I listened intently to the Prime Minister’s inaugural speech to the Commons and his first PMQs.
What became screamingly obvious was that his answer to the lack of growth in the UK, currently looking rather anaemic, is essentially more State, more control, more infrastructure, with the private sector apparently expected to pick up the bill. Really?
Britain doesn’t need a municipal transport enthusiast. Someone should sit him down, over a ‘curry and beer’, and explain that he is no longer Mayor of ‘Munchesta’, presiding over ‘booses’ and ‘treynes’ for the ‘publik’. There is a much bigger, wider, and considerably more complex world out there. Britain does not need another municipal transport enthusiast; it needs someone who understands the fundamentals and dynamics of commerce.
Andy, listen up my boy, please allow us to educate you, since we think you need it badly. Maybe they didn’t brief you properly at your crisis meetings at No. 10.
PRIVATE SECTOR, ENGINE OF WEALTH
For your edification, the private sector is roughly four times the size of the public sector and is the engine that generates the wealth upon which the State so dependably feeds.
Government does not create wealth on its own.
It taxes it, regulates it, redistributes it, and occasionally provides the infrastructure and conditions in which other people create it.
And therein lies the delicious contradiction. The legacy of the Starmer Government is, for instance, more regulation of employers through Workers’ Rights, higher employment costs through the minimum wage and increased Employer National Insurance.
The OBR estimates these additional costs alone will ultimately reduce employment by at least 50,000. What a perverted result of socialistic dogma this is!
WELCOME MAT DISPLACED
Youth unemployment is already around 16% going north, while graduates emerge from university clutching enormous student loans and discover that the jobs market has apparently misplaced the ‘welcome mat’.
This makes employing people more expensive, running businesses more difficult and investing in Britain less attractive.
Then we hold a seminar to investigate the mysterious disappearance of UK growth. You couldn’t make it up, could you?
TRIUMPH OF ECONOMIC SELF-HARM
The abolition of the non dom regime was another triumph of economic self-harm. Thousands of wealthy, mobile people have taken their capital, businesses and tax contributions elsewhere, leaving Britain nursing the warm, morally correct satisfaction of having driven them away at the expense of the country, and now there are rather more empty boardroom chairs in deserted offices.
Do we need any further proof of this folie grandeur than the example of Chris Rokos of Rokos Capital Management, who manages £22billion of funds, employs 370 people and who paid £330million in UK tax last year.
He is moving his tax residence to Athens, Greece. He will pay 100,000 Euros as a flat tax on foreign income up to 15 years. Who is the winner in this vivid scenario?
USEFUL WARNINGS
History offers us useful warnings. Idi Amin, that great African philosopher of economic mismanagement, expelled Uganda’s Asian business community in the 1970s and discovered what happens when you remove the very people who know how to run an economy; total chaos and ruin resulted, in this once proud country.
Our own experiment is, thankfully, more genteel. We merely truss up entrepreneurs with taxes, regulations, and bureaucratic hurdles until they quietly relocate somewhere less hostile.
After all, there’s nothing more mobile than an entrepreneur running from an asphyxiating tax regime.
NOVEL BURNHAM SOLUTION
And what is the novel Burnham solution to this morass, more ‘booses’, more ‘treynes’, more devolution. “Saints preserve us,” as the late Reverend Ian Paisley may have sighed.
Of course, Britain needs decent transport. Infrastructure matters after all.
But infrastructure is an input to growth, not growth itself. A shiny new railway does not spontaneously manufacture entrepreneurs, productivity, investment or profitable companies. You cannot make an economy prosperous simply by giving the State more levers to pull. Burnham’s philosophy seems blissfully naive and endearingly parochial, but he is trying to get the ‘horse to push the cart up-hill’.
The Old Labour mantra dictates that if something isn’t working, give the Government control of it. Take your pick… which industry would you prefer? Water, Electricity, Banking, Gas or Transport? And when that fails, presumably you set up a quango to pontificate about it… that should do the trick!
My observation is that Burnham is a career politician who may have a cursory understanding of the machinery of government but evidently has no instinct for the rather ‘cut and thrust’ machinery of commerce.
THE PRIVATE SECTOR MATTERS
Life Lesson No. 1: A private company has an unforgiving discipline, called a profit-and-loss account. Waste money and the company’s banker’s squeal. Run out of cash and people lose their jobs.
On the other hand, the ‘dead hand of Government’ has a rather more forgiving and accommodating protocol to nationalise industries.
Run out of money? No worries then just raise taxes to fill the void. Lose money on a project and call it an ‘investment’.
And, whatever you do, bury the losses somewhere deep in the State accounts, where almost nobody will find it!
That is why the private sector matters. It takes risks, invests capital, invents things, employs people, and then hands a sizeable portion of its profits to the Government in taxes.
Look across Europe, where larger State ownership and heavier regulation have hardly produced an economic renaissance. At the same time, admire our peers across the Atlantic with their deeper capital markets, entrepreneurial culture, and fiercely competitive private sector.
Businesses compete, innovate, and take risks rather than waiting patiently for the ‘Government Albatross’ to swoop down and bail them out. JLR and its present woes is a good example.
Britain needs more of that spirit. Instead, we have created an increasingly bloated State and a burgeoning welfare sector, consuming humungous resources that might otherwise be invested in productivity, enterprise, and, perhaps, rather importantly, to defend the Nation against our foes. There’s an idea.
IDEOLOGICAL PURITY WILL NOT RESCUE BRITAIN
Ideological purity will not rescue Britain. Nor will the familiar political incantation about ‘believing in ourselves’ and fixing ‘brawken’ Britain through hope, aspiration, and the occasional sermon from the pulpit. This is puerile hyperbole.
Putting ‘the train carriage in front of the engine and then wondering why you are not going anywhere’, is not an economic strategy.
Sadly, we’re finding out the hard way that the Coronation or should I say ‘shoe in’ of the Prime Minister, without the scrutiny of a competitive beauty parade amongst other contenders in a hustings process, is going to be a very high price that this country could ill afford in these challenging times.
SENDING MR. BEAN INTO A BOXING MATCH
I’m pleased to see that the Great North Run has one more competitor but dispatching the PM onto the forbidding world stage to fight for the UK’s interests, is the equivalent of sending Mr. Bean into a boxing match with ‘Mad’ Mike Tyson and after only a few minutes having to rescue him from certain death and to collect the body parts which his opponent has removed.
So, my advice to our Prime Minister, ‘Andy Pandy’ from ‘oop’ north, is simple. You have a hard-nosed, experienced economist, Lord O’Neil, whom you trust and is desperately trying to tell you how to revive Britain’s fortunes.
A good start is to resist trying to tax the rich for economic salvation. For heaven’s sake, listen to him.
Or as President Ronald Reagan once, so eloquently put it: “The nine most terrifying words in the English language are: “I’m from the Government, and I’m here to help.”
