When Labour arrived in government over 6 months ago apparently the Prime Minister kept complaining there was not a growth lever. Of course, those mythical levers that control everything from Whitehall do not exist and part of the reasons for policy failures has been a belief for too long that they did. It perhaps explains why the government has been so unsuccessful on its number one commitment – to grow the economy.
It also demonstrates a fundamental misunderstanding. It isn’t ministers with their speeches, glossy strategies, or just wishing for growth that moves the dial. It is the millions of decisions taken every day by people running businesses, deciding whether to invest or hunker down, assessing if now is the time for that big investment in machinery or to put it off, or considering the potential of beginning to export and target new markets.
And those are precisely the businesses whose confidence has plummeted. The reason? The negative rhetoric the Prime Minister and his Chancellor chose to use about the UK economy when they first entered office. They repeatedly talked it down with false claims about their economic inheritance. And then they introduced the biggest tax-raising budget in modern history. £40 billion a year in higher taxes.
Little wonder that the Office for Budget Responsibility actually downgraded the growth rate by 0.7 per cent over the next five years after the Budget.
This is a worrying situation and talking to firms locally I have heard deep concerns over the hike in the costs of employing people, the cut in business rate support for retail, leisure, and hospitality business, and other measures.
So it is welcome that the Chancellor has suddenly changed course and begun to talk about the strengths of our economy, our leading industries, and the potential for investment. Adopting a more positive tone about the economy is better late than never but a lot of damage has been done in the meantime.
The most headline catching announcement in the Chancellor’s speech last week was support for a third runway for Heathrow. Whether it ever gets built however it is not going to affect growth or living standards in this Parliament. There was much talk of the Cambridge and Oxford growth corridor – plans developed by the last government - which could have positive spillover effects to our area. Disappointingly, other growth projects including upgrading Ely Junction were mentioned.
Where the government brings forward measures to support growth we will back them. Norfolk has plenty of schemes to do just that and I’ll keep pushing the government to approve them.
Last week in my role as Shadow Treasury minister I’ve been providing line by line scrutiny of the measures in the Budget Finance Bill including corporation tax, changes to non-dom rules, and even taxes on Coke and other soft drinks. Another area is air passenger duty where Ryanair has said due to the government’s plans a third of the average ticket price will be tax in future. All the measures in the Bill have to be seen in context of pressures on firms and families.
The globally unpredictable element in the forecasts for economic growth is of course President Trump and whether he decides to impose tariffs on the UK. He’s already applied them to Canada, Mexico, Colombia, and China. The EU could be next. Clearly the Prime Minister’s attention should be squarely focused on talking to our American allies to prevent any damaging measures being introduced.
