by George Freeman
On Monday, the Chancellor announced that “austerity is coming to an end”. Politically, there was a lot to cheer in this Budget – some good news and headlines for struggling high streets, our crucial Universal Credit reform, NHS workers and the vast majority of constituents who rely on public services. Furthermore, there were many helpful retail pledges for colleagues in marginal seats. Given the Brexit divisions and infighting, we badly needed some good news.
But if we are going to end the biggest squeeze on disposable incomes since the war, the central question for our future is this: how can we get back to the 2.5-3 per cent growth that we enjoyed pre-Brexit? Before the EU Referendum, we were one of the fastest-growing economies in Europe and the G7. Now we’re one of the slowest-growing.
The Budget invites the public to judge us on different metrics – no longer on our commitment to balance the books (abandoned) or reduce the debt (still growing), but on our ability to “end austerity”. People will now need to feel tangible improvements and see how Brexit can be a catalyst for much higher growth and prosperity.
Because this Budget won’t be decided on the comment pages of broadsheets. It will be decided on the ground. By parents chatting at the school gates. Families looking after their ageing relatives in care homes. Commuters stuck in traffic jams because the housing has come, but the infrastructure hasn’t. Or the millions standing on trains every morning who’ve shelled out £2,000 for a season ticket and feel ripped off.
I no longer advise the Prime Minister, but here’s what I’d say if I still did. We need to remind people that every public sector pound has to be earned before it is spent, and that we need a more inspiring programme of business-led growth to drive prosperity and opportunity. This means some big changes.
First, accelerating our transition from a service economy to an innovation nation. Innovation is key to our driving up productivity, prosperity, inward investment and exports. We won’t escape debt with growth at 1.5 per cent and low productivity. We need a renaissance of enterprise and innovation. Such buccaneers as James Dyson and Richard Branson have done more to transform this country’s prospects than any government department ever will. We need to stop the business-bashing and promote entrepreneurship and innovation. While the UK is still a crucible of start-up entrepreneurship, the engine is not yet humming: we have too many start-ups that are never scaled up, too little of our innovation funded by the City and too little that is taken global by British companies. We need a new national mission. We must be the innovation nation.
Second, tangible access to new markets for our innovation.We can’t just do research. We need to innovate, manufacture and trade. If Brexit means anything, it surely means an opportunity to go global. But that can’t mean importing cheap food and cheap clothes from sweatshops. We need to be exporting our innovation. The UK should be using every tool possible to unlock access to the fastest emerging markets in Africa and Asia.
For 40 years our whole economy has been geared to our being a European services economy. Why don’t we make Brexit the moment to embrace a new global strategy for higher growth through exporting technology and innovation into emerging markets? If the opportunity is properly seized, we could use our Industrial Strategy and public sector innovation to make Britain a crucible of new technology scale up and financing through the City.
We could then use our aid budget and global soft power in emerging markets to grow our exports and trade links with the fastest growing economies. Why don’t we offer some of the fastest emerging countries where we have a strong historic links a deeper Aid, Trade and Security Development Partnership?
Third, harnessing the public sector as a test bed of innovation. We’ll never export our innovation if we’re not using it ourselves. Innovation can’t be just about making a lucky few in the City rich beyond their wildest dreams. In order for us to be a test bed for new technology, we need to put enterprise and innovation at the heart of the public sector. If we want to lead the world in digital health, we won’t do it unless the NHS is already a pioneer. You can have as many digital health clusters in Shoreditch as you like. But if the NHS isn’t testing and buying it, we will never become the innovation nation we need to be. Building, financing and growing these little start-ups into serious businesses of scale. The problem of the austerity era was thinking that our problems could be solved by cutting things. Actually, the only way our problems can be solved is by growing things.
Fourth, empowering local leaders to innovate more. Innovation can’t be ordered from on high. It comes from people having the power to make decisions themselves. That’s why we need to embrace bolder economic localism. Let’s remember that our national economic performance is made up of hundreds of local economies, all of which need to be growing faster. Another five years of ever-tighter spending controls from the Treasury risks undermining local growth and innovation. Instead of delaying essential local infrastructure holding our growth hubs back, why not let them raise infrastructure bonds in the international capital markets and embrace bold ideas like integrated track and train mutuals which invests users money into better services?
Fifth, a new model of Treasury incentives. Too often, Whitehall’s funding orthodoxy rewards failure. If you deliver more for less in the public sector we give you…less! And give more to those failing. If you ran a business like that it would be bust. And depressing to work in. It’s no wonder that public sector leaders are so dispirited. Many are leaving. We need them to stay. So why don’t we send a signal to encourage them, be bold and embrace a new model of incentives-based funding which rewards successful local service leaders for delivering efficiency and productivity? We need a new approach based on a radical idea: if an area reduces the deficit quicker than Whitehall’s average we should let them keep 50 per cent of the savings to re-invest. Why not the same on growth? If councils grow their tax base, why not let them keep 50 per cent for local services?
Our choice as a nation is clear. Do we timidly manage our decline? Or do we set out a bold plan a brighter future? At the moment we are treading water and appear to be relying on popular support for Brexit, and the threat of Jeremy Corbyn, to keep us in office.
For a majority of voters, keeping Corbyn out and delivering Brexit are not good enough answers. We need to show voters that this is the path to something more inspiring. We need to start setting out a bold vision for Conservatism in the twenty-first century.