Faced with the disastrous consequences of years of compulsive borrowing, the British government has adopted the twin-track strategy of trying to cut the public sector and hoping the private sector will take up the slack.
Yet the British economy remains very sluggish. Many talk of the need for a “Plan B”. They might be more credible if some of them were not the very people who got us into this mess in the first place, and if their “Plan B” were not the same policies that caused the mess – excessive spending, borrowing, and printing of money.
So the government’s strategy remains the best option, perhaps the only option, on the table. Indeed, it would be nice if they actually implemented it. The economy is weak because they have not done what they say needs to be done. It is not enough simply to wish the private sector to grow. They need to help it, or at least stop hindering it.
Of course, tax cuts would be a good idea, but we need to accept fiscal and political realities. They would generate growth that would pay for them in the longer term, but in the short term the government must pay its bills. That said, a genuine and meaningful cut in the taxes that businesses face befoere they even make a profit - payroll taxes and business rates - is still probably essential. And, that cut needs to be substantial - halving the burden of each at the very least. Tinkering with a 1% here and 1/2% will not make a difference.
On top of this, for a realistic hope, government needs to listen –actually listen, and then respond – to some of the things business has been saying for years. We may sound like a cracked record when we go on about Britain’s failed education system and excessive regulation, but the consequences are now too obvious to be ignored any longer.
The reform of education will take years – and we will believe it when we see it – but the effects of deregulation could be immediate, if only there was the political will to implement it seriously. The evidence is against there being such a will. The government pays lip service to the need for it, and has abolished a few obscure rules of which most of us have never heard, but whenever the government faces a real choice, it funks.
The current administration failed its first test when it implemented the previous government’s notorious Equality Act. Its most recent failure was its burying the obvious truth, known by the Prime Minister’s own adviser, that excessive maternity and paternity leave entitlement discourages business from generating new employment.
If government wants business to give it growth, put us to the test. Suspend demands for unnecessary paperwork for six months, and, during the same six months, allow business to employ new workers on contracts exempt from statutory impositions like maternity and paternity leave. Such signals of a serious commitment to change would be enough to re-establish Britain as a desirable business venue, and trigger a tsunami of new enterprise, new businesses, new growth, and new employment unparalleled in the West in recent times.