The Four Pillars of Jeremy Hunt

EEEEasier said than done?

In his speech today, Jeremy Hunt outlined his strategy for growing the UK economy. He said that he had four pillars each starting with the letter E. These are enterprise, education, employment, and everywhere. This all sounds great and I think most people would agree that these are all important. However, the devil is in the detail and of course economic growth is EEEEasier said than done. Anyway, here is what I would do if I was Chancellor.

Enterprise

Hunt was right to rule out tax cuts at this time. However, it was unfortunate that he went along with the planned hike in corporation tax. I’ve written about this before but while it’s true that the UK did have a lower headline rate for corporation tax than many other comparable countries, this is not the full story. Essentially, the definition of ‘taxable profits’ widened significantly while the headline rate was being cut. This is because tax reliefs – including for investments – became far less generous. We want businesses to be investing in order to boost productivity. As such, the chancellor should look at reforming corporation tax  to incentivise business investment. My friend Tom Spencer has a very good article on this today which is well worth a read.

The chancellor also needs to look at complexity. The UK ranks poorly when compared to other advanced economies when it comes to tax complexity, especially when it comes to taxes on businesses. Different taxes applying to various types of businesses plus all the various different and narrowly targeted taxes and reliefs. All of this increases costs for businesses either directly (having to pay them) or indirectly (the costs associated with complying with them). Jeremy Hunt should launch a review of the tax system to make the tax system less complicated and thereby reduce the burden on businesses.

We also need to deal with political instability and uncertainty. Hunt and Sunak have helped to bring stability – especially to the markets – after the disastrous and ill fated Truss and Kwarteng period. However, there is still uncertainty over our relationship with the EU and frictions and barriers to trade which need dealing with. What is more, having a senior cabinet minister mired in scandals over his tax affairs is yet another distraction. The government needs to improve relations with the EU, increase trade, and fire Nadhim Zahawi.

Education

When it comes to education, our minds naturally turn to primary and secondary education. This is obviously important and there is definitely room for improvement here, but we tend to do a pretty good job in England when it comes to educating our children. If we want to tackle inequality and improve the life chances of children from the poorest backgrounds then the government needs to provide more targeted support for these children. This can be done in the form of educational support but it will also mean that children are not going hungry either at home or school. We should make free school meals universal for children of all ages to make sure that no child falls through the cracks. Moreover, we should abolish the cruel two child limit on benefits which has simply exacerbated poverty for families.

We need to ensure that our world class universities remain world class. Cambridge, Oxford, the LSE, and Imperial are among the best in the world and only the likes of Harvard and MIT in the US compete with them. Some people might feel uncomfortable with this but we should be unashamedly elitist and proud of our greatest universities. 

However, things are not guaranteed to stay this way. Direct financial support will obviously help, but there is much more that the government can do to ensure that these universities remain their edge.

The most pressing thing is to build the Ox-Cam Arc. This would see the area in and around London, Cambridge, and Oxford have the homes built in needs alongside transport infrastructure which will connect the area. I bring this up pretty much every blog post but our failure to build enough homes, especially in London and the South East is one of the biggest things holding this country back. It’s pricing out some of our smartest and most productive people and seriously hampering productivity. We also need high speed rail between Cambridge, Oxford, and London and to build a lot more science labs. Frankly, if the government fails to do this then it might as well not even bother.

The government also needs to commit to lifelong learning. This will ensure that businesses have access to the people with the skills they need. It will also help people to retrain so that they are not thrown on the scrap heap later in life. Not only is this the right thing to do, it should also decrease the need for  protectionist measures to prop up failing industries. The government should protect and support people, not industries such as steel or agriculture.

Employment

The government has flirted with the very silly idea of a bung for boomers in the form of tax breaks for the over 50s to get them back to work. I’ve written before about why this would be a terrible idea and so won’t rehash the arguments. 

The most effective thing we can do to get more people working is to reform childcare. It’s currently incredibly unaffordable and means that many people are working fewer hours than they would like and in some cases not even working at all. Again, I’ve written about this before but the current system is deeply unfair to women and means that businesses and our economy are missing out on their skills and talents. Making childcare much more affordable is super low hanging fruit and the government would be either stupid or reckless to not do so.

We also need to massively increase immigration, especially of the low skilled variety. There are huge labour shortages in the UK, especially in industries and sectors which, for whatever reason, Brits simply refuse to do. I’ve also banged on about this before.

Again, we also need to build far more homes. The housing crisis means that our most productive workers are prevented from undertaking roles for which they are a really good fit. This means that these roles either go unfilled or are undertaken by somebody less suitable. Alternatively they are undertaken by a suitable person but they often have a much longer commute. The end result is always that productivity is hampered.

Everywhere

We need to be careful here. There is a danger that the government will use this as an opportunity to punish or neglect London. This is a mistake because as I’ve pointed out before, there is a lot of poverty and desperation in London and any form of levelling up is dependent upon London thriving. We also need to be realistic. We simply can’t turn my hometown of Huddersfield into a London and nor should we try.

However, we can and should be ambitious for the various regions of the UK and help them and the people who live there to realise their potential. Unfortunately, the government often does a really rubbish job at listening to the people from these areas. As Tom Forth has pointed out on a number of occasions, the government will often ignore the pressing needs of communities and instead obsess over something nebulous such as Skills (always with a capital S).

What people really need in towns in ‘left behind’ areas is reliable transport. Everytime I go home to Huddersfield I have no trouble getting to Leeds from London or Manchester from Oxford. I do, however, have great difficulty getting to/from Huddersfield on the TransPennine Express. The trains are, without exception, either massively delayed or cancelled. This is simply frustrating for me but it would be unsustainable if I lived in Huddersfield and worked in Leeds or Manchester. The cities in the North are generally fantastic and are brimming with potential. Unfortunately, they are not reaching their full potential as the people in the surrounding towns and villages can’t get there to work or socialise. Moreover, the people living in these towns and villages can’t reach their full potential as they are locked out from employment and educational opportunities in our major cities. The government needs to commit to a massive investment in the railways and buses around the country.

As an aside, despite what out of touch think tank directors might try and claim, the number one priority is NOT taking on the yobs…

So, to sum up. It’s a great thing that Jeremy Hunt is ambitious for the UK. However, the UK is in decline but it need not be terminal. He’s right to identify his four E’s, but we need to see real substance if it’s to work. Without this, it’s as meaningless as the Chancellor saying that his plan for the economy is to Live, Laugh, and Love.