John Redwood MP: Freeing Britain to compete

Rt Hon John Redwood MP is Co-Chairman of the Economic Competitiveness Policy Group.  In this article for ConservativeHome he argues that a more enterprising Britain will also be a freer, greener and more compassionate Britain.

The winds of global competition are blowing strongly on the world’s economies. We are living through a massive shift in economic power, as the Asian economies led by China and India emerge as global manufacturers, service providers and traders with attractive offerings to the customers of the world.

These winds could power us to greater success, or they could destroy business and jobs at home if our economy is not well secured and supported by a government that understands the needs of enterprise. If we respond by creating the right conditions at home and by offering the right goods and services to these emerging markets, globalisation can be an opportunity for the UK rather than a threat.

The Government claims that the UK has done well over the last fifteen years, with steady growth and relatively low inflation, but the last decade has been good for the world economy as a whole, characterised by the two massively favourable trends of easy money and a disinflationary environment.

Despite these very favourable trends the UK has fallen down the league table of the most competitive economies. Our growth rate has been flattered by inward migration and conceals 5.4 million people of working age without jobs living on benefits.

Such global trends can not be relied on for an acceptable rate of growth. With the current uncertainty in world markets we should proceed on the basis that money will be tighter in the years ahead than during the last decade. We should also recognise that China and India will not continue to exert strong downward pressure on prices to the extent that they have in the last ten years. The UK and USA can not afford to ignore inflationary pressures brought about by easy money at home.

We also recognise that the UK’s growth over the past decade has been very lop-sided. While London has benefited from new capital and workers from around the world, other parts of the country continue to experience poor growth rates, where low incomes and low employment rates still pose substantial problems. 

Our report identifies ways to create the right environment for Britain to attain its full competitive potential. It is based on the strong evidence from around the world that the countries which choose the lowest tax rates and the least oppressive but effective regulatory regimes are the ones that grow the fastest and become the richest.

Business must be set free to compete, by creating a simpler and more competitive tax and regulatory framework. Our dramatic proposals to set an annual regulatory budget for the Government will ensure that each year the costs imposed by regulation will be reduced overall, relieving business of an annual £14billion by the end of a five-year programme. Many regulations are not needed to keep business honest and safe, whereas some regulations achieve the opposite of what they set out to do – recent pensions regulation being the most sobering example.

The UK’s potential is hampered by considerable capacity shortages in transport, water and water control, energy, and by a lack of skills in the workforce. Our report demonstrates 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. Where we have left monopoly public provision in place we have shortages.

We examine ways in which private capital and competition can be harnessed to ensure more plentiful supplies of transport network capacity, of energy, and of water. We look at how our Universities can be freed to raise more endowment money for themselves, and to serve the wider global educational world. We propose changes to the organisation of training, so that individuals and companies have more say and quangos less in how the money is spent, ensuring employees are equipped with the basic skills needed to obtain worthwhile and better paid jobs. We propose a new approach to public sector management to achieve higher quality and more output for the money Government will be spending.

We want a new Conservative Government to be the friend of enterprise, on the side of those who strive to be more successful. We want that Government to follow policies which 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, so that the many can share in Britain’s success. We believe a more enterprising Britain can be a greener, freer and more caring Britain.