David Gauke: Cameron’s values in government may be out of favour, but they are not wrong

13 Apr

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

The Government’s announcement that it is undertaking an independent enquiry of the Greensill Capital affair is unlikely to bring much cheer to David Cameron. He has endured weeks of bad publicity, and there is little chance that the story is imminently going to ‘move on’.

Whatever the rights and wrongs of the former Prime Minister’s actions – and he has acknowledged making mistakes – the furore is all the more painful because his reputation as Prime Minister was already at a low ebb. Critics of his economic policy accuse him of inflicting austerity which, they argue, were unnecessary, stunted growth and damaged public services; he is castigated by Remainers for calling and losing the Brexit referendum and by Leavers for being a Remainer; some on both sides accuse him of deserting his post by resigning the morning after the poll; his electoral successes have been surpassed by Boris Johnson’s thumping majority in 2019. Not unrelated to this, neither the man nor his political values appears to have much influence on the modern Conservative Party.

Defending Cameron’s record in office is deeply unfashionable. So I will do so.

Let us start with the economy. There are few defenders of ‘austerity’ in today’s public debate. Labour still want to argue that the electorate got it wrong in 2010 and 2015, just as they tried to do in 2017 and 2019 (which, incidentally, suggests that this might not be a guaranteed route to success). Johnson, meanwhile, is not temperamentally an austerian and enjoys the opportunity to demonstrate that he is new and different from recent Conservative history.

The economic debate has also moved on. Governments have been able to borrow vast sums of money in the last year without much of a risk of a sovereign debt crisis. Central banks have played a more active role, debt servicing costs have fallen and international organisations have advocated expansionary fiscal policies. This may all go wrong at some point – there is more reason to worry about inflation than for many years – but it hasn’t gone wrong yet.

None of this means, however, that the concerns of fiscal conservatives back in 2010 should be dismissed. The global financial crisis had resulted in substantially higher spending and permanent damage to tax revenues. The risks of a sovereign debt crisis – with consequences for inflation, debt interest costs and consumer and business confidence – were not imaginary. The IMF and the OECD advocated that countries needed to have credible plans to put the public finances on a sound footing, and many countries did just that. In short, the balance of risks and the expectations of the markets in the years after 2010 were very different to where we are now.

Did fiscal consolidation significantly hamper our economic recovery? It is true that economic growth in 2011 and 2012 was disappointing (although not as bad as it appeared at the time when the ONS early estimates suggested that we had had a double dip recession), but it is worth remembering that the independent Office for Budget Responsibility put this down to the lasting effects of the banking crisis, higher commodity prices and the Eurozone – not fiscal consolidation.

Looked at in the round, over the 2010-2016 period, the UK had the joint highest growth for a G7 economy, level with the US. It was also a period of rapid jobs growth, with the highest employment rate in our history and income inequality falling. Had the Brexit referendum gone the other way, there is every reason to believe that the post-2016 UK economy would have been characterised by high economic growth, rapidly rising living standards and strong public finances, as opposed to us falling to the bottom of the G7 league table.

Were public services were unduly damaged? Difficult decisions had to be made, but many of them were unavoidable given that the spending plans that we inherited were based on an over-optimistic, pre-crash assessment of what was affordable. It was possible to drive greater efficiencies and find ways of getting more for less. The British state has been placed under enormous strain in the last year by Covid but there have been some real successes. Just looking at two areas where I have some familiarity through Ministerial experience, HMRC was able to introduce the furloughing system in a matter of weeks, and the Department for Work and Pensions was able to cope with an extraordinary surge in benefit claimants. Neither would have been possible without reforms undertaken by the Cameron Government.

Having said all that, we relied too heavily on spending cuts over tax rises. It was politically easier at the time to cut spending rather than raise taxes and, as time went on, we got the balance wrong. Some areas of government spending – justice, for example, or social care – were squeezed too hard. But a period of spending restraint was necessary and inevitable and too many of Cameron’s critics fail to acknowledge that.

It was the decision to hold a referendum on the UK’s membership of the EU and then lose it that hangs most heavily over Cameron’s reputation. It will, unfortunately, always be for what he is remembered and, for many Remainers, this will never be forgiven. The referendum result created huge uncertainty and will, in my view, inflict lasting damage to the UK. But we should not kid ourselves that had he adopted a different approach our membership of the EU would currently be assured.

The Conservative Party was moving in the direction of being a Vote Leave Party – in part because of the fear of UKIP peeling off Tory votes – and the decision to offer a referendum was motivated both by a desire to win the 2015 general election by winning back UKIP voters but also by a recognition that a post-Cameron Conservative opposition would, in all likelihood, favour Brexit.

The best chance of staying in the EU, Cameron concluded, was to settle the issue early with a decisive Remain victory – the longer the issue was left, the greater the chance we would leave the EU. As it turned out, he was wrong to believe that he could deliver a Remain victory but he may have been right that this was the best chance of defeating Brexit.

As for the criticism that he should not have resigned following the poll, one lesson of the last five years is that the referendum did not tell us what exactly ‘Leave’ meant. I do not believe it is plausible to think that the European Research Group would have allowed the leader of the Remain campaign to define the answer.

More broadly, much of his political approach has stood the test of time. In wanting more women and ethnic minority MPs, caring about climate change and the environment and introducing equal marriage he took positions that were controversial at the time but have aged well.

Yes, Johnson’s majority in 2019 – and continued strength in the polls – exceeds anything achieved by Cameron, but it is not clear that a political strategy based on white voters without post-16 academic qualifications is the right long-term strategy for an electorate that is becoming more diverse and better educated.

Cameron represented fiscal conservativism, social liberalism and internationalism. These values may be out of favour but they are not wrong. It is too early to say to what extent his personal reputation will – in time – recover but the dismissal of the achievements of his Government is undeserved.

Jimmy McLoughlin: Let’s hear it for entrepreneurs creating the jobs of the future

17 Mar

Jimmy McLoughlin is a former adviser to Theresa May and Boris Johnson and is writing on the launch of second series of Jimmy’s Jobs of the Future – a top 20 Apple business podcast.

Transitioning careers is hard, really hard. I should know: I left Downing Street over a year ago, and despite being a business adviser specialising in entrepreneurship and technology, I have failed to transition careers. I have written extensively about that process here.

It is more difficult to work out the world than ever before. As a young person – or any person for that matter – it can be difficult to know where future careers are coming from and how you build relevant skills for the future. The World Economic Forum surveyed large global businesses last year, and 43 per cent said they were planning to reduce the size of their workforce. By 2025 they estimate that the computers and humans will do the same level of work.

This can seem daunting, but the job market has always evolved. The first caveman to train a hunting dog was probably accused of taking another caveman’s role, in the same way Luddites in Nottingham opposed machinery in the 19th Century.

The difference now though is the pace of change, and people can see it more. Supermarkets in the UK now employ more people than coal mining did in 1960. People can see that the traditional job of cashier and check out assistant disappears each time they go into a store. Amazon this month launched its first cashier-less store, and we can rapidly expect the same across the UK.

One of the hardest parts of my job in Number Ten was when the phone would ring at 7:45am with a FTSE Chair calling me to say they were just about to announce a large number of redundancies and wanted to let us know ahead of the markets opening. I would then deliver the bad news to the Prime Minister in the 8am meeting – after all, every job lost would mean a family and potentially an entire family impacted.

However, pre-coronavirus the employment statistics were continuing to go up. Where were all the new jobs being created?

It was a fair question, and I endeavoured to brief the Prime Minister on new entrepreneurs that were perhaps adding a dozen or so employees a week, it would not make headline news, but cumulatively they were making a big impact.

I thought I would try and democratise this information. That is why I launched a podcast, ‘Jimmy’s Jobs of the Future’, which interviews entrepreneurs about where they are creating the jobs of tomorrow and recreate the Prime Ministerial briefings.

It is hard to know where the world is going and how to future-proof yourself against the dramatic change that is coming. I think that entrepreneurs who are building fast-growing companies is a good place to start. We regularly hear tales of a retail corporate cutting hundreds, even thousands of jobs, which understandably makes
headline news. Little do we know about the fast growing scale-ups which are creating hundreds of jobs every day.

Before the pandemic we had witnessed a ‘jobs miracle’ over the last decade, but where are these jobs coming from? It’s down to the entrepreneurs who are starting around 1,000 companies a day and making incremental hires along the way. It’s not headline news, but is fascinating, and I want to help shine a light onto these people and tell us where they are going to take their companies in the next decade.

For example, we hear a lot about ‘a green recovery’ and ‘green jobs of the future’, what does this actually mean?

Well in our first interview we speak to Hayden Wood who founded Bulb, the renewable energy company, five years ago. It is now the fastest-growing private company in the UK and employs over 900 people. They’ve also become a modern-day export, launching in France and Texas recently. We ask him where he thinks the company will be growing in 3-5 years and what skills they are looking for – the answers are illuminating for anyone that wants to work in energy or a fast growing scale up.

For this series, we’ll be travelling across the UK meeting entrepreneurs who are creating dozens of jobs every month: Nigel Toon, who has built a billion-pound company in Bristol; and Graeme Malcolm, who is building a world leading quantum company in Glasgow. They need people with PhD-level skills such as software engineering and data
scientists, but they also need marketeers, copywriters, and international operation scalers.

Readers of ConservativeHome may know that my father was a coal miner from Cannock Chase and became Chairman of our party. People may describe that as social mobility in action. However, what does social mobility mean to the public? I think it is a rather odd Whitehall/think tank term that doesn’t hold much meaning in the Dog and Duck.

Sometimes in the technical policy arguments over furlough, it has been forgotten that work is far more than just a salary or financial reward: it provides a sense of purpose, of self-worth and camaraderie. When my aunt passed away two years ago, I was pleasantly surprised to see former colleagues from Asda turn up, but I was truly surprised by the fact former customers also came to the funeral. These are not points that can be factored into a Treasury spreadsheet.

I hope that this podcast can help a few people along the way and almost provide a mass form of mentoring from the best entrepreneurs in the business, opening up a network of career options that people had perhaps not previously considered before.

There has never been as many career choices out there. Whilst this is exciting, it is incredibly daunting, and the mass of information is overwhelming when you try to navigate it, the tools to source and disseminate information will be increasingly important. I hope that this podcast will help do that whilst inspiring people about the amazing jobs out there that innovators and entrepreneurs are creating.

You can listen to the podcast through Apple, Spotify and other networks here. You can sign up to receive further updates here.

Tackling unemployment might finally show us what sort of Conservative the Prime Minister really is

23 Feb

As the Prime Minister set out his roadmap out of lockdown in the House of Commons yesterday, there was for the first time a real sense that the nation might actually be on the path back to the distant, half-remembered state of ‘normal life’.

But today’s unemployment figures are a sobering reminder of the serious challenges the Government will face even when, deo volente, we have finally brought Covid-19 under control. According to the BBC:

“The Office for National Statistics said 1.74 million people were unemployed in the October to December period, up 454,000 from the same quarter in 2019. The figures show 726,000 fewer people are currently in payrolled employment than before the start of the pandemic. Almost three-fifths of this fall, 425,000, has come from those aged under-25.”

The figure for young people should be especially concerning. Voters in that age group are already deeply reluctant to vote Conservative, and have made huge sacrifices to protect older citizens during the pandemic. If ministers allow a joyous unlocking for some voters to be simply a transition to further economic hardship for others, they risk alienating an entire generation.

Fortunately, the ONS also reports that there are ‘tentative signs’ that the employment market is stabilising. But decisive action will be needed. We have previously explored what it might be, and looked at the measures already covered in the Plan for Jobs. Centre-right think-tanks such as the Centre for Policy Studies have also published their own proposals in reports such as After the Virus and A Northern Big Bang.

The Budget will therefore be illuminating because it might start to give us a firmer idea of what ‘Johnsonist’ economic policy might look like. Freed from the exigencies of the pandemic, the Prime Minister will have to start making more obviously ideological decisions than he has to date. Will he rely on traditional Tory measures, as the CPS would doubtless prefer? Or will he seek inspiration from John Maynard Keynes, as Jacob Rees-Mogg advises in our latest Moggcast?

A man with Johnson’s sense of history will know that his legacy may depend on getting it right. Memories of the Conservatives’ hard-nosed attitude towards unemployment in the 1980s (however justified) helped to lock the Party out of many of the ‘Red Wall’ seats he captured in 2019. Voters will be swift to punish, and slow to forgive, a perceived relapse to being the ‘same old Tories’.

Jethro Elsden: Failing to extend the stamp duty holiday would be a big mistake

23 Feb

Jethro Elsden is a Data Analyst and Researcher at the Centre for Policy Studies.

Reports that the Chancellor is going to try and use the budget to claw in a bit more revenue to try and pay for the cost of the pandemic are worrying. Even if the costs of the pandemic are eye watering, we are only just on the cusp of emerging from the pandemic, now is the time to go for growth not wallop the economy with tax rises.

Even more worrying is the fact that among measures being discussed is allowing the stamp duty holiday to end and the system to revert back to how it operated prior to the introduction of the holiday in July last year.

As the new paper we at the CPS have published lays out, failing to extend the stamp duty holiday would be a serious mistake. It would deliver a sledgehammer blow not only to the housing market but also the construction industry and act as a major drag on growth, just as we are trying to kick on and recover from the economic carnage the pandemic has caused.

After the pandemic hit and we entered the first lockdown back in March last year housing transactions plummeted, falling by over 100,000 in Q2 compared to the same period the year before. To try and reverse this collapse and help to stabilise the construction industry, Rishi Sunak introduced a Stamp Duty holiday in early July, raising the threshold from £125,000 up to £500,000, thus slashing the burden of the tax.

The impact of the measure was immediate and the housing market has not only recovered but positively boomed. Provisional data for the last quarter of 2020 shows transaction numbers at 316,300. To put that figure in context that’s up almost 50,000 on the same period the year before and is the highest number for quarterly transactions since the end of 2007, before the housing market slumped in the wake of the global financial crisis.

Because of this the construction industry has been stabilised. High transaction numbers have ensured that housebuilders have had the confidence to continue building new houses and haven’t cut back supply. In fact, despite the dire economic situation the number of new builds completed was actually 0.5 per cent higher in Q3 2020 than the same period the year before.

However, with the holiday set to stop at the end of March the Government risks delivering a sledgehammer blow to the housing market and the construction industry which they will take many years to recover from, just as occurred after the global financial crisis. This will weigh on the economy just as we try to recover from the pandemic. Transactions will fall significantly, and this will cause the number of new builds to move in the same direction. And while government revenues might rise slightly the economic damage that ending the holiday will do will be very significant.

To avoid this the Government must at the very least extend the holiday, by making the £500,000 threshold permanent on primary homes. Alternatively, the government could be more ambitious and opt for broader reforms which the CPS have previously proposed , either by keeping the threshold at £500,000 and lowering the rates above this back to their 2005 level for primary homes, or simply abolishing the tax altogether.

The economic distortions that stamp duty inflicts are widely acknowledged and it has a strong claim to be Britain’s worst tax, it is certainly far more damaging than either Income tax or VAT. Probably the worst impact it has is that by discouraging transactions it leads to a poor allocation of housing, and in the UK where housing supply is far from elastic this causes a large loss in welfare.

For example, by disincentivising downsizing it causes elderly people to remain in housing unsuitable for their needs, while preventing younger people having the opportunity to buy larger houses that the same elderly would otherwise be selling. Lower downsizing by the elderly means there’s less demand for housing specifically designed for their needs, which may explain why the UK has on an international comparative basis so little specialist retirement housing. And by making upsizing more difficult it can force young couples to delay starting a family. These are not trivial issues: the costs are real and significant.

The reforms we propose will help to minimise (or in the case of abolition, end) the damage and distortion that stamp duty causes. Furthermore, by increasing transaction numbers they will substantially increase the number of new builds each year. Because there is a well-established relationship of about one new build for every ten transactions that occur, we estimate that the increase in transactions that our reforms would cause would lead to an extra 20,000 new builds every year (or in the case of abolition, 23,000 extra new builds). This will not only be of significant economic benefit but will also go someway to helping the UK meet its target of 300,000 homes per year.

Because stamp duty is such a destructive tax the costs of these reforms, whether that’s just extending the holiday so that the £500,000 threshold is permanent or full-on abolition, are significantly lower than a superficial static analysis would suggest.

Of course, it is impossible to know the counterfactual where the holiday had never been introduced, but it seems likely given how weak the economy has been that transaction numbers and stamp duty revenue would have remained significantly below their 2019 levels. But let’s assume that in the second half of last year stamp duty revenue managed to climb back to 90 per cent of its 2019 level, that would mean the holiday cost about £1bn in lost stamp duty revenue. However, if the housing market had bounced back less strongly and revenues had only recovered to say 75 per cent, then the cost is only £300 million.

But on top of this the wider economic benefits of the holiday will have filtered through and helped support numerous other businesses, such as construction suppliers and estate agents, in staying afloat and not cutting back employment. Meaning less government spending on unemployment benefits and tax revenues such as VAT will have been boosted. This means that the true cost will be lower, perhaps substantially so.

Once you account for the increase in transactions, the extra tax money that will be raised from the complimentary spending which tends to occur when someone moves house, and the increase in new builds (and the extra revenue this will generate through section 106 etc), the cost of keeping the threshold at £500,000 and lowering rates is only about £500 million, while abolition on primary homes would cost only about £2bn.

No doubt in the coming months the Government will be looking at different policies to help boost growth and help the country recover from the pandemic. While it might involve a small cost in lost revenue, extending the stamp duty holiday by making it permanent on primary homes, or more broadly reforming the system by lowering rates or abolishing the tax, would be one of the best ways the Government could help to stimulate the economy.

If it fails to do so, the cost will be significant, and the housing market and construction industry will be dealt a body blow they may struggle to recover from for the next few years.

David Green: When it comes to economic rejuvenation, there’s no alternative to cutting Corporation Tax

9 Feb

David Green is CEO of Civitas.

With a Budget due on 3 March, the Government has been floating the idea of a windfall tax on ‘excess profits’ made during the Covid crisis. But instead of pondering how to punish companies that adapted successfully to the lockdown, it would be better to ask how we can most effectively accelerate our economic recovery

The case for some resolute tax cutting in the Budget is overwhelming. Excessive taxation can dampen the resolve of the most determined entrepreneurs. Top of the list should be a cut in corporation tax to ten per cent. At 19 per cent the rate is still high compared with several OECD members, and within the EU several countries charge much less. In Hungary it’s only nine per cent, in Bulgaria ten per cent and Ireland’s main rate is 12.5 per cent.

The low rate in Ireland has attracted a long list of international companies with at least a major office in Ireland, and often their European headquarters. Facebook has its European head office in Ireland, as does PayPal, while Google has a major presence. Airbnb has 500 employees, eBay has 900, and Microsoft 2,000. Other big names include LinkedIn, Accenture, HP, Apple, IBM, Pfizer and Pepsi.

It’s true that tax-avoidance shenanigans were heavily implicated in the location decisions of some of these companies, but the low headline rate was the clincher.

What would a cut mean for the public finances? In 1919-20 UK revenue from corporation tax was £63.2bn. If the rate were cut from 19 per cent to tern per cent this figure would be significantly lower, perhaps around £30bn.

However, we can predict a large increase in jobs, which in turn would increase revenue from income tax and national insurance. Both are far more important than corporation tax. In 1919-20 total HMRC revenue was £633.4bn, with income tax producing £193.2bn and national insurance £142.8bn. Revenue from both can be expected to go up sharply. Increased economic activity resulting from the cut in corporation tax would also raise the take from VAT, which brought in £129.9bn in 2019-20. If the revenue from these three taxes increased by only seven per cent it would more than make up for lower receipts from corporation tax.

Cutting the headline rate of corporation tax would also reduce tax avoidance and encourage companies operating primarily in the UK. It is notoriously easy for international companies to shift profits to overseas subsidiaries and pile costs onto their UK branches to reduce taxable profits. It’s much harder for companies whose operations are mainly in the UK to hide their profits, and a cut in the headline rate of corporation tax would be a just reward for their patriotism.

For many years the OECD has tried to reduce the scale of avoidance through its Base Erosion and Profit Shifting (BEPS) project. Member countries invariably give it lip service but little has been achieved. There is a huge literature about the devices deployed to avoid tax via controlled foreign subsidiaries, including strategies based on transfer pricing, the allocation of interest payments, and charges for intellectual property.

The lower the tax on profits, the less it’s worth spending on an army of accountants and lawyers to shift profits without breaking the law. And if international companies engage in fewer tax dodges, the Treasury can spend less on prevention. HMRC now has over 67,000 staff. Some could be transferred to more productive activities.

To make it clear that the aim is to incentivise job creation, the Government could also abolish capital allowances. At present when a company builds a factory or adds a production line it can’t treat the outlay as a cost that can automatically be deducted from taxable profits. Expenditure has to go into a special pool and is deducted from profits over time. It has long been recognised as a perverse incentive against investment, and in 2019 and 2020 the Government increased the capital expenditure that is deductible from £200,000 to £1m. Some want to increase this ‘annual investment allowance’ still further and to add to the list of items covered by the ‘first year allowance’, which is over and above the annual allowance.

But it would be lot simpler just to scrap the whole system and allow all investment in new productive assets to be a deductible cost. Such a dramatic step could easily lead to the multiplication of Nissan-style factories and well-paid jobs throughout the left-behind regions.

Cutting corporation tax would upset the European Commission, which may renew its protests against the evolution of the UK into Singapore-on-Thames. But having learnt nothing from the row over vaccine distribution, it will find itself vainly huffing and puffing again.

The Government is determined to spread prosperity to every corner of the land, but it should not be content with measures like posting civil servants to the North and redistributing infrastructure spending outside the South East. Improving roads, rail, ports and the internet is an essential component of a strategy of economic rejuvenation, but it’s no substitute for cutting corporation tax. Combining the two could be transformative.

Mario Laghos: More support, less regulation – how Government can help British industry thrive

23 Jan

Mario Laghos is a political analyst and the editor of Just Debate.

So many of our countryside towns, which are home to historic churches, school buildings and libraries, are increasingly blighted by the emergence of fresh-faced red brick town houses.

They buffet the existing architecture in the most jarring way, even though not too dissimilar in aesthetic quality to the sort of brown Soviet-style flats that were built in the 1970’s and 1980’s to facilitate those same town’s growing populations. Iconic villages are being swamped by the apathetic copy and pasting of dwellings whose one and only reason for existing is the cheapness involved in their construction.

In most if not all cases, however, these villages are sited next to quarries, from whence the original buildings’ constituent stone is derived. Yet those quarries sit dormant, even while so many of our youth suffer the indignity of precarious employment, or flee to cities for opportunity.

These sites could give meaningful work to the young whilst ensuring our historic towns are conserved by using local resources, local labour and local style. Why not honour our past, and capture its spirit for our future, by re-opening them?

Well, primarily because of cost, of course. It isn’t economical, prima facie. The steel we use for construction, and the coal required to forge it, are imported in such huge volumes – and from China no less – despite the fact that we sit atop a mountain of coal and are a nation home to some of the best steel workers in the world.

Our steel industry is essential to the defence of the realm. Much of our coal wealth sits beneath some of our most destitute regions. Yet we refuse to extract it for fear of emitting carbon. Far easier to have a freight ship carry it across the world, so as to keep the CO2 off of our books. After all, the cost of having to beautify the mine after it has been exhausted, erecting solar farms to offset emissions, and cutting all the red tape would no doubt be a costly and time-consuming affair.

Thus towns which were once the engines of the nation are resigned to destitution and sink into terminal decline, buoyed only by call centres, coffee houses, and betting shops.

In 1998, we imported 20 per cent of our energy. Today that figure stands at 40 per cent. We rely on Russia for the bulk of our solid fuel and much of our petroleum. Yet while many could be given high-skilled work and boundless opportunity by extracting energy via fracking, a technique which has made the US a net exporter of energy, we have placed a moratorium on it.

Worse, we are an island nation who continually fail to make good on our geographic gift; that we are surrounded by water. We are constantly told that we are set to become the Saudi Arabia of wind, but why not of tidal power, too?

We have become so infatuated with financial services and the City of London, we have lost sight of our nation’s traditions and its strengths. Thanks to the market economy we have become acutely aware of the price of everything: we know goods and materials from poor countries with inadequate labour laws are cheaper than those produced onshore. The start-up costs associated with brickmaking factories or quarries can be prohibitive – far better to buy them in then, and let balance of payments deficit grow further still.

The list goes on. We have found it convenient to be energy-dependent, particularly as self-sufficiency often necessitates government subsidies, a most unattractive proposition. And there is little profit in being readily prepared around the clock for a once-in-a-century medical crisis, as the state of our PPE warehouses attests.

But we must become more attuned to the virtue of value, rather than the seductive mistress of price. Rather than sending young people into the doldrum of recruitment agencies which recruit for recruitment agencies like Russian dolls, meaningful employment and national value can be found in traditional industry, and the kickstart costs incurred by the helping hand of governance will be paid back. High-wage taxpaying workers, the value added of energy self-sufficiency, the control of our destiny, and the improved social relations and reduced crime wrought by stable work and increased home ownership will pay back and more that which would be required to jumpstart dormant industries.

Of course, such work is not limited to simple labour, but will require the efforts of highly skilled engineers, architects and technicians, and administrators.

This rediscovery of the virtue of industry and meaningful work does not mean abandoning Conservative values. It should go hand-in-hand with a ferocious effort to cut the pointless regulation which holds back investment and development. Rishi Sunak’s task force should be just the start.

The UK is a leader in the global race to administer vaccines. But we could improve our lead, and once we finish in poll position could turn our resources over to benefit of the world.

But our programme, excellent though it is, was late off the blocks, its momentum partially scuppered by (now-scrapped) regulation which required vaccine givers to have completed 21 documents, including courses to combat terrorism and have adequate knowledge of human rights. It failed to move into fifth gear fast enough due to an evident reticence to involve the military. And it is set to be dealt a further blow still by our lack of onshore manufacturing capability, as Pfizer’s Belgium plant is having to ration its output.

Much like our dithering on extracting British coal, which has held up approval of a singular Cumbrian coal mine for years, and as with the moratorium on fracking, despite our willingness to import natural gas, it is another instance of tedious regulations which serve only to straightjacket Britain from fulfilling its potential – all while exacerbating the harms they are designed to mitigate.

It is time to throw a one-two punch. Market forces must no longer be allowed to hollow out towns, cities and villages with race-to-the-bottom-on-cost housing. Nor should they relegate to a footnote of history proud and noble industries with strategic value in favour of financial services and the City of London. And to achieve these ends the government must become adept in knowing when to step up and offer needed support, and when to step stand back by consigning counterproductive regulation to the dustbin.

Jo Gideon: Civic pride can help level up post-Covid Britain, but it needs Government support

21 Jan

Jo Gideon is the Member of Parliament for Stoke on Trent Central.

Community spirit has been integral to our fight against the virus. Looking beyond the pandemic, local areas must be empowered to harness civic pride to create the opportunities needed to level up the UK.

While there is no doubt that the last few months have been difficult, particularly as we enter another national lockdown, there are reasons to be optimistic. For starters, we are making fantastic progress with the roll-out of the vaccination, with more than 2.8 million vaccinations already administered across the UK.

But these next few months are also an opportunity to rekindle the civic pride we saw from local businesses, volunteers and communities during the first lockdown. According to national surveys, community spirit was high in April, but diminished alongside easing of restrictions. Now, we need communities to pull together again as cases soar and the latest outbreak of the pandemic threatens to overwhelm local health systems.

Civic pride is an important catalyst here. People in my constituency, Stoke-on-Trent Central, have a strong sense of belonging, and this is something that our community can build on, both to fight the pandemic and to deliver on levelling up.

Unfortunately, too many people lack the hope that things will improve for them and for their families. We need to find a remedy for this disconnect and help people believe in the potential of their local community once again.

Now that we have delivered on our manifesto commitment to get Brexit done and reclaim our sovereignty from Brussels, people and communities need to feel empowered. We must now hand back control to the community over their aspirations and opportunities, to build an inclusive economy from which everyone can benefit and to which everyone can contribute.

To unleash the UK’s productivity and create these opportunities, which will be the building blocks for our recovery, places need to be empowered through access to funding and greater decision-making powers. This means involving local social enterprises, businesses, and third sector organisations, who all have a hugely important role to play in providing jobs and training as well as vital services and spaces for people to support each other. These organisations, together with local decision makers, are better placed to identify and address local challenges and opportunities than policymakers in Westminster.

Not only must we recognise that engaging communities in the delivery of local infrastructure is essential for levelling up, we need also to expand our understanding of what ‘essential infrastructure’ is. Investments in physical infrastructure are undoubtedly essential for driving local economic growth, but social infrastructure is equally as important for communities’ prospects.

Research by the Centre for Progressive Policy (CPP) clearly demonstrates that investments in local skills, health and child services both offer comparable productivity returns to investments in physical infrastructure and are vital for generating that sense of civic pride that provides people with hope. CPP’s insights show that cuts to government spending on vital community services such as libraries, parks, and early-years offerings coincided with declining levels of civic action and engagement, showing how investment in these community assets is critical for fostering pride and hope in localities.

The national levelling-up fund announced by the Chancellor in November acknowledged the importance of ‘funding the infrastructure of everyday life’ for places’ economic recovery. In the coming months, local MPs like me should draw on the expertise of the community and business sectors to direct this funding to deliver the projects that are right for our communities. Showing people in places like Stoke-on-Trent Central that this Conservative Government is listening to and acting on their concerns will be essential for keeping hold of our newly won seats in the next election.

Levelling up should not be framed as the North vs the South, nor London vs the Rest. Poverty and inequality exist across the UK, and CPP has proved that investment in unleashing potential is required wherever there is a need for it.

To deliver on the levelling up agenda, all places must be afforded the same benefits as combined authorities, and influence of outfits such as the Northern Research Group. Stoke-on-Trent currently has neither, and we are less able to access funding drawn from central pots as a result.

For instance, we did not qualify for the first round of the Towns Fund due to the unique geographical make-up of the city and the historically linear nature of the city’s six towns. We also missed out on the last round of brownfield remediation funding, which went to combined authorities. Yet it is areas like ours that are particularly left behind and need this kind of funding.

The £4bn levelling up fund presents real opportunity to harness civic pride and local knowledge to reinforce cities like Stoke-on-Trent against the uncertainty of the future. To level up successfully, the Government must ensure that the fund gives real power to places and can be pooled with existing revenue streams to enable truly strategic and holistic investment. It must not become another centrally-controlled pot which pits communities against each other in a bidding war.

The civic pride present in constituencies like mine is a tremendous asset, which we must build upon to create a brighter future for post-Brexit, post-Covid Britain. Securing a landmark deal with the European Union was just the start. To win the next election for the Conservative Party, we must focus on delivering real levelling up opportunities for constituencies across the country.

Prioritising investment in local social infrastructure, growing our social asset base, and empowering local areas to deliver our local levelling up agenda can both bolster community spirit and support longer term economic prosperity.

Adrian Lee: Erhard’s economic miracle has lessons for Britain and Germany today

16 Jan

Adrian Lee is a Solicitor-Advocate in London, specialising in criminal defence. He served as a London Borough Councillor for 20 years and was twice a Conservative Parliamentary Candidate. Between 1994 and 1995, he served as Chairman of the National Young Conservatives.

On Tuesday 30 June 2020, amidst fear of economic collapse in the wake of the lockdown, the Prime Minister made a speech evoking the memory of Franklin Roosevelt and signalling his own willingness for government to intervene in the economy and launch their own “New Deal” to stimulate growth.

The message from Boris Johnson was that desperate times required drastic measures. Fair enough, but maybe we should consider the example of Germany in the immediate post-war years before we leap into a Keynesian spending spree?

At the end of the Second World War the German economic structure lay in ruins. It is hard today to contemplate the physical destruction caused by ground fighting, aerial bombing, population displacement, genocide, and Nazi demolitions of vital infrastructure. Millions of people had seen their homes destroyed and malnutrition and disease were starting to spread throughout the country.

Yet within a decade the newly created Federal Republic of Germany had started to enjoy a prosperity that would last until the present. One person was principally responsible for this turnaround: Ludwig Erhard.

Erhard was born on 4 February 1897 in the town of Furth, adjacent to Nuremberg. His father, originally of peasant stock, owned a small clothing shop which he had started himself in 1888 and had married the daughter of a glassblower. At the age of three, Erhard suffered an infantile paralysis that left him with a deformity of the right foot that led him to having to wear orthopaedic shoes for the rest of his life. He was at best a mediocre primary school pupil and when it came to him moving on to secondary education he was sent to a vocational school.

By attending this school, he was automatically excluded from going on to university, as vocational schools did not offer the Arbitur certificate required to enter higher education. Therefore, faced with few other options, in 1913 Erhard embarked on an apprenticeship at a textile firm in Nuremberg.

Despite having doubts about the Great War, he volunteered for military service in 1916 and became a gun-aimer in the 22nd Royal Bavarian Artillery Regiment. Unfortunately, his military career came to a sudden end on 28th, September 1918 at Ypres when he was struck by fragments of an Allied shell. He stayed in hospital until the Spring of 1919 and endured seven operations on his left arm and leg which resulted in the arm being shortened and his left leg permanently weakened.

Returning home to Furth in 1919, few would have laid odds on the success of this plump, disabled man with few qualifications. However his life was about to take a significant turn. Fed up working in his father’s shop, Erhard signed up for a course in business administration at a local college and all at once, found his vocation with the study of economics.

He received his diploma in March 1922 and was eager to undertake postgraduate studies, but once again there was a snag. The local college did not have the right to award formal degrees, so it took considerable lobbying by his tutor to have his star student accepted by the University of Frankfurt. In Erhard’s case an exception was made, and he was awarded his Masters degree in 1924. For the next decade Erhard worked as a researcher for a trade association in Nuremberg whilst studying for his Phd.

By the time that he had completed his doctoral thesis Hitler had come to power and, as Phd holders were allowed to take up academic posts, a precondition for graduation was membership of the Nazi Party. Erhard had no intention of joining the Nazis and so withdrew his thesis from consideration. Remarkably, throughout the period of the Third Reich, Erhard managed to keep his distance from the regime and continued working for bodies like the Consumer Research Company and his own Institute for Industrial Research.

Erhard believed that the key to Germany’s economic success lay in the re-direction of industry into the production of consumer goods. What he proposed was a significant break with Germany’s past, which until 1945 relied mainly on the heavy industries of iron, coal, steel, and chemical production. Erhard rejected fashionable criticism of materialism and argued that the purpose of economic activity was the satisfaction of consumer desires:

“Our economy serves the consumer, he alone is the standard and judge of economic activity”, as he put it. Economic goods helped to free people from mundane tasks so that they could pursue more lofty aims.

Erhard rejected Keynesian solutions and declared that currency stability should be accepted as a basic human right. He favoured balanced budgets and argued that only if tax revenues were available should the state spend money.

Another priority for Erhard was home ownership: “Property makes you free”, he declared in 1961. However, he wanted property to be attained through saving and not by receiving it as a grant from the state. In time, Erhard envisaged a society with wide share ownership in order to entrench acceptance of the free market. He rejected the concept of distributive justice as a society “…where everyone has his hand in the pocket of everyone else.”

In 1945 Erhard was swimming against the tide of economic thought. Britain had just elected the Attlee Government, committed to nationalisation, and the United States was still in thrall to the New Deal.

In Germany, the revived Social Democrats (SPD) had plans to collectivise the whole economy and institute a system of state planning. Their leader, Kurt Schumacher, spoke openly of the abolition of capitalism and the establishment of a socialist state. The opposition Christian Democrats (CDU) fell under the influence of a group of Christian socialists who lobbied the party to “curb capitalism” and to end the “traditional bourgeois society”. Indeed, as late as February 1947, Konrad Adenauer’s Ahlen Programme for the CDU stated: “The capitalist economic system does not correspond to the state and social needs of the German people.”

Erhard’s success seems to stem from the support that he received from US General Lucius D Clay, Head of the Office of Military Government in the American. occupation zone. Legend has it that Erhard turned up at their offices on the second day of American occupation to offer his services. Clay appointed him Minister of Economics of Bavaria and later Chairman of the Special Office for Money in Credit.

Throughout this period Erhard suffered immense political turbulence, which was not helped by his refusal to join any political party. The SPD opposed his policies on ideological grounds, whilst the Allies were still debating the merits of de-industrialising Germany. At one point, Erhard had to literally beg the Americans not to liquidate and dismantle BMW. However, he laboured on, putting the region back into working order and re-focusing industry on production of consumer goods, and on 2 March 1948 Erhard was elected Director of Administration for Economics for the whole western Allied zone. In this position he persuaded the Allies to implement currency reform by introducing the Deutschmark and allowing an end to rationing of consumer goods.

Eventually, with his policies starting to bear fruit, the CDU adopted Erhard’s policy of the “Social Market Economy”.

Erhard argued that the Social Market Economy differed from traditional laissez-faire in as much as it required a strong central state to act as umpire to prevent cartels and ensure the endurance of competitive markets. When questioned by Friedrich Hayek about the inclusion of the word “social”, Erhard explained:

“I hope you don’t misunderstand me when I speak of a social market economy. I mean that the market as such is social, not that it needs to be made social… The freer the economy, the more social it is.”

He would serve as German Minister of Economics for a total of 14 years and went on to serve as second Chancellor of the Federal Republic. In that time, he would argue with his adopted party, the CDU, on many issues, notably the European Community. Erhard was suspicious of creating European institutions, which he believed would lead to more planning and bureaucratic interference. He feared that a single economic or fiscal policy for Europe would inevitably fail and opposed tariffs against non-Community members.

Erhard died in 1977 and, therefore, sadly did not live to witness the 1980s, the era when his views gained wider acceptance under the Anglo-American alliance of Margaret Thatcher and Ronald Reagan. Yet we should remember how he harnessed the free market to lay the foundations of post-War Germany’s enduring economic strength, and his methods should be re-examined by Conservatives unconvinced by the long-term benefits of Keynesianism.