A Six-Point Plan for GrowthAugust 15, 2011
As appeared in the Telegraph
By Baroness Jo Valentine
Lower growth forecasts and Sir Mervyn King’s warning of “years more turmoil” will no doubt leave the Government facing yet more questions on how it plans to kick-start the economy. With UK output still below 2006 levels, and continued volatility in stock markets, the answer is that the Government must do more to encourage private sector growth.
While the Coalition’s deficit reduction programme is necessary, growth must be a priority. We can’t reduce the country’s debt without allowing the most productive sectors of the economy to thrive.
Barriers to growth such as the restrictions on highly skilled, global talent coming to Britain; clunky visa systems that would put off even the most seasoned traveller, and national policy that stops us developing vital infrastructure need to be swept away. Tackling just a few key issues could release billions of pounds of growth, supporting thousands of new jobs – without significant cost to the taxpayer.
Firstly, confidence must be restored in the competitiveness and stability of our tax regime. It is vital that the UK creates a fiscal environment that specifically encourages growth – a stable and predictable regime will support investment, which in turn will deliver GDP growth and jobs. Yet our highest rates of personal tax are higher than our main competitors – and it’s doubtful that having a top rate of 50pc raises any more money. Osborne has already signalled the 50p tax will be removed by the end of parliament – but some of his Coalition partners regard the political price as too high. Ending the tax as part of his autumn statement – perhaps alongside changes to take more of the low paid out of tax – would send a clear signal that the UK wants to attract the best global talent. Come on George – be brave!
And then there’s uncertainty about the Government’s attitude to regulation. They talk of slashing red tape but their record so far suggests increasing intervention. Regulatory stability is a key consideration for any international company looking to locate here. Let’s not pretend that what we have is perfect – but what we don’t need is change which makes it worse. For instance, in banking, the upcoming Vickers report needs to be radical – ironically by recommending no immediate fundamental change, while we wait to let changes already in the pipeline bed down and reassess when the economy is more resilient.
Thirdly, accelerating investment in small and medium sized infrastructure projects, creating jobs short term and supporting growth thereafter, should be high on the agenda. Yet the current sluggish approach to introducing tax increment financing (TIF) leaves much to be desired. Implementing pilot TIFs now – allowing infrastructure to be funded by bringing forward the tax gains it generates – would enable local authorities, businesses and communities to drive investment and growth almost immediately.
Fourthly, growth in tourism from new markets, like China, offers a major opportunity. However, our visa system is time consuming and unhelpful – it also remains to be seen whether the recent riots will have a long term impact on our reputation. Streamlining the visitor visa process would give the UK a chance to compete more with the EU Schengen countries – where one visa opens up umpteen countries. Attracting just 10pc more Chinese visitors would give the economy a £100m boost. Joining Schengen might cause cardiac arrest for Eurosceptics, but some sort of mutual visa recognition agreement would see thousands more tourists flashing their credit cards in Bond Street and Westfield without sacrificing our border controls.
In the longer term, Government must put the UK’s competitiveness at the heart of everything it does. But populist policies like the immigration cap continue to threaten our reputation. There are rumoured plans to tighten the cap further – with even a U-turn on the exclusion of intra-company transfers. New settlement proposals kick out economically valuable people, even if we still need them. We are once again sending the impression around the world that Britain is closed to overseas talent.
Lastly, Government must think further ahead with its aviation policy and find a way to enable business to fly where they need to fly. If London is to remain globally competitive and play its part in shifting the UK economy towards business investment and net exports, it will need more international air links. Expanding hub airport capacity may be politically challenging, but it will attract new investment.
If companies can’t see growth here, we risk business being done in New York, Paris or Asia instead of in Britain. That’s not good for London or the UK.
Baroness Jo Valentine is Chief Executive of London First