Let’s hope that the new prime minister, whoever he or she will be, listens more closely to the business and financial community than the current incumbent has.
This is not a comment on Brexit or the tax debate that is dividing the candidates, much less an appeal for the government to do whatever the business lobbyists want.
It’s a plea for the new government to think about the financial implications of its decisions, rather than flippantly assuming the private sector can handle it.
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Step back and think about economic policy. They fall into three main groups. There’s tax policy, the whole tax and spending side, and there’s a lot of attention given to that.
There is monetary policy that is subcontracted to the Bank of England but ultimately has the government on the hook if anything goes wrong.
It’s the taxpayer who has to bail out the banks or pay the higher interest rates on government debt when interest rates rise.
And there are a variety of things that governments do in regulation and legislation that affect the economy. These are lumped together as structural policies.
Most of the debate revolves around the first two and not nearly enough around the third. But how?
Last weekend, this paper ran some thoughtful comments from business leaders.
Marks & Spencer leader Archie Norman, himself a former Tory MP, called for a post-Brexit restart – “a long-term plan for productivity and competitiveness”.
John Allan, chairman of Tesco and Barratt Developments, said similarly. A reset “is long overdue and hopefully possible now”.
He wanted the government to “present a comprehensive strategy that it is ready to commit to over the long term”.
I see the need for policy realignment and the appeal of longer-term thinking. And I would urge the new government to work much more closely with business leaders. But I also advise caution. These long-term plans have to be right.
Germany has made the long-term plan to rely on Russian gas, shut down its nuclear power plants and build more pipelines to bring the gas in. It doesn’t look very rosy now.
Or you could point out flaws in business planning, including at companies like M&S and Tesco. M&S shares have fallen 56 percent over the past five years.
And Tesco’s failed attempt to build its Fresh & Easy brand in America between 2007 and 2013 is a classic study of how careful, detailed planning can go disastrously wrong. It cost shareholders $2 billion (£1.7 billion) to extract Tesco from the US.
That’s not the fault of the current chairmen, both of whom are making a decent fist trying to turn these companies around. Rather, it aims to draw attention to another aspect of what the government should be doing. It certainly needs a reset, but not so much in strategy as in attitude.
The UK is in the midst of two economic upheavals. One is the shift in trade relations away from Europe and towards the rest of the world, and the other is the shift towards new technologies. Governments must encourage both.
They require tremendous attention to detail. In the first case, the task is not so much to make deals with other trading blocs, although it is helpful.
Rather, it is about examining why exporters are facing headwinds, why domestic manufacturers are struggling to gain market share, how we are helping importers diversify away from Europe to cheaper suppliers in other countries – and so on.
Do we use regulatory freedoms or do we create new regulations that burden companies with additional administrative work? Customers pay higher prices for this admin.
To put it in a nutshell: regulation is the concern of small and medium-sized enterprises. Big companies can hire professionals to deal with it. Little ones can’t. So regulation helps big companies at the expense of small fish.
Ultimately, the second transition is even more important than trade relocation. We need to build the companies of the future, but no one knows what those companies will be. The UK doesn’t do badly in European business start-up comparisons, but we don’t do as well as the US.
So we need a government that listens to everyone, the universities, the budding entrepreneurs, the investors – the whole, complex, chaotic world of the market economy. And then take what they’re hearing, piece by piece, and think about the business implications of everything they’re doing.
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HAMISH MCRAE: The new Prime Minister needs to listen to business
Source link HAMISH MCRAE: The new Prime Minister needs to listen to business