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Leading article The Week

Leader: Growth or bust

29 January 2011

12:00 AM

29 January 2011

12:00 AM

David Cameron has said he is determined not to lead a cuts-only coalition. He has spoken about promoting entrepreneurship, rightly hailing small businesses as the engine of Britain’s economic recovery. At the last Tory party conference, he paid homage to ‘the doers and the grafters, the inventors and the entrepreneurs’. He was fully behind these ‘wealth creators’, and no, he said, ‘those aren’t dirty words’. And since then: nothing.

As we digest the news that the British economy shrank during the final three months of 2010, it is worth asking what’s happened to George Osborne’s growth strategy. It seemed not to exist during the general election campaign. In August, the Treasury invited several think-tank leaders to discuss the best way of achieving growth. Some of those in attendance detected a lack of clear thinking, but were prepared to wait for the white paper on the subject promised for the autumn. But it never emerged and a new deadline was set for Budget Day at the end of March.

Meanwhile, businesses are beginning to despair. The Confederation of British Industry prefers to exert influence through quiet chats and leisurely lunches, but Richard Lambert, in his final days as chief CBI apparatchik, this week voiced his frustration at the lack of a growth policy. He levelled what is a potent charge against George Osborne: that the Chancellor thinks about political posturing first, and economics second.

The 50p tax has, alas, become emblematic of these priorities. The only question among economists is whether this will deepen the annual deficit by £800 million or £3 billion. From April, the effective top tax rate in Britain will be raised further still, to 52 per cent — the third highest in the world. This sends out a powerful message about a country’s attitude. Britain looks awfully like a place that has decided — for the first time since the 1970s — to take a carving knife to its golden geese.

The Chancellor would doubtless protest, and say he is lowering corporation tax from 28 per cent to 24 per cent over four years at a cost of £4 billion. But nearly two thirds of this is to be clawed back by a reduction in capital allowances for business investment in plants and machinery. This harms the manufacturers who are currently keeping the economy afloat. Such allowances are now at their lowest since they were introduced in 1970.

When Mervyn King made a speech about inflation on Wednesday, he started by saying, ‘when it comes to measuring success, don’t count money. Count happiness.’ There was a roar of laughter when he attributed the quote to the comedian Ken Dodd — for this is precisely the sort of statement that we have become used to hearing from ministers. The Bank of England governor went on to talk about how living standards are midway through their worst fall since the 1920s: an extraordinary admission. If inflation cannot be controlled, wages need to rise — and for this, business needs to be unburdened.

From paternity leave to green taxes, this government seems to have acquired an unfortunate habit of making life harder for business. That it does not mean to do so is cold comfort to those affected. As James Forsyth says on page 12, the Chancellor is in a rather tight spot. Either businesses recover, or he ends up out of power. The most astute move he can make is to help business by cutting tax and regulation. It may be a boringly simple formula, but it is this government’s single best chance of success.

The right to buy

It is easy to imagine Lord Attenborough making a film about a group of Scottish crofters buying land from a reluctant noble. But in reality the noble lord is himself an aggrieved laird. He is angry that, having agreed a price of £1.6 million for his Bute estate, the Scottish authorities then intervened and insisted that the community be granted the right to buy the property for £1.4 million.

There are few subjects more certain to raise the hackles of wealthy English property-owners than Scottish land reform. If it is not ‘worthy of the Bolsheviks’ it is almost certainly a ‘Mugabe-style land grab’. Yet rather fewer objections are made about its urban cousin: leasehold reform. There is, however, no fundamental difference between Scottish crofters granted the right of first refusal to buy, at a price determined by a government valuer, the land which they have farmed for many years, and leaseholders in Belgravia granted the right to acquire the freeholds of the houses and flats in which they live — again at a price determined by government officials. After much huffing and puffing, and a little reflection on the tax breaks enjoyed by forestry-owners like himself, Lord Attenborough may care to wonder whether Londoners would feel a little oppressed if every square inch of London’s finest residential districts was still controlled by the Duke of Westminster and a handful of his peers. The enfranchisement of residents in Bute might just give its economy some of the liveliness of London’s.

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