The most overused word at the moment has to be “growth.” From the politically naïve (or stupid) and thankfully short UK premiership of Liz Truss through to far more respected economists, growth has been their mantra. However merely repeating this term ad nauseum achieves nothing. Might I suggest that such commentators may wish to either turn the telescope around or ask Nelson to use his other eye?
So what is wrong with a word that is quite obviously, as a concept, so right? The answer lies in the fact that growth is the result they wish to achieve – but it’s not the word you start out with. The real question should be, how do you get to growth, be it for your economy or even that elusive “money tree” that so many politicians are searching for? (May I suggest that they have a change of term for this season and maybe try a hunt for a golden fleece – at least that may keep them warm during a cold gasless winter).
The source of growth of any kind comes from a decision by a company, a politician, or, most importantly, us as individuals, to act – to create, to buy or sell. And what is the catalyst that starts this? Put simply, confidence. Without that we will merely place ourselves in a slough of despond and mutter the sad ravings given to King Richard II by Shakespeare: “For God’s sake, let us sit upon the ground and tell sad stories of the death of kings.”
In the UK we have recently had a perfect example of the dangers of public warnings about future pain and difficulty, as our new Prime Minister lays out the problems that he and his ministers have found upon taking power. No doubt some of this may well be true, but here we have seen a group of politicians wallowing in a pond of negativity that has already affected public sentiment and confidence – and, yes, spending, investment and future opportunities for growth.
Now Sir Keir Starmer has to be careful not to backtrack on these comments too quickly or he will be accused of economic illiteracy. Confidence in an economy is provided initially by calm and clear leadership, and then followed by an economic programme to reassure the audiences, both domestic and international, both personal and corporate, that there is at last a steady hand on the tiller ready to steer the economy through hazardous waters.
Leaving aside actions taken on a political basis, look at potential economic measures. First, this need not be about spending money as quite obviously with these levels of government debt, free outlays of cash are not going to very credible. For all of us in Europe, including the UK, confidence has been shaken. However, this can be changed with policies that will encourage investment and expenditure – and not spending by the Government.
In the UK we have been blessed with some valuable key areas of talent, some through historical luck, such as the City of London’s geographical bridge between East and West, combined with its centuries of expertise, but others by having newer centres of expertise mainly built up by our universities. Two immediately come to mind: technology and financial services.
Regarding the former, we have seen hubs of technology develop and grow across the UK, not just in London and the south east. These have been based around developments that were often originally the infrastructure of high-speed internet and have provided a sound base of development. The nicknames silicon roundabout, silicon glen, silicon fen, silicon beach and silicon gorge relate to such centres from Cambridge to Brighton to Bristol. However, despite our success in starting such areas we seem hamstrung when it comes to being able to provide longer term capital and often see such successes being snapped up by overseas entities taking the companies away overseas.
Some have squealed that this is unfair and “government should do something about it.” What, exactly? They certainly shouldn’t buy them or even invest in them. Far better to create the investment environment that attracts such development money, locally, domestically and internationally. There is not a magic formula for this but there is a known mechanism which can work and which involves no government investment up front. We have seen innovations like the Enterprise Investment Schemes (EIS) in which the government provides percentage guarantees for investors in the case of failure, which means the government only had to pay up when there is failure. But if the schemes are successful, it will be rewarded by way of tax income from the companies, employees and local economy.
Taxation can also be turned from a negative – the government “stealing” even more of our money – to a positive, by way of rewarding people by recognising their achievements (and I don’t mean selling peerages) to changes in Inheritance Tax and reform to areas of family taxation and transferring financial responsibility for health and welfare away from the state.
Such a change in attitude is also not just domestic but also international as overseas investors will see the UK as a sound place to invest, be it in companies, products or government debt. For example, we saw in the 1980s a period where national debt was reducing and becoming more attractive to foreign institutions. There was even speculation about the very future of the UK government debt market (Gilts) on the grounds that the area was shrinking so fast. No one had heard of Quantitative Easing (or even needed it) in those days.
So, we can have growth, not used as a repetitive mantra by the politically naïve but as a backdrop for credible policies and initiatives. The darkest hour may be just before dawn but that is the moment for good leadership to provide that vital confidence for us all to help us see that the first shafts of light will shortly be coming over the horizon.
