Richard Ritchie: Why I believe that Enoch Powell would have supported this Brexit trade deal

29 Dec

Richard Ritchie is Enoch Powell’s archivist and is a former Conservative Parliamentary Candidate. He was BP’s director of UK Political Affairs.

During the twelve days of Christmas, people like to play games in order to pass the time.  One such game this year, for those of a political inclination, might be to guess how the original Brexiteers of the 1970s – especially John Biffen, Richard Body, Ronald Bell, Neil Martin, Enoch Powell and Derek Walker-Smith – would have reacted to Boris Johnson’s deal, were they alive today.

Would they have supported it, or preferred to leave without one?  Since Powell’s writings and speeches on the subject are more extensive than the others, perhaps he is best placed to speak for them all.  But he has no claim to originality or primacy.

Powell was later to the party than some of those listed above, and for a specific economic reason.  As he readily conceded: “I had entered Mr Macmillan’s Cabinet only six months before the veto fell; but I am prepared to confess that in those days I used to argue the case, and answer objections, on purely commercial grounds.”

Indeed, he admitted in 1965 that he was worried by the thought of Britain being “excluded” from “her fastest growing market”.  This was not a fear shared by, for example, Walker-Smith, who identified the political implications of membership far sooner than Powell.  But then, as now, exclusion from the European market was one of the greatest anxieties of those who felt that Britain’s economic future would be bleak outside.  As Alec Douglas-Home put it in 1967: “where do we find the jobs for our people unless we take advantage of an opportunity like this?”

While Powell was always a fervent free trader (although less so as he grew older and more immersed in Ulster politics) he was slower than the earliest Brexiteers to acknowledge the distinction between a customs union – a Zollverein – and a Free Trade area.  As his understanding of this discrepancy grew, so did his support for entry diminish.

Broadly, his free trading instincts were impeccable, albeit defined in their purest form which seem somewhat remote from the provisions of even the freest trade deal today. He never seemed especially exercised over so-called non-tariff barriers, which are now cited as one of the biggest potential weaknesses of the new arrangements.

Ironically, it is today’s criticisms of the deal which make it more probable that Powell would have welcomed it.  Europe’s move towards a Single Market and the reforms of 1992 ended for Powell any pretence that free trade in his understanding of the term had any similarity with the Customs Union enshrined by the European Community.

As he eventually recognised, “The Community is not about free trade; the Community is about perfect internal competition – which is something essentially different.  It is also about common restriction of external trade. There is no such thing as perfect internal competition and common external trade regulation between free nations.”

For this reason, he would have rejected as false the premise that leaving the Single Market is equivalent to reducing the scope of free trade.  He didn’t think we had it anyway, although how he would have answered specific objections over additional administrative expenses and red-tape provoked by new non-tariff restrictions is unclear from his speeches.

Of one thing, however, we can be confident.  He would not have called for a ‘tit-for-tat’ response against the EU’s invisible barriers to trade.  He distinguished between revenue and protective duties, having no objection to the former but rejecting the need for the latter –  because he believed that “one of the beauties of free trade is that it is a ‘a-political’: you do not have to browbeat or overrule anybody else in order to enjoy its blessings for yourself.  It is a game at which, like Patience, one can play”.

He would have argued that EU barriers against UK businesses would in the end hurt them more than us, provided we didn’t reciprocate. In the end, what some perceive as the greatest dangers of the new arrangements are what would have made them acceptable to Powell and most of his fellow Brexiteers of the past.

But of course, for Powell, these points would have been peripheral to what really matters, encapsulated in his assertion that “a political nation which cannot tax itself or make its own laws is a contradiction in terms.”  What would have made this Agreement acceptable to him is that it has succeeded, for the first time, in recovering powers which some thought had been lost permanently.

That does not mean that Great Britain is free from all international constraints. There was an occasion in 1966 when Powell severely criticised the Labour Government for imposing “illegal” import surcharges “which damaged our EFTA partners and severely shook confidence in Britain’s word and in the seriousness of her desire to enter into closer ties with Europe.”  He did not regard international trade agreements as inconsistent with sovereignty, provided Parliament had the right to scrutinise and reject them – but not to unilaterally renege from them, once signed and ratified.  That was another reason why Powell was so opposed Britain’s entry into the European Union – the longer that one was in and ‘absorbed’, the harder and more impractical it became to consider withdrawal.

But it has happened.  Something which the original Brexiteers warned was virtually impossible before entry, but which they demanded once EU membership was a fait accompli, has been achieved.  We have left the jurisdiction of the European Court of Justice – a massive recovery of sovereignty.  We are free of the risks of further political integration in the EU which were ever present so long as we remained a member.

While we may still be affected by the Euro’s vulnerability, we are at least spared the legal obligation to recuse it or those it damages.  We have recovered the right to negotiate our own international trade deals.  We may not have yet fully recovered our ability to deregulate and compete fiscally with Europe, but the fact that financial services fall outside the deal may make it possible for the UK to do just that in what is the most important section of our economy.

Talk of ‘free ports’ and the like suggest an economic direction entirely in accordance with free market principles – but which could equally be reversed should the British people choose a government with different priorities and beliefs.  This safeguard was, too, a fundamental belief in the recovery of sovereignty.

If Powell and his fellow Brexiteers were around now, perhaps they would have preferred leaving without a deal – especially if David Cameron had permitted Whitehall to prepare for Brexit in advance of the referendum, thus avoiding the consequent delay and enabling a new relationship to be formed before a pandemic struck.

But the fact is that Powell once accepted the case for entry on the grounds that exclusion from the European customs union was a danger.  He supported EFTA and other such trade agreements, even though they carried obligations and restraints upon domestic policy.  Given what this deal’ has recovered politically, it is doubtful whether he would have allowed its weaknesses to dissuade him from believing that, finally, the ratchet has been turned back, and Britain is once again a sovereign nation.  He would have supported the deal with a clear conscience.

Neil O’Brien: How can we make the economy grow faster?

14 Dec

How can we make the economy grow faster? That’s going to be a big question in 2021 as we bounce back from an unprecedented recession, and start trying to make up lost ground.

There’s lots of things we need to look at. Obviously the big questions are about whether we get an EU deal and how fast we recover from the virus. But one of the other places to look is how we turn our savings into investments.

Rishi Sunak’s clearly interested. Recent weeks have seen him announcing a new infrastructure bank; reviewing Solvency II (regulating insurance firms investments); creating Long Term Asset Funds and extending a tax break to encourage investment. During his first weeks as Chancellor, he mandated the Bank of England to work on “the supply of productive finance, in all regions and nations of the UK” to “assist the Government’s levelling up agenda.”

They’re all welcome moves, because this is a huge issue for the UK.

One recent review noted that “the proportion of UK start-ups which scale into large businesses lags significantly behind the US”, and lots of start ups complain about access to finance. From a macro point of view, Britain has long had a lower stock of capital than other similar countries – at least when it comes to tangible, physical stuff. More machinery, better IT, more automation and stronger infrastructure would help us be more productive.

These are long-running challenges. Previous attempts to address them include the Myners Review (2001), Kay Review (2012), and Patient Capital Taskforce (2017) plus various select committee reports.

So what might be getting in the way of successful matchmaking between opportunities and funding?

1) Regulation and market structures

Riskier, longer term investments have higher returns. Pensions, banks and insurers face complex rules governing their investments, to control the share of their investments in such things.

In some cases, UK investors are putting less of their money into these growth areas than firms elsewhere. As Anna Sweeney from the Bank of England notes, “UK insurance companies only allocate around two per cent of their assets to unlisted equity. This is a smaller share than many of their European peers.”

By reviewing regulations like Solvency II, as the Chancellor is, we could refine the rules to safely enable more growth, not least because it was designed to fit the EU as a whole, not tailored to each country. We could also reshape regulations to make it easier to invest in long term funds. That’s the thought behind the plan to create Long Term Asset Funds.

And on top of the regulations, there might be related factors we could fix. As the Bank of England Financial Stability Report notes, the current industry norm is to value pensions (a long term investment) in ways that force them to behave like short term investors: “Daily trading and pricing is also common practice for [Defined Contribution] schemes, which is another constraint on investment in illiquid assets.”

The Bank should be prepared to act radically: tackling these barriers could mean more money for long term investment and more in your pension because of it.

(2) Public listed companies & short termism

We shouldn’t be too doomsterish about short termism. Plenty of money is being piled into tech firms that have never turned a profit, so clearly there are investors out there prepared to wait and accept risk in the hope of a good return.

But there is a real problem, particularly for public companies. It’s striking that privately owned companies invest somewhere between four to eight times more than public listed companies of the same size.

There’s long been concerns that relentless quarterly scrutiny of returns faced by public firms pushes managers towards short-termism: cutting investment in R&D or entry into risky new markets means profits will be better today, but worse tomorrow. But if your remuneration is based on your share price today, its tempting to go short term.

Managers agree there’s a problem: A survey of over 400 executives found three quarters would give up a project with a positive value in the longer term to smooth out earnings.

Investors agree too: in a CFA Institute survey of European investors 70 per cent said short-period evaluation cycles by asset owners are an impediment to long-term investing. Two-thirds of members of the National Association of Pension Funds said investment mandates encouraged short-termism.

If the investment gap between public and private firms reflects short termism, the economic costs of it would be pretty huge. As a paper by Andrew Haldane, the Bank of England’s Chief Economist and others, notes: “the elimination of short-termism would then result in a level of output around 20 per cent higher than would otherwise be the case.” That’s a big number.

Trying to escape short termism has led to two trends.

First, more and more public firms being taken private. “Public-to-private” deals where publicly-traded firms are taken private, plus fewer public listings (at least until this year), has been leading to “de-equitisation”. Across the US, UK and Eurozone the number of public listed companies has declined. But publicly listed firms remain a huge part of the economy, so if there is a short-termism problem there, it’s still going to have a huge economic impact.

Second, in the US new tech firms increasingly set up voting structures to keep founders in charge through dual-class share structures. Mark Zuckerberg has special shares with ten times more votes than ordinary shares. US firms like Google, Lyft, Pintrest and Snap use this kind of structure, allowed there since the 1980s. But in the UK dual class structures aren’t able to get premium listings. If this model particularly suits tech firms with hard to value intangible assets, perhaps that should change?

3) Tax?

One of the biggest, but hardest to fix distortions is the differential taxation of debt and equity. The fact that you can get tax relief on debt but not equity means firms load up on debt more than they otherwise would, and invest less overall. The Institute for Fiscal Studies’ landmark Mirlees Review suggested creating an “Allowance for Corporate Equity” to fix this.

But the cost to the Exchequer of such taxbreaks would be huge. Alternatively, any rebalancing by reducing the tax relief on debt would probably have to grandfather this debt somehow, as firms have borrowed heavily on the assumption of relief. It’s a very, very hard problem to crack, but that doesn’t mean a (very) long term solution is impossible.

4) Small business lending and equity

The most common financing problems MPs hear about is bank lending to small businesses. The problem’s a long running one.

The truth is that it’s a low-margin business for banks to analyse the finances of zillions of small firms, yet the provision of such loans has wider benefits to the economy. That’s why over decades governments have created a succession of bodies to support lending: from ICFC to 3i to the British Business Bank (BBB) we created in 2012. With the Bank of England predicting large numbers of unlisted firms will need to raise equity to grow (given their post-pandemic debts), it’s encouraging to see the BBB now growing its role in providing equity too. It’s a success story, and we should continue to support its growth.

As the economy bounces back next year, lots of firms will be in debt. But there are also real opportunities to reform regulation and market structures to help money flow into new opportunities. It’s a great place for the Chancellor to be looking to get growth going.

Richard Holden: This first Johnson year demanded tough short-term decisions. The coming second will demand tough long-term ones.

7 Dec

Richard Holden is MP for North West Durham.

The Sarnie Salon, Consett

A week may be a long time in politics, but a year is an eternity. Another truth is that it is very rare that situations arise in politics that have never been encountered before.

But the best-laid plans of twelve months that were expected to be dominated by Britain getting out of the European Union, and starting to level up the country – so delivering on two of the major promises of the election – have been more than overshadowed by the borderless forces of nature.

In North West Durham, with the fells iced with snow, I was thinking about other times when occurrences on the other side of the globe had dealt out a thrashing to well-laid plans.

In 1815, a volcano in Indonesia exploded. Mount Tambora was reduced by five thousands feet in height, as the mountain was blown into the incalculable pieces and up into the earth’s atmosphere in the greatest explosion in a thousand years.

1816 became known as the ‘year without a summer.’ Crops failed, the largest famine in the nineteenth century ripped through the world, and hundreds of thousands died as conspiracy theories abounded.

While today we know more about why and how external shocks happen – facts that won’t stop some of those conspiracy theorists – this doesn’t alter the impact of such events . No-one can doubt that the global Coronavirus pandemic has hit every aspect of our lives, and that its aftershocks will be felt for many years to come.

The disaster that we witnessed in Southern Europe of football stadiums being used as mortuaries and hospitals being overwhelmed has been averted here. The measures that have been taken to avoid that scenario have come at a huge financial cost, as taxpayers’ money has been used to support employees and employers, since businesses were forced to close in the interest of public health to the tune of hundreds of billions of pounds. The other costs, in terms of impacts on education, physical and mental health are not yet fully quantifiable, but will be significant, too.

In the early nineteenth century there was no understanding of what had happened among either the people or the Government. The price of food went, no-one knew why – and there was suspected conspiracy, which led to rioting in the cities. In the countryside, people didn’t know why the sun wasn’t shining. That, by contrast, we know the causes of the problem we’re facing is very helpful – and the recent announcement of vaccines also gives us an end point.

For the overwhelming majority of my constituents, because they have a panoply of facts on hand, the pandemic isn’t political. What they want to see if politicians of allsides working to get out of it.

For our political opponents, their attempts at politicising it are probably the reason that, despite the economic impact, poll ratings are holding up for the Government. Rather than a government-in-waiting, Labour are seen as an opposition that leaves people wanting. In the last year nothing could be clearer than the seeming inability of the new Labour leader to deal decisively with Jeremy Corbyn and Labour’s anti-semitism problems. It is quite clear that the opposition is hopelessly divided.

For Labour, their situation a year in is compounded by what looks like the Keir v. Jeremy show. I don’t believe that if I walked down the main drag in Crook, Consett or anywhere else in my constituency I could find a single person who could name a member of the Shadow Cabinet and their job title.

For a new MP, the overwhelming international issue of Coronavirus has provided some practical difficulties on the ground, but it has really bound me to the community. Having championed our local pubs and hospitality sector, there is nothing worse than seeing it closed. Seeing the excellent work of our community hospitals and their renewed purpose during Coronavirus has helped get my campaign for a new community hospital to replace it over the line as one of the new 40 that our Prime Minister promised at the election.

It has also shown what strong and wonderful people there are out there in our towns and villages, putting themselves our for others. Remembrance in County Durham matters and, recently, I nominated two people locally for the Prime Minister’s ‘Points of Light’ awards who had raised funds for it: Vera, who has been supporting the Royal British Legion for decades and has earned the sobriquet “Mrs Poppy” for raising over £1 million for the appeal, and Venita, on behalf of a team of over 50 local volunteers, who created thousands of poppies as a memorial to over 200 men of Weardale killed in the World Wars. Nothing drives me on in campaigning for North West Durham more than meeting people who are giving their all for our community every day.

While this year may have been overshadowed by the pandemic, we can now very much see the light at the end of the tunnel. The ruin it has wrought will last, though. Our communities will remember the response that we now make.

So the call to ‘Build Back Better’ will need to prove more than a catchphrase for the electors of North West Durham in 2024. The new community hospital, awaited for decades, is very welcome, as is the funding for a feasibility study into a new public transport link from Consett to the Tyne. But underpinning all of that will be good jobs, a sound economy and public finances that can afford to pay for the levelling up agenda. That economic development needs to be self-sustaining locally as far as possible to be sustainable.

The first year has been tough. The second year will involve real decisions about the long-term and will cast in steel the signs for the future. Crucially, the towns of the North East, left behind for generations by Labour, will need to see their Conservative MPs forging a path to a future that enables them with good jobs, better services, a growing economy and sound public finances to support it. The groundwork is down to the individual MPs, but the direction of the centre will be critical.

Iain Dale: Let’s hear it for the private sector and hear less about a bigger state

4 Dec

Iain Dale presents the evening show on LBC Radio and the For the Many podcast with Jacqui Smith.

“Let’s hear it for the private sector”. Seven words you hear very rarely nowadays. The current narrative is that the state can and should provide us with everything – even to the extent of providing breakfast and lunch for Scottish schoolchildren.

It’s not just the state taking over the role of parenting. It is increasingly involving itself in aspects of our lives which only a few years ago we would have been horrified by.

I totally back many of the measures taken to halt the spread of Coronavirus, but in order for the rest of the population to buy into them, they have to seem reasonable.

Dare I say the Welsh government’s decision to ban alcohol from being served in pubs and restaurants at all times of the day is a measure that is completely unreasonable? Quite how having a glass of wine with your lunch in a restaurant makes you more likely to spread Coronavirous or contract it yourself only Mark Drakeford knows. I know Wales has a proud tradition of Calvinism, but even so…

Without the private sector, many of our most recent medical advances would have been made. John McDonnell wanted to have a state-run pharmaceutical industry. We will never know how it would have been able to do what private sector drug companies are doing in terms of inventing Covid vaccines.

It’s certainly true that the private sector is often the worst advert for itself, given some of its more vocal adherents are not exactly an example to the rest of society, but I guess that’s human nature for you. The greed exhibited by too many of our highly paid executives does little to restore people’s faith.

Yet this week there has been a move by Tesco which rather restores one’s faith in big conglomerates. It is to return more than half a billion pounds they received in business rates relief to the Treasury.

I just hope that this is redistributed to very hard-pressed local councils. Morrisons quickly followed suit, and I suspect the rest of the big supermarkets will, in the end, grudgingly do so too.

Saisnbury’s say they won’t (at the time of writing), but it’s difficult to justify huge payouts in dividends if a similar amount is being received in business support from the Government in one form or another.

– – – – – – – – – –

Talking of people who give the private sector a bad name, let’s have a word about Sir Philip Green. I was the Jeremy Vine TV show on Wednesday talking about the demise of his Arcadia group and Debenhams, along with another guest, Becca Hutson, who seriously suggested that it was up to the Government to bail them out, and it was all the Government’s fault anyway because of Covid.

Seriously. She clearly hasn’t been reading the business pages of the newspapers over the last three years. Had she done so, she’d have been aware that the demise of these businesses had been predicted for a long time. While Covid has no doubt hastened their fall, there’s little doubt they were doomed anyway. Neither business had embraced online shopping in the way that their competitors have, and have suffered the consequences.

If I’m honest, I have a teency bit of sympathy for them in, that ten years ago, would I have imagined that I too would be buying clothes, suits and shoes on the internet? No. But I do.

To think the Government should become the employer of last resort is the economics of the mad house. Yes, I feel incredibly sorry for anyone who loses their job, but if the state comes to the rescue of Top Shop or Debenhams, then why didn’t it for BHS or Woolworths? Or countless other businesses.

Ah, they say, but the banks were bailed out, so what’s different about shops? Well, everything. It doesn’t take a genius to work out the consequences for the economy if the banks had all been allowed to collapse like dominos. That is not true of the retail sector. Business is all about strategy and risk. Get the strategy wrong and take the wrong risk, and you become another corporate casualty.

That’s what Sir Philip Green has done, and it is sadly his staff and customers who are suffering the consequences. And, all the while, he sits on his £100 million Monaco-based yacht and gets through the remaining £900 million of his personal fortune.

While there is no legal way he can be forced to compensate any of his employees, surely anyone with even a small heart would make some sort of effort to alleviate the misery of those who are about to lose their employment? I’m not holding my breath, though. He’s not that sort of man, as was clear from the evidence he gave to a select committee not that long ago. A more repulsive human being I have rarely seen.

– – – – – – – – – –

Back in 1997, I did something mad and opened a specialist political bookshop in Westminster called Politico’s. It soon established itself as a meeting place and event venue, too.

Seven years later I closed it, and took it online, due to a combination of the advent of Amazon, a huge rent increase by our landlords, the Crown Prosecution Service and the congestion charge. But I sold the online business a couple of years later.

This week, I have resurrected the name and the online shop at http://www.politicos.co.uk. The intention is for it to become a one stop shop for all sorts of political items and ephemera, not just books. I hope that ConHome readers will be regular customers.

Tim Pilcher: How simple connectivity vouchers can empower Britain’s businesses right now

25 Nov

Tim Pilcher is the CEO of Glide. This is a sponsored post by Glide.

The impact of Covid‐19 on SMEs has been truly staggering, with 9.4 million people placed on furlough by July this year. Many, if not all, SMEs have been forced to change the way they operate overnight and the reliance on connectivity has never been more important. As the Government encourages us to build back better, it’s essential that we give Britain’s businesses what they need to survive, or their very existence could be in danger and the livelihoods of many threatened.

What’s the problem facing SMEs?

SMEs are facing a perfect storm – an unprecedented pandemic and now the impending fallout of Brexit at the end of the year. SMEs are at the heart of the UK’s recovery and economic growth plans, but in order to compete on a national and global stage, they need fast connectivity that works if they are to hope to generate investment in new services and solutions for their customers – and ultimately create job opportunities.

A lack of easily accessible funding to upgrade existing connectivity has meant that gaining fast internet connectivity is still problematic for many SMEs. A successful and efficient, simple, stand alone, non-aggregated voucher scheme to incentivise connectivity already exists – however, demand meant funds were used up quickly plus it is no longer available to new applicants.

The current scheme requires its beneficiaries to be grouped together into areas of demand, which increases the risk that individuals will be left behind. Simply put, either you’re in with your neighbours, or you’re out on your own.

Without Government intervention, local businesses are under threat.

Ultimately, Britain’s SMEs need more support and robust internet connectivity to survive and indeed thrive as they form the heart of the UK’s post‐pandemic and Brexit economy recovery; funding via Government support is needed for those businesses now as many face the risk of closure if they cannot compete in a digital world.

What the SMEs are saying:

“Although I desperately needed better broadband, I couldn’t have upgraded without the voucher scheme. What was great is that the system was so simple. Funding really can’t be a communal thing where businesses have to wait until the whole community agrees – it doesn’t make any practical sense.”

− Eugen Kail, Director, Autozoom

“It is really important for the majority of businesses here to have high speed connectivity to help them expand their business and respond to customers quickly. One of the first questions prospective tenants ask is ‘how good is the internet connection?’.”

− Linda Connelly of Spring Property Management

“Without the support of external funding many companies won’t be able to afford to increase the capability of their internet connections. This will leave them either having to place more employees within the office premises or they will have to scale down their operations either through furlough or redundancies.”

− Steve Voller, Director at MDI Networks Ltd

What can be done?

Fortunately, the solution is pretty simple. We’re calling on the Government to reallocate some existing unused funds from complex schemes, which are expected to be left unspent, into similar, simpler ones to provide immediate support for individual connectivity requirements. Schemes such as the Gigabit Voucher Scheme (GBVS) have proved hugely popular, with around 30,000 applicants successfully improving their connectivity as a result.

While incredibly important to continue to fund schemes to support rural broadband connectivity, we believe the imbalance in uptake compared to funding allocation needs to be set right. As well as funding rural areas, the Government should also consider supporting additional funding for those struggling with connectivity in urban areas. In doing so, it will give SMEs the connectivity they need to survive throughout the ongoing pandemic and into our post‐Brexit environment.

If you believe the Government should intervene and support SMEs to get easier access to funding to support connectivity installation, please register your name here.

Liam Fox: Today, the Chancellor should aim to boost an unambiguously private sector-led recovery

25 Nov

Liam Fox is a former Secretary of State for International Trade, and is MP for North Somerset.

The successful development of vaccines by the world’s largest – private sector – pharmaceutical companies brings much-needed optimism as we look forward to 2021. Yet, any political respite for the Government is likely to be short lived, as the focus inevitably shifts towards the seismic economic impact that the coronavirus has created at home and abroad.

As the Chancellor said at the weekend “people will see the scale of the economic shock laid bare”.

The UK’s overall debt has now reached 100.8 per cent of gross domestic product (GDP) – a level not seen since the early 1960s. It is terrifying to imagine where we would be if the public finances had not been improved to the extent they have over the past decade. The most recent Bank of England forecast estimates that unemployment may peak at around 7.7 per cent in April to June of next year but could be as high as 10 per cent.

The key to the post-Covid-19 recovery will rely on the ability of Britain’s small businesses to create jobs on the scale that we have seen in recent years. At the beginning of 2020 there were 5.82 million small businesses (with 0 to 49 employees), 99.3 per cent of the total business population.

Despite the unprecedented support from the Government through the Coronavirus Job Retention Scheme (the furlough) which has been extended to the end of March 2021, the Business Interruption Loan Scheme and the Self-Employment Income Support Grant, many small businesses fear that they may not survive the transition to the economic “new normal”.

The unprecedented government assistance has masked the fact that this group has suffered more than most in the varying degrees of lockdown that we have experienced since March, with some still struggling to get lenders to support them.

The longer that lockdown continues, the more that demand for their goods and services is likely to be depressed and their viability threatened. Many fear they may not survive to see the recovery. That is why, in his spending statement this week, the Chancellor must make clear the Government’s commitment to Britain’s SMEs, for this must be an unambiguously private sector-led recovery.

While there are understandable demands to pump more funding into the public sector, we must restore the habit of making sure we have the money in the bank before we start spending it.

Unless we are able to grow our economy through the private sector and generate more national income, then we will be back in the territory of having to choose between damaging tax rises or unpopular spending cuts.

Our ability to borrow heavily during this crisis has maintained the viability of a large part of our economy but an inability to control future borrowing will be deeply damaging to our long-term prosperity and our ability to fund the quality public services on which we depend.

I would like, in his financial statement, to see the Chancellor replace or at least add to David Cameron’s policy test which was “how will this affect and be perceived by every family in Britain”. The new test would be “the entrepreneur test”. This is in line with his natural instincts.

We must assess how every bit of legislation and every regulation will affect the wealth creating part of our economy and our every statement and every speech should be mindful of the message it sends to our small business community.

We must ensure that we are not only a great place for business start-ups but that we can deal with the lack of capital that often results in a failure of scale ups. We must ensure that the elements that make the United Kingdom such an attractive place for foreign direct investment continue – a stable regulatory framework, an attractive tax environment, flexible skills in our labour force, access to quality higher education, access to tech and gold standard protection for intellectual property. As the world’s third largest destination for foreign direct investment, we are already strong in all these areas.

In the 1980s, the Conservatives demonstrated our commitment to the ownership society through our totemic policy of council house sales. The Conservatives must now be seen as the natural ally for every white van man and woman, every tech entrepreneur and every corner shop owner. The Chancellor must make us unequivocally the party of small business.

Nick King: Johnson’s Reset. The Government needs business if it’s to build back better.

22 Nov

Nick King is a Research Fellow at the Centre for Policy Studies

Much has been written in the last week, on this site and beyond, about what a Government ‘reset’ might look like, following Dom Cummings and Lee Cain’s departure from Number 10. Broadly. those perspectives have focused on what might be termed ‘the three Ps’ of positioning, people and policy.

In terms of positioning it has been argued that Number 10 needs to take a less confrontational approach – whether that is towards the media, public institutions or, indeed, Conservative backbenchers.

On people, the part played by the indomitable Carrie Symonds and the increasing importance of Allegra Stratton has been acknowledged, but the search continues for the right Chief of Staff to promote and protect Boris Johnson’s own interests.

The issue of policy is perhaps the least clear cut, with competing views espoused as to whether or not the Government can be the party of Workington as well as the party of Notting Hill. My own view is it can and it must.

But there is a final P which needs to be thrown into the mix – not as a fourth horseman, but as a corollary of the three Ps – and that is the private sector.

The fact is that British business is at a low ebb right now, in terms of performance, confidence and its relationship with Government. Covid-19 is the most obvious explanatory factor for those first two issues – forcing millions of businesses up and down the country to close will take the wind out of their sails however generous the set of support packages provided. But introducing those measures only serves to make the job of working constructively with British business all the more important for government. On this task, it has been found wanting.

Across industries, sectors and different parts of the country, there has been consternation and confusion as different restrictions have been introduced, without any (published) economic analysis of the potential impacts or of the evidence base upon which these decisions have been made.

As we approach December 3rd, businesses remain in the dark about whether or not they might be able to reopen, despite the long lead times needed for various parts of the hospitality sector in particular (a sector whose import will perhaps never be as keenly felt as it will be in December 2020).

That businesses don’t feel like the Government supports them is hardly new news, however. Successive polls commissioned by my think tank, the Centre for Policy Studies, has shown that a clear majority of small businesses don’t think that the Government is on their side. Indeed, the Government’s own survey data shows that only a quarter of businesses think government understands business well enough to regulate it. But in the context of a national economic shutdown, this is simply not good enough.

This is not to say there aren’t people around Government who understand business, or who are keen to support it. Rishi Sunak, Alok Sharma, their political teams and Departments are obviously on businesses’ side, as is Ed Lister and Alex Hickman’s business relations team in Number 10. But the disregard of other influential figures towards business has meant that much of the private sector has failed to get a proper hearing throughout 2020.

The anticipated ‘reset’ is an opportunity for the Johnson administration to put that right. Which duly brings us back to our three Ps.

On positioning, the Government needs to be unapologetically pro-business, free enterprise and open markets. The Conservative Party must defend the role of enterprise and the private sector and be resolutely on the side of the millions of small business owners up and down the country. This is important ground both ideologically and politically – and ground which the Conservative Party is in danger of ceding if it isn’t more full-voiced in its support for business.

In terms of people, Andrew Griffith and Neil O’Brien’s recent appointments are welcome, and will help emphasise the role of business, but change is needed in Number 10 itself. A Chief of Staff with extensive private sector experience would be welcome but, failing that, an understanding and sympathetic attitude towards enterprise should be regarded as a sine qua non. Just as important is for Number 10 to have a strong and expert voice for business sitting within its policy unit. That there has not been a business policy function sitting within the policy unit since David Cameron was Prime Minister is extraordinary – the existing business relations team needs to be strengthened and given a proper policy role.

Which brings us onto the final P of policy, which is the most important of ‘the three Ps’. Positioning and people are all well and good, but fine words doth butter no parsnips, as they say – so Johnson needs to ensure his Government is putting business front and centre as he looks to build back better.

Post-pandemic, securing growth is the only game in town. Without that there is no hope of new jobs, greater opportunities or improved living standards – whether in Workington or Notting Hill. And none of this can be achieved without unleashing the awesome and dynamic power of the private sector.

An important starting point would be to curtail the steadily increasing regulatory burden on business. Each measure, taken on its own merits, seems important and its impact trivial to business. But the corrosive, drip-drip effect takes its toll and as growth flatlines and productivity stagnates, politicians stand with their hands on their hips, double teapoting, wondering why.

Take the recent HFSS (foods and drinks high in fat, sugar and salt) consultation for example – likely to cost British industry hundreds of millions of pounds. No doubt full of noble intent, but hardly what the economic doctor might order as we look to recover post-pandemic.

More worrying still are the suggestions that we will increase both the rates and the scope of business and enterprise taxes in 2022. This is no way to stimulate and incentivise the businesses who are our only way out of the economic morass in which we find ourselves. Rather than clipping its wings, the Government should provide the wind to help business soar.

Speaking of wind power, the vital role of the private sector was clear in the Prime Minister’s 10 point plan for a Green Industrial Revolution. But the truth is that few of his priorities can be achieved without the business community. Levelling up? It requires business investment and private sector jobs in the North and the Midlands. Net zero? Industry needs to transition and innovate our way towards it. Protect the Union? Champion our British businesses and demonstrate our reliance on the free flow of goods and access to important markets both north and south of the border. Global Britain? Remain open to inward investors and get more companies exporting.

Pfizer, BioNTech and other companies have all too ably demonstrated just why we need the private sector recently – it’s the key to solving so many of our problems. Which is why Boris Johnson needs to put it front and centre through his reset exercise.

A reformed Number Ten must get on the front foot with business relations and business policy. It needs to articulate a clear vision of our post-Brexit future, rooted in entrepreneurship, investing in success, focused on innovation, with a skilled workforce, trading with the world and built off the back of our brilliant SMEs. That’s a reset worth waiting for.

Nus Ghani: The Government must act to ban British companies from exploiting slave labour

18 Nov

Nus Ghani is MP for Wealden and a member of Business, Energy, and Industrial Strategy Select Committee.

Last week, the Government announced unprecedented action to save the rainforests. DEFRA lead on the announcement and the new legislation which will make it illegal for British businesses to use products that come from unlawful deforestation. This is hugely welcome.

Yet if the Government is able to take this legal position with UK businesses to tackle deforestation, there can be no reason why it can’t make it illegal for British firms to exploit slave labour in value chains too. And where better to focus than the supply chains in China – which is both the biggest source of pollution and slavery?

That’s why, in September, the House of Commons Business, Energy and Industrial Strategy (BEIS) Committee announced a new inquiry into UK firms transparency and auditing of supply chains in China, with a specific focus on the link to the two million Uyghurs held on slave labour camps in the Xinjiang region.

Earlier this month we heard how H&M has led the way in investigating its supply chains, ensuring transparency and ending its relationships with suppliers in Xinjiang due to concerns about forced labour. This was in contrast to the disturbing evidence presented by other firms such as TikTok, Boohoo, and Nike.

But at least they turned up to explain their involvement in China – in contrast, Disney failed to respond to our invitation to give evidence and explain how they happened to film Mulan in the shadow of slave labour camps.

There is no doubt that in some circumstances supply chains can be long and complicated, but when it comes to Xinjaing the evidence is clear, with internment camps and re-education centres visible from satellite pictures. So it was curious when Volkswagen confidently declared it has no forced labour in its car plants in Xinjiang. One wonders how Volkswagen can be so sure?

As a report by the Australian Strategic Policy Institute (ASPI) Uyghurs for Sale details, an estimated 80,000 Uyghurs have been transferred from Xinjiang to other parts of China to work in factories that are in the supply chains of at least 83 global brands in the technology, automotive and clothing sectors. The list includes brands like Apple, BMW, Dell, General Electric, General Motors, Google, Land Rover, Microsoft, Panasonic – and yes, Volkswagen itself.

There is a specific issue around cotton, fabrics and fashion. More than 80 per cent of China’s cotton is grown in the Uyghur Region, approaching almost 20 percent of global production, according to the Coalition to End Forced Labour in the Uyghur Region. This is a group of over 50 human rights organisations including Anti-Slavery International and Human Rights Watch, endorsed by over 280 other groups from more than 35 countries. Consequently, major apparel products sold by high-street brands such as Abercrombie and Fitch, Adidas, Calvin Klein, Gap, Marks and Spencer, Nike, Polo Ralph Lauren, Tommy Hilfiger, Victoria’s Secret, and Zara could have been produced by slave labour.

As Omer Kanat, Executive Director of the Uyghur Human Rights Project, says: “Given that so much cotton is sourced from the Uyghur region, the fashion industry is uniquely culpable for forced labour, and by extension, systematic policies meant to destroy the Uyghur identity.”

Brands like Nike, Zara, and Uniqlo, he adds, are not only “enabling forced Uyghur labour, they’re also supporting an entire system of genocidal repression. Who is picking the cotton and stitching the clothes that western consumers are wearing every day? Uyghurs. Drawn directly from mass internment camps.”

Under Britain’s Modern Slavery Act, companies have a legal responsibility to be transparent about slavery in supply chains. Yet it is curious that at a time when businesses go to great lengths to ensure brand management and corporate social responsibility, such efforts seem to come to a halt at the borders of China when it comes to human rights.

Just to bring the issue home, Merdan Ghappar used to model for the Chinese online retailer Taobao. Today he is handcuffed to a metal bedframe in detention in China’s western Xinjiang region, one of at least a million – perhaps as many as three million – Uyghurs and other Muslims held in a network of prison camps. Perhaps those who walk the fashion catwalks of the western world today will at least remember him – and question whether they should be promoting products made by his fellow prisoners?

In September the United States took the unprecedented step of banning exports from five entities in the Xinjiang and Anhui provinces of China, including garments, cotton, computer parts, and hair products. As Kenneth Cuccinelli, the Department of Homeland Security’s acting secretary said, “These extraordinary human rights violations demand an extraordinary response. This is modern-day slavery.”

Leaked high-level Chinese government documents last year speak of “absolutely no mercy”. China’s state media has declared that the aim in this crackdown on the Uyghurs is to “break their lineage, break their roots, break their connections and break their origins.” As the Washington Post put it in an editorial, “It’s hard to read that as anything other than a declaration of genocidal intent.”

A new independent tribunal, chaired by the man who prosecuted Slobodan Milosevic, British barrister Sir Geoffrey Nice QC, is now investigating whether the atrocities against the Uyghurs constitute genocide. If they do, high-street brands may be complicit in this crime.

Volkswagen might want to recall its history. It should not be lost on them that Marie van de Zyl, the President of the Board of Deputies of British Jews, and others in the Jewish community, are increasingly drawing direct comparisons with the Holocaust. In a letter to the Chinese ambassador in London, she said that nobody could see the evidence and fail to note what she describes as:

“…similarities between what is alleged to be happening in the People’s Republic of China today and what happened in Nazi Germany 75 years ago: People being forcibly loaded on to trains; beards of religious men being trimmed; women being sterilised; and the grim spectre of concentration camps.”

Her letter was preceded by the decision by the Jewish News to highlight the discovery of 13 tonnes of Uyghur hair – with “Nazi resonance” – on the frontpage of the newspaper. Indeed, it is significant that the Jewish News is the only British newspaper to have highlighted the plight of the Uyghurs on their frontpage, and has done so twice.

Just as we are asked about our legacy on the rainforests, so we will also have to explain how we responded to a modern day, technologically-advanced destruction of the Uyghur. We need a national effort – on the left and right – to wake up to the fact that as important as the rainforests are, slavery threatens the existence of entire people. And we need the Government to act as decisively, and legislate stop British businesses using or abusing slavery in supply chains just as it has to stop unlawful deforestation.

Neil O’Brien: The plans we must make now to ensure that our ship doesn’t hit the rocks

16 Nov

Neil O’Brien is MP for Harborough.

I’ve been thinking about endurance. HMS Endurance specifically. It was a little ship the Royal Navy used to send down to the South Atlantic.

A friend used to serve on it, and I’m haunted by his description of life out on a tiny ship in some of the world’s roughest seas: the vast winds that endlessly circle Antarctica, with no land anywhere to slow them; the huge waves down in Drake Passage, with the green water coming over the bow and even hitting the bridge; and of wondering whether the ship would be broken by the sheer power of the ocean.

A bit after he was on it, the ship nearly sank following an accident. It filled up with freezing water, and with all power lost, amid a gathering storm, it started drifting towards the rocks. The crew spent 24 hours fighting for their lives: bailing out the ship by hand, and eventually escaped from a gathering hurricane in the nick of time. While the story of how they survived is an inspiring one – the account of the mistakes that were made that led to the accident in the first place is an informative one.

As so often with disasters, the warnings were all there: the wrong sort of ship; no proper maintenance; too many key staff absent; major problems with the culture…

As with so many disasters, in retrospect the warning signs were all there.

One of the great arts in politics is to see the problems and the big choices coming, so that you can solve them before the ship starts sinking. 2021 is shaping up to be a year where we make some very big choices that will define the coming years.

And I what I really want is readers’ views on what the big choices are. But let me start with my own mental list for later next year.

Let’s assume for a moment that we have come out of the other side of Coronavirus and Brexit. It’s 2021, the vaccine is rolling out, the virus is dying out, the economy is recovering. Still a long way to go, I know. But what will happen then? I think there are four really big choices:

First, the big fiscal choice. At present the focus is rightly on helping support the economy until we get into sustained recovery. But it seems likely there will be some kind of structural deficit afterwards, because the economy will be behind where we hoped it would be. We won’t know how big or small the deficit will be for quite a while. It may be small enough that we can take some time. Or so big that we can’t. So we may face some big choices on (a) how fast to try to close any gap, and (b) what mix of tax and spending decisions to use to fix it.

The second choice is our plan for growth. Western countries have had a rough decade, and some economists worry about “secular stagnation”. How do we get the economy moving faster? How can the tax system better support investment and innovation? How can we change the composition of government spending on research to better support business growth? How attract more inward investment in higher skill, higher tech, higher wage industries?

Third, we face big choices about the future of the UK. The Scottish Parliament elections on 6 May may herald a dramatic new phase in the debate. The bookies (though they’ve been wrong before) give the SNP a 95 per cent chance of being the largest party and a 66 per cent chance of an outright majority, either of which they would use to rev up their demands for another referendum. The breakup of Britain would lead to a decade or more of catastrophic paralysis. Years of arguments over currencies, pensions, debts, mortgages and state assets. Officials working to unpick hundreds of years worth of stitching. All parts of the UK would suffer economically, and it would make the Brexit rows of 2016-2019 look like a walk in the park. Yet even with the virus raging, the SNP are preparing to go into overdrive to force a second referendum. An equally strong campaign will be needed to fight back. How do we fight it?

The fourth big choice is about the levelling up agenda: and how far and how fast we can go. The lead times on getting things done can be daunting. For example: in 2014/15 we decided to phase out rubbish “pacer” trains in the north. But last won’t leave service in the north until next month. We need policies which will genuinely help poorer places catch up, but also need to show significant progress by 2024.

Then there’s all the other things.

Decisions to take about the future of devolution and local government in England, with a White Paper out in the spring.

There’s a second year of tough decisions to take on school exams. The Welsh government has already cancelled next year’s exams. Assuming we can still hold them in England, there are unavoidable choices on how to mark them. Given the disruption to schooling, mock results will likely be worse, but not evenly so across different types of schools – for example, the crisis has affected state and private schools very differently. So how do universities assess potential? And should we measure pupils against each other with the same distribution of grades as earlier years? Or maintain comparison with previous years, which would likely see grades drop across the board?

There’s a long-expected decision to take on universities. Do we keep the current system? Or build up technical education, and try to reduce the number of students on low value university courses which lead to low earnings while consuming lots of taxpayer subsidy?

At the start of November next year, the UK will host the UN Climate Change Conference in Glasgow. There are big choices to make about how and how fast to pursue decarbonisation at home, and lots of questions about what the UK should be pushing for at the conference.

MPs voted for net zero, but massive questions about how to do it remain open. Are we aiming for heat for people’s homes to come from electricity in future, or by pumping hydrogen through the current gas grid? If more and more vehicles will be electric, what mix of (and how much) electricity production are we aiming for?

Then there’s big questions in foreign and security policy. The Integrated Review is due out, which (sensibly) combines the questions of our future defence and security spending with questions of economic security – given a world where we face ruthless technology competition, not least from China.

But there are other big security questions: France is suffering a wave of brutal Islamist terror attacks – is there more we need to do to pre-empt such atrocities here? The Prime Minister and President-Elect Joe Biden have both floated new ways to get the world’s democracies working together, including those like India and Japan that are outside NATO. Can something new be brought together?

These are just my starters for ten – so readers, it’s over to you. What are the biggest choices? What are the problems that we have to get ahead of to keep this ship afloat?