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Charlie Elphicke MP: A handful of measures to accelerate recovery

Charlie ElphickeCharlie Elphicke is the Member of Parliament for Dover and Deal. Follow Charlie on Twitter.

When construction falls 3.9% in the second quarter it doesn’t make a lot of sense to talk about building projects that won’t happen for five or more years – things like Heathrow, garden cities and building in the greenbelt. It makes more sense to concentrate on the many existing planning permissions out there for “oven ready” developments that are good to go right now. Grant Shapps has pointed the way on what can be done with his success in bringing forward the development of 22,600 homes in Kent. A development that will provide 60,000 jobs and help get things going in the next year. Meanwhile the Government is looking at guarantees to help fund stalled infrastructure and housing projects. The more we focus on what can be done now, whether through Ministerial activism or (results based) Government guarantees, the more we are likely to accelerate recovery.

But we mustn’t forget the role business can play in accelerating growth. Businesses have £700 billion sitting on their balance sheets. The Office for Budget Responsibility (OBR) had expected a 7.7% increase in business investment this year which has been revised down to 0.7%. Investment in kit like new manufacturing machinery or more modern computers would increase GDP on the one hand and make us more competitive over the longer term on the other. The investment of just 2% of the cash businesses are sitting on (£15 billion) would mean a 1% boost to GDP. The ONS believes weak business investment is due to the continuing Eurozone debt crisis and weak domestic growth. So it’s worth thinking about what steps could be taken to overcome the nervousness business has about investing — like generous time limited investment tax breaks.

Not every business is rolling in a cash pile. Bank of England numbers show how many, particularly smaller businesses, are struggling to borrow the money they need to grow. To the frustration of all, the big banks have pocketed all that quantitative easing to puff up their balance sheets and failed to increase business lending. So we should consider setting up a form of industrial bank focussed on getting growth capital to smaller businesses. It’s worth remembering that before it became a private equity fund, 3i was the largest provider of growth capital to unquoted companies in the 1950s and 1960s.

We are not powerless to act. Indeed the Government has taken effective action to rebalance the economy, restore the credibility of the nation’s finances and kept interest rates low. Given what’s happened in Europe that’s no mean achievement. Things may be tough right now, but they won’t be fixed by quailing in the face of the Euro mess or adding to Labour’s toxic legacy of debt and economic failure. They’ll be fixed by keeping our eyes focussed on what we can do in the here and now.


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