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Where’s the Growth Coming From?

Last Updated: Friday, February 18th, 2011

Earlier this week ConservativeIntelligence held its Going for Growth conference. Attached to this Letter is the speech that Treasury Minister David Gauke gave. The other minister who attended was David Willetts, Minister of State for Universities and Science (who didn’t deliver prepared remarks). Both were most interesting during the Q&A periods where each spent thirty minutes engaging with the fifty participants.

They would have been concerned, however, if they’d stayed later when, in a Jonathan Dimbleby moment, I asked attendees to raise their hands if they thought the Coalition was doing enough to increase economic competitiveness. Not one hand went up. Nearly every hand went up when I asked if much more needed to be done.

Six concerns were raised most frequently during the Q&A period and in the margins of the event:

1. The 50p tax rate;
2. High energy prices caused by an energy policy described by one delegate as “picking winners” but the winning energy sources are all expensive;
3. Lack of investment in new airport capacity;
4. Inflexibility on immigration of skilled labour;
5. A need to ‘end the war on the City’;
6. The dangers of NIMBYism to business expansion.

In the final session Mark Littlewood of the Institute of Economic Affairs summed up the mood: “A major challenge for the UK over the coming years is to create a culture of entrepreneurship rather than entitlement. That won’t happen by accident. The truth is that the Coalition’s ambitions in this area are really rather modest. Things could be worse, of course. Being modestly ambitious is better than not being ambitious at all. But unless the government discovers a more passionate voice around supply side reform – to at least match the apparent fervour surrounding the Big Society – then the best they can hope for in this area is a very modest legacy. That might not be a catastrophe for Britain, but it would be a major disappointment.”

Read Mark’s full essay via http://j.mp/fTrOO9.

I agree with many of the concerns and hope some of them will be addressed in next month’s Budget; already billed by George Osborne as a Budget for Growth. It would be wrong, however, to think that the Coalition has not done anything on growth. I’ve listed top ten measures as:

1. 75,000 extra apprenticeships.
2. Education reforms, including conversion of many LEA-controlled schools into academies.
3. Putting higher education on to a sustainable funding basis.
4. Welfare reforms that will encourage more people into work.
5. Annual reductions in corporation tax from 28% to 24%.
6. A major Tax Simplification initiative.
7. Protection of science and infrastructure spending from the worst of the cuts and a plan for a £34bn hi-speed rail link to connect north and south, bringing the regions together.
8. A promise of the “best broadband in Europe”.
9. Lord Young’s review of health and safety red tape.
10. A reorientation of the Foreign Office so that serving Britain’s commercial interests becomes a priority.

I think it’s also important to see last week’s conclusion of Project Merlin as the end of the political establishment’s hostility to the City. There is still the all-important Vickers Review on banking structure but once that is concluded we will, hopefully, enter a period of stability for financial institutions and they can plan to expand in London, knowing that the tax and regulatory systems are settled for the foreseeable future.

Read all of the recent Going for Growth essays on ConservativeHome.com, including the conference contribution from Nadhim Zahawi MP, by clicking on http://conservativehome.blogs.com/platform/go-go-go/

Tim Montgomerie

 

HIGHLIGHTS FROM THE LAST WEEK ON CONSERVATIVEHOME

The focus has been on AV but let’s not forget the other implication of The Parliamentary Voting and Constituencies Bill: “There has been some suggestion that the equalisation of constituency size will give the Tories about 8 to 12 extra MPs. That number is certainly not to be sneezed at but CCHQ is convinced that, if the boundaries fall where they expect them to fall, the gain is likely to be up to twenty extra Conservative MPs. Labour understand this and that is why they fought so hard against the Bill in the House of Lords.” More via http://j.mp/h4iclQ

Paul Goodman on what happens if Cameron loses the AV referendum: “Cameron would have lost the confidence of the Parliamentary Party. New, “collective leadership” would be demanded. There’d probably be a Cabinet reshuffle, and not on his terms. His authority would be weakened and the Government vulnerable to events. Inevitably, there’d be talk of a challenge, but there’s no obvious successor. At any rate, the Prime Minister would be in danger of becoming what Nigel Birch once called one of his heroes, Harold Macmillan: the lost leader.” More via http://j.mp/gNs9gx

One of ten observations on the Big Society: “Cameron needs to reconnect the Big Society with the idea of Broken Britain. Even before the recession struck there was something wrong with Britain. Extreme poverty worsened under Labour. Family breakdown accelerated. Problems of addiction and anti-social behavior multiplied. Loneliness amongst the old grew, as did mistreatment and neglect in care homes and hospitals. Cameron’s Big Society is about finding ways of tackling these problems that neither economic wealth nor government welfare had addressed or can address. People won’t buy into the Big Society until they recognise it is the solution to a real set of problems.” Read the other nine via http://j.mp/esy59F

Andrew Mitchell freezes aid to India: “The India decision is probably the most controversial call of Mr Mitchell’s period as International Development Secretary so far. Previous decisions have included axe-ing all assistance to Russia and China; a 40% increase in aid to Afghanistan; establishing an independent watchdog to monitor the effectiveness of aid; cancellation of £100 million of ineffective programmes; and the establishment of a new Private Sector Investment Unit within DFID to encourage a more markets-friendly approach to aid.” More via http://j.mp/fFDLj2

In brief:

• 750,000 non-jobs in local councils? http://j.mp/fKEf9N
• Voters blame central AND local government for cuts: http://j.mp/eVY5BX
• The Reform think tank finds considerable inconsistencies in how government departments are reforming public services: http://j.mp/hs7szk

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