UK exports are plummeting. They fell some 21% in the last year. Firms are selling less to the rest of the world because Labour has made it more expensive to do business both by it costing more to employ people and to invest. And don’t mention energy costs. What makes a nation rich – hat-tip to Adam Smith – is its ability to produce which itself is fueled by investment. And don’t say “Brexit” – suggesting that has reduced our potential for exports is like saying that Scotland will win the World Cup.
So what needs to happen to change things?
Firstly we need to reform our incredibly convoluted and self-defeating tax system so that it no longer limits or penalises success. Success should be reinforced not smacked down. We need to reward work and investment
Secondly, and incredibly stupidly, the Government is looking to realign with the EU. The net result would be a decimation of farmers and a complete halt in our burgeoning tech sector. It is practically speaking a huge cost on existing businesses. We have to have a trade policy that opens markets rather than closing them. And for sure we would have to raise another £10-15 billion in taxes to pay for it.
Thirdly, we should revise employment rights to create a fair balance between employed and employers and allow lower paid workers the right to decide whether or not to do so. As it stands, the costs of employing a lower paid worker far outweigh the benefits. Giving in to the Unions merely exacerbates the situation.
Fourthly, our incredibly throat-choking planning rules which permanently result in nothing getting built need completely overhauled and mostly scrapped. As things stand, Denmark has built three very long bridges and a tunnel in half the time it has taken the UK to merely consider building another runway at Heathrow. Even so, nothing has happened. And I won’t even mention reservoirs. We need radical planning reform to unleash housebuilding at the very least and that alone would give growth a kick start in our ossified economy.
Fifthly, net zero has given us higher energy prices than anywhere in the world. We have stopped exploiting our own resources for nearly 2 years now and that will continue for the foreseeable future. The result is there will be no UK produced energy within the next few years with more and more having to be imported. Energy security simply won’t exist. We need North Sea oil and gas to be encouraged rather than driven abroad. Never mind the numbers that would be employed and be taxed, simply having our own production would help lower the cost of living.
Sixthly, we need to reduce nonsense degrees and refinance students in such a way as to make it worthwhile for students to take the loans on. I was delighted to see newspaper main headlines asking the obvious question – why would anyone get into such incredible debt to be no better prepared for the workplace and receive no additional income? It appears that some students are getting the message and opting NOT to take degrees but to get training on the job as it used to be.
And finally, the big daddy. Bring central government spending under control. Every penny it spends is taken from people who are productive and earn it. That means less and less gets ploughed back into the economy for purely ideological reasons. Don’t bet on anything being reduced until the IMF steps in. I saw a note recently that says as it stands, we have a 50% chance of having to do so by 2030. You may say 50% isn’t much but the mere suggestion that it could actually happen would hasten them through the door.
We in the UK used to be the great upholders of free trade, but now we seek to inhibit it. As Adam Smith observed more than 250 years ago, free trade allows nations to specialise in what they do best and then import what is produced more cheaply elsewhere. What we have at the moment is a program of nationalisation for ideological reasons which is already killing industries. If you hide behind tariff walls you deny the market the chance to work properly. You end up subsidising production which means the taxpayer has to subsidise what is being produced inefficiently. And that means raising more taxes which depresses growth even more. The most glaring situation at the moment is what is laughingly called British Steel. In the last 9 months £377 million has been spent keeping the furnaces running. Quite why I don’t think anyone really knows, but that is just over £500,000,000 (half a billion) per year. If they paid just what French and German steelmakers pay for energy (which is near enough 50% of what happens in the UK) it might become competitive. But no – our policy is to have the highest energy prices in the world so that our industries cannot compete.
Directing capital by political fiat is a recipe for disaster. Interfering in markets never works and never reduces prices. What DOES reduce prices is competition, and, for example, our supermarkets are the envy of every other country for their efficiency and smooth operation.
Despite what you might think, Brexit has actually been good for growth in our industries. Demonstrably our economy (until Labour messed it up) out-grew all EU countries. If only we had not been hamstrung by obstructive civil servants and insane energy, planning and employment policies we would be even further ahead than we are. How do I know this? Because at least two countries, one the USA and the other Argentina, have espoused exactly what Brexit should have given us. And both are powering ahead.
The trouble is that at some point the distortions will have to unwind – and that creates even more turmoil. When the market is allowed to reassert itself, it very quickly returns to a balanced, market-clearing equilibrium. There is a (relatively) revered writer and economist called Peter Schumpeter, who postulated that because capitalism worked so well, the political midgets that mostly inhabit the ruling classes would subvert that success and impose bureaucratisation and political direction on a system that worked perfectly well. The result would be stasis. He espoused the view that “The Machine” – price mechanism and Mr. Market – learned from mistakes and misallocations very quickly. Once politically distorted, the machine can’t learn and we are left with no progress at all. As he has said this produces an economy supposedly promising fairness and efficiency but actually delivers neither. We have starved the very machine that produces growth and well-being. It will now take a total revolution within our political system to deliver growth ever again. Is that going to be delivered by Andy Burnham? I very much doubt it.
But think on this. The average term of a Prime Minister from Theresa May to Sir Keir Starmer has been some 730-740 days – less than that of the average Premier League football manager (787 days). That is a truly terrifying thought.
