Britain back in recession: The key to growth that the coalition is missing

So the UK is technically back in recession, not as worrying as it sounds but nevertheless remains concerning and alludes to the government’s failure to generate wealth and therefore growth.

The key to this is not to reverse austerity measures. They are necessary in order to lower the absurd debt run up over past years. What the government need to do is something about the policies that obstruct growth and enterprise which deter business coming into the UK.

Firstly the government need to lower corporation tax. Osborne lowered this in the Budget earlier this year from 26% to 24% but as I argued in my post on the Budget, this is not competitive enough. Corporations are essential for economic growth, therefore we must work with them, and not against, in order to alleviate us out of recession.  Director of the Centre for Policy Studies Tim Knox is one of numerous business voices who make a compelling argument to lower corporation tax to something nearer 10-15p. What a much lower rate of corporation tax will do is ensure that the UK is one of the fastest growers in the world. We need to attract the business confidence of foreign wealth generators.

Another crucial area of policy that needs to be addressed is employment legislation. The power of Trade Unions over political life may have substantially curbed thanks to Thatcher, but whilst Labour did not reverse this trend, they instead committed to statute the regressive will of the Unions. The rise in compensation culture and other disproportionate legislation has had the knock on effect of deterring businesses from expanding their work force. Whilst public sector employment is largely due to the impact of sector cuts, unemployment has become such a problem due to the lack of jobs generated in the private sector. Attracting and supporting business in these areas is the only way of resolving this unemployment.

The minimum wage also needs to be examined. In theory this protects workers from exploitation but actually in practice the policy has failed to do this. Labour neglected to link the minimum wage in line with inflation, therefore it contributed to the depression of wages, making the policy meaningless. Leaving this to the market is a way of resolving this. Many would pay more competitively if not for the government endorsement of a low minimum wage. The market knows best when dictating wage levels.

And what about retail? One of the least business-friendly policies in the Budget was rise in business rates to 5.8pc. This is no way to grow an economy as it burdens all businesses on the high street, especially small and local businesses yet was not addressed in the Budget. Business rates are a means used by local councils to generate funding, but what the state are in practice achieving with this policy is first and foremost, obstructing business from generating wealth which then has a knock-on consequence of ensuring that councils collect less taxation, due to lower profits. A lower business rate would, in reality see Councils collect more taxation from a larger pool of profit. This would also contribute massively to the overall national economy. Business rates must be addressed.

There is a common theme running through these problems with government economic policy.  That is when the government does less, they are in fact doing more. My concern with what the coalition is doing in respect to the economy is not with what they aren’t doing, but with what they are doing too much of.

This has even permeated to their austerity measures in the form of VAT. VAT is impacting disproportionately on ordinary people whom make up the majority of consumers. The rise of VAT to 20% has hit people and businesses alike very hard. High VAT by the government is a lazy, short-termist measure of generating revenue when in fact what the government needs to do is assist business in generating wealth. They can do this through addressing the obstructive policies that I have talked about. The state deterring consumers from purchasing in this respect is indicative of too much government in the day-to-day lives of citizens. Government must not  put the breaks on prosperity. This clearly is not in consumer interests, neither is it a policy conducive to business.

The government therefore must do less, if they want to do more. Very simple in theory, but is evidently politically challenging to a coalition. The government can’t afford to be afraid of making unpopular decisions. What the public need from the government is the will to generate growth and concern themselves less with  shaking off the image of being “posh boys”.  The public will be forgiving in the long term if the government takes the tough decisions in order to sort out the economy. That is the mandate from which Cameron was elected. But what the public won’t accept is pain without a clear end goal in sight which promises better times. Cameron can afford to be unpopular, but he can’t afford to fail.

House of Lords Reform: How an elected Chamber will fail democracy

Ever since the Parliament Act 1911, reform to the House of Lords has been an issue, with varying priority, to our mainstream political parties. However what the coalition appear committed to achieving is to the detriment of democracy in the country.

But only inflexible, dogmatic liberal purists who have little more than a romanticised ideal about democracy advocate a fully elected chamber, that and opportunistic politicians in the Lower Chamber who appear to be using this populist issue to centralise their power over the Lords. This is very dangerous.

What an elected Second Chamber would do is pave the way to inevitable formal party politicisation of the House of Lords. Currently governments attempt to do this informally by appointing an overwhelming number of Peers for their own party in order to help ease their legislation through the Lords. Not only would an elected chamber endorse this, it would go much further than that into genuinely dangerous territory. At the moment, Peerages can’t be removed, so future governments can rebalance the Lords through appointment of their own Peers, but what this kind of reform would do is see all lords lose their permanence.

Purely speaking, this doesn’t sound too bad, but like all things with this debate, in practice it would prove counter-productive to democracy. Peers under this kind of system would be under far more pressure to toe the party line. This is because it is the leaders of the Lower Chamber who would have control over the party list of candidates. What politicians in the Commons want from an elected chamber is ‘yes’ men and women. Peers, who have a history of showing independence and therefore doing their job of scrutinising Bills, will inevitably find themselves taken off the party list, come the next election.

If the Lords have their hands severely tied when it comes to scrutinising legislation, due to this threat, then what do they really offer to democracy? If they can’t adequately hold government legislation to account, if they become mellowed to effective status of Select Committees, then having a Second Chamber simply becomes an expensive waste of time. Legislation may as well go straight from the Commons for Royal Assent under such a system.

Another inevitably from such a reform is that the quality of our Peers will woefully decline. Instead of experienced public servants with expertise in various areas, we will have a second Chamber of career politicians, who have no real world experience or recognised expertise in any field. Not only this, but they will be second-rate career politicians. What aspirational upstart would chose to run for the House of Lords, stripped of all its prestige, in favour of real power in the House of Commons? The answer is only those whose options are limited by their own inadequacy.

Understanding democracy as only being about elections is far too simplistic. Mussolini, Franco and Hitler held elections. Fixation on this element, whilst ignoring others, leads to effective “elective dictatorship”. Lord Hailsham’s use of ‘dictatorship’ is no exaggeration. If the government is able to pass their legislation, which often lacks direct mandate from the public (especially a sensitive area for the coalition) with ease, not only through the Commons but also through the Lords, what such a political system would do is lose all credible scrutiny, therefore it ceases to be democratic. It would be the final nail in Parliament’s coffin and would complete the project of consecutive government’s agenda to further centralise their power. This must be prevented.

Conservative Back benchers, over to you…

Why both Kinnock and Cameron failed to win open-goal elections

Easter Monday and the 1992 General Election is treading on Twitter. This struck me as very odd. I soon discovered that the BBC was airing the footage of election night on their Parliament channel. Whilst I still don’t quite understand its festive significance it has certainly made for fascinating viewing, twenty years after John Major, against all odds and polls surged to a late majority to bring home a fourth consecutive election victory for the Conservatives.

A running theme in the coverage is the concern at the somewhat forgotten recession of the 1990s. The Tory victory undermined the election success Giant of “It’s the economy, stupid”. This alludes to the fact that the economy is the central issue going into an election. If the government get this right, then they get rewarded however if the economy goes pear-shaped under the governments watch, then they are punished by the public. Surely John Major’s government couldn’t have won yet they did. The question for politicians at the time was ‘”why?”. Understanding of this in 1992 is no less relevant today.

The truth is the Conservatives were there for the taking. The economy was in trouble, the party was much divided and was led by a man who had already governed unconvincingly for several years without a direct mandate or approval from the British public. This prima facie ought to have been enough to secure electoral humiliation and a Labour victory. This however proved no more than a pipe-dream for the Left.

Where Labour ultimately missed this open goal opportunity was ensured by their failure to secure economic credibility. Whilst Kinnock’s reforms to the party were noteworthy, he did however fail to shake off sufficiently the influence of the socialist left and the trade unions over Labour. Labour had not yet got to grips with the fundamental principles behind the country’s dramatic economic renewal. This was through enterprise, growth, prudent public spending and most significantly of all low taxation.

Labour need not have waited until 1997 to claim power from the demising Conservatives, had they accepted these principles then they could have won confidence. However what undermined Labour was their stubborn, constitutional dogmatic commitment to socialism, their willingness to encourage government dependency, their inability to adequately stand up to the trade unions and their determined subscription to unreasonable taxes. What this meant was the public could not trust them and this was translated electorally in what was one of the greatest election underachievements in our history.

This was all impressively addressed going into election in 1997 by Tony Blair, Gordon Brown and Peter Mandelson with the birth of ‘New Labour’. This demonstrated that the Labour Party could be rid of the stigma of loony leftism and was capable of forming a credible alternative to the Conservatives.

Now let’s examine the greatest underachievement in election history. The Conservative failure to secure a majority in the 2010 contest. Gordon Brown was the most unpopular Prime Minister in a very long time, the party was hugely divided and riddled with scandal.

Cameron won the argument in respect to achieving public recognition that spending cuts were necessary. This was candidly achieved with lines such as “We are only asking to cut 1p in every pound”. Whilst this was true, in Chancellor Polls of Vince Cable, Alistair Darling and George Osborne, Osborne actually had the lowest public confidence whilst actually Vince Cable had the largest. This shows that in 2010 the public were more convinced that we needed to get Labour out of power than we were that the Tories were the right party for governance.

Where I believe Cameron and Osborne failed was in their failure to relate to the people. Where Kinnock went into election armed with many policies, albeit wrong ones, Cameron kept his cards very close to his chest. The centre piece of the opposition years was the Big Society agenda. This failed to really talk to people. What is meant by the ‘Big Society’ is still unclear today but this was even more the case back in 2010. Nobody knew what the ‘Big Society’ meant. Where Cameron could have won the election was to go further. Winning the debate on austerity was not enough. You can’t win an election without any policies, no matter how unpopular the government were.

What Cameron needed was commitments to lower taxes. Labours tax policy under Brown moved away from the fiscally prudent New Labour approach. ‘Big Society’ sounds great but was too airy fairy. It does not directly affect the individual lives of voters and their families. Commitments to lower taxes do. Bringing the lowest paid people out of income taxation, lowering the crippling tax burden on Middle England and an alternative to Labour’s unsustainable welfare policies ought to have been the clear and simple message that gets the public on board. This alongside their success in shaping the economic debate towards austerity would no doubt have won over the British people.

What the 1992 election shows is what we already really knew. The public flirted with socialism in 1992 in desperation in order to get the Tories out, but just about resisted and waited for Labour to return with a much more realistic proposition in 1997. Thatcher well and truly got the country on side in terms of moving the country away from the post-war consensus era. Ironically it was in the years following Thatcher's departure that arguably ensured the prospects of socialism had well and truly died.

Labour lost 1992 because the public couldn’t trust them and their economic policy. On a slight variation, Cameron failed to win outright in 2010 because his economic policy was not explicit enough, voters understandably did not want to take a lurch into the unknown. The lesson for Cameron was that what the public want from a government is a degree of certainty as to what they will get from a party if they win, not only that but even more crucially the voters have to like it. Perhaps this is something that Cameron and Osborne did not trust.