John Redwood

|

Freeing Britain to Compete

Few can be oblivious to the dramatic shifts that have occurred in the global economy over the past decade. China and India have emerged as formidable global manufacturers, service providers and traders with attractive offerings to the customers of the world.

Britain can either see this shift as a threat, or seize it as an opportunity. If our economy is not well secured and supported by a government that understands the needs of enterprise, our business and jobs could be destroyed, particularly in areas where China is currently gaining ground – in engineering, motors, chemicals, and other manufacturing.

If we create the right conditions at home to respond to the new challenges and to offer the right goods and services to these emerging markets, we can be reassured that every new job created in India and China is creating a better paid consumer who requires goods and services which the UK can help provide.

The Government claims that the UK has done well over the last fifteen years, with steady growth and relatively low inflation. Sadly, this is too complacent. Compared to the rest of the world Britain’s performance is not so impressive.

Despite massively favourable trends in the global economy, the UK has fallen from fourth to tenth place in the global competitive league table since 1997. Our growth rate has been flattered by inward migration and masks 5.4 million people of working age without jobs living on benefits. What matters is growth in income per head, which has performed less well that overall output.

Economic growth in the UK has also been very varied geographically. While the South East has performed reasonably well, the further north or east you travel, the less rosy the picture becomes.

Our Economic Competitiveness report demonstrates that the UK will never achieve its full competitive potential under the current burden of business regulation; nor can it compete while it is hampered by inadequacies in transport, energy and water infrastructure, and suffering from the present shortage of suitable skills in the workforce. An incoming Conservative Government must address these problems and create the right conditions for competition.

The report’s recommendations are based on the strong evidence from around the world that countries with the lowest tax rates and the least oppressive but effective regulatory regimes are those that grow the fastest and become the richest. Government regulation is nearly always well-intentioned, but it often fails to realise its original aims. It can even effect the opposite, as we have seen recently with the pensions debacle.

The same can be said of employment regulation. Such regulation seeks to bring about more better paid jobs, but the best way of achieving this is to free business from needless red tape. Our proposals for a five-year programme of deregulation would save business an annual £14 billion, leaving them with more to invest not only in research and development, plant and equipment, but also in their workforce. This will particularly benefit smaller businesses – the large companies of tomorrow and the backbone of an enterprise economy – which have struggled with the crippling regulations brought in by Labour.

We need sufficient infrastructure to assist us in getting where we want to go. Economic development in southern Yorkshire and the North East, for example, depends considerably on significant improvements to the number of lanes and to junctions along the whole length of the A1M and A1, and improved rail and road capacity to the East Coast ports. Our report therefore provides far-reaching solutions to the capacity problems in our transport system. It proposes ways in which railway capacity can be substantially increased to move more commuters and freight, and it identifies ways in which the road network can be improved to relieve congestion.

Recent events have confirmed that capacity shortages in water and water control, in addition to energy, similarly demand urgent attention. It is now clear that where we have trusted the market and competition more – as with telephones – the much needed extra capacity has been put in to tackle the problem. Shortages occur in areas such as water and energy because monopoly provision or regulatory and planning constraints have prevented a better response.

Providing the necessary skills base for our economy requires a re-organisation of training, so that individuals and companies have more say in how the money is spent. It also requires freeing universities to raise much-needed money to attract the best global researchers and students who can supply the intellectual capital for our economy.

The benefits of these improvements will be felt by all. We want to promote a savings culture, and for the Government to follow policies that encourage the many to share in Britain’s success. Government should make it easier for people to buy a home of their own, to own shares in other people’s businesses, and to own a stake in their own business.

Deregulation does not mean stripping workers or consumers of their rights: such rights can be protected by appropriate domestic legislation. All too often, combining over-prescriptive EU and UK regulation has greatly multiplied the cost without improving the effectiveness. Improving transport capacity does not mean greater damage to the environment: our proposals encourage the increased use of cleaner trains, and the alleviation of congestion – a major cause of CO2 emissions.

The sustainable tax revenues of healthy growth will result in better public services, more job opportunities and higher incomes. It will also allow lower tax rates which in turn will bring in more tax revenue as the economy grows. With a new Conservative Government on the side of enterprise and those who strive for success, we can achieve a freer, greener, more enterprising Britain, fit for the global challenges of the twenty-first century.