George Freeman was elected MP for Mid Norfolk in 2010 after a fifteen year career in start-up venture capital in the technology sector. He worked closely with the Chancellor’s office in Opposition on the Richards and Dyson Reports reviewing innovation and business support policies, and is contributing to the Growth Review.
There can be no more urgent priority than unlocking growth. The outcome of the Coalition’s entire programme will ultimately depend on whether we get the growth we need. The result will determine whether Britain continues down the trajectory to being a depressed, old, debt-ridden, public sector economy or a vibrant place of hope able to compete successfully in an extraordinarily dynamic global enterprise economy. These are high stakes indeed.
What can Government do when it hasn’t got any money? Because that is the challenge baffling Westminster politicians. The lesson that Govnt cant 'buy' sustainable economic growth laid bare in the Blair Brown years is one the Red Eds appear not to have learnt.
The Chancellor’s bold deficit reduction strategy is an essential step in the right direction, as are the NI and Corporation tax measures to help business. But they are first steps. We must go further, faster, harder. The Coalition has shown admirable appetite for reform. Let’s channel more of its reforming zeal into removing the barriers to growth instead of tinkering with our voting system. The public will not thank us for obsessing about A.V. when real incomes are falling.
To really deliver the vision of a Britain 'Open for Business' again, I believe, as someone who has come to politics from business, that we need to learn some lessons from business. So now that we’ve issued the profits warning, slashed the dividend and reorganized the management, what should the board of UK plc be doing to unlock new revenues?
As with any business, you repair the Profit and Loss Account (the budget deficit) as best you can by taking out some cost, as we are doing. But the long term key is in the Balance Sheet: unlocking new revenues from the assets you have, and tackling the long term liabilities (the structural deficit). We need to look more closely at the assets of UK plc – our assets – and ways we can be more creative and entrepreneurial with them in pursuit of public policy goals.
To really make Britain ‘Open for business’ every Minister will need to drive their departments to go for growth. Every Secretary of State and Permanent Secretary must be asking: what can we do to help growth? The Department of Health should examine how to unlock the value of the UK’s goldmine of patient data – the holy grail of modern biomedical research worth billions to the Pharma industry. The Department of Transport look to make more from the land assets sitting under our railway tracks. DEFRA and BIS get together and promote our neglected world class food science and agricultural sector, which has huge potential in a world of exploding population and resource pressure. Unlike the forestry reforms, unlocking these assets and opening them up to new investment will be key to growth. Of course the most precious asset of all is the British people. We need to create a culture of entrepreneurship that sets them free and encourages everyone to have a go.
We need to remember that businesses are built by people and refocus policy on the people who really make growth happen. People who take risks tackling challenges in pursuit of rewards. Successive governments have systematically increased the barriers to entrepreneurship and decreased the rewards. Our great triumph in the 1980s was to make Britain an enterprise economy. Labour have strangled the baby in red tape, bureaucracy and taxes that follow inevitably from a bureaucratic state. Why, for example, does the EIS (Enterprise Investment Scheme) regime now discriminate against employee shareholding? Why do so many British entrepreneurs sell out early rather than build their businesses? How will we ever reward innovation in the public sector when the system penalizes those who manage to deliver more for less in a budget year by cutting their budget the next? Unless we recognize that it is people who drive growth by taking risks, and reward them for it, they won’t. We don’t need a ‘£1bn Government Fund for Technology’ in the Budget (we couldn’t afford it even if we did). We need a package of measures to remove barriers and restore incentives to encourage the risk takers who make things happen.
Tax matters. Entrepreneurs and businesses are highly tax sensitive. It’s time to bring tax down. Why? Because we are pushing to the wrong side of the Laffer curve. Let’s send the message that if you come to Britain to start or grow a business, we will reduce your tax bill proportionally to the rate at which you create jobs and invest in and grow your business. Or we could take it a step further and have a ‘Zero Tax and Regulation’ regime on all fast growing small businesses. The system would pay for itself many times over.
Entrepreneurs and businesses are also highly sensitive to red tape. It demoralises them. UK over-regulation is stifling growth. Latest data shows over regulation is now costing British business £23bn PA. “1 IN, 1 OUT” is only a first step. In any case it doesn't stop the tide of European legislation. We need a new culture of deregulation. We must move away from the current approach of ‘regulation by inspection’ to one of ‘regulation by compliance’. Let’s scrap the endless form filling, set clear simple rules with random checks, heavy penalties for those who don’t comply, and watch business comply. It works with TV licenses; why not try it for Health and Safety?
Rebalancing the economy is rightly a key plank of the Coalition’s economic policy. UK plc has become too dependent on booms in the public sector, City, retail, and housing, and on Greater London. But deficit reduction alone won’t rebalance the economy. We need to do more to unlock the growth potential of our high technology, manufacturing, and longstanding businesses in our cities, regions and local economies. Areas like East Anglia can drive growth in exciting new technology sectors but lack the rail, road, and broadband links to allow it. The RDAs (Regional Development Agencies) deserved to go because they were wasting so much money meddling rather than tackling the infrastructure and skills gaps holding us back. But we need to make sure that the new LEPs (Local Enterprise Partnerships) have the clout, incentives and freedoms to drive new models of infrastructure funding and regeneration.
Here, too, the 1980s have some important lessons. Urban regeneration through enterprise zones was one of the success stories of the Thatcher Governments of the1980s. Why have we forgotten it? Targeted tax breaks, capital allowances and fast track planning reforms focused on areas in need of regeneration have been proven to drive growth and reduce Government spending and debt. Enterprise zone relief would do more to drive growth, tackle the welfare dependency and broken society of our inner cities than any number of RDA initiatives and networking events. It’s no less urgent now than it was then. The London Dockland Development Corporation is a model. Canary Wharf should be as much a reminder to us of the power of urban regeneration to drive growth as of the City’s boom time excesses.
And whilst irresponsibility in the City clearly played its part in causing the debt crisis, it does not follow that the City and our financial services sector is necessarily now ‘part of the problem rather than the solution’. The City of London and our financial services sector are vital engines of growth. We neglect them at our peril. As a recent report illustrated, our financial services sector is predominantly an SME sector, not a mega-bank sector and we should be encouraging it to drive growth. Our growth strategy should be about making Britain a world hub for global entrepreneurs to come and build world class businesses, restoring the City’s historic role of financing business and trade.
So let’s use the Budget to launch a serious business plan for growth in UK plc. David Cameron, George Osbourne, and senior Coalition Ministers have set out the direction of travel, now we need to accelerate. As with any business venture, this approach needs ambition, drive, and passion. We in Government don’t have to start the businesses, just create the conditions for entrepreneurs in the private – and public – sector, who will gladly do it for us.