrawn, it is perverse that employers have to pay an extra 13.8 per cent of salary in national insurance for every new employee they hire. That is why we recommend NI holidays or taking many SMEs out of paying NI altogether. 

On infrastructure, we have lagged behind some of our global competitors for decades. That is why we recommend the publication of a long overdue National Infrastructure Strategy later this year, a focus on shovel-ready projects to get spades in the ground as soon as possible, the creation of a new British Infrastructure Bank, and the establishment of a new Future Growth Fund, focused on those sectors which will drive innovation and productivity growth. 

Productivity levels continue to be a cause for concern across the UK. To help overcome this historic challenge, we recommend incentivising business investment by introducing “full expensing” and having an unlimited Annual Investment Allowance to encourage capital investment.

To ensure any recovery is not strangled at birth, we call for a moratorium on any new non-urgent regulation on businesses. But we also go further and suggest that relaxations of regulations, especially around planning, are fast-tracked to help businesses deal with the implications of social distancing and so that people can get back to work as soon as possible. 

Ultimately, this country needs to get back to work. Which is why we have suggested a new training programme focused on young people in unemployment hotspots and reforming the apprenticeship levy, which is not working as it should. 

But getting people back to work, ultimately, depends on there being the jobs for them to go back to. That, in turn, depends on businesses being confident enough to invest, employ and to grow. 

The government needs to implement a set of policies which will provide that confidence to the private sector. After the Virus provides just such a blueprint for reform. 

It is a blueprint which unashamedly backs business — because while it wasn’t business which got us into this mess, it is only business which can get us out.

Read more: The City View: Rachel Cunliffe on lockdown, culture wars and why she misses the office

Main image credit: Getty

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.

Share: