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Westlake Legal Group > economic growth

Ryan Bourne: To help grow prosperity, let’s focus on people and not places – such as towns

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Stian Westlake describes it as the “Strange Death of Tory Economic Thinking”. Conservatives have ceased telling an economic story about why they should govern, and how. Sure, there’s still the odd infrastructure announcement, or tax change. But, since Theresa May became leader, the governing party has shirked articulating a grand economic narrative for its actions.

This is striking and problematic. From Macmillan to Thatcherism to deficit reduction, the party’s success has coincided with having clear economic agendas, gaining credibility for taking tough decisions in delivering a shared goal. But, arguably, deficit reduction masked a secular decline in interest in economics. David Cameron and George Osborne, remember, wanted to move on to social and environmental issues until the financial crisis and its aftermath slapped them in the face.

Now, with the deficit down, economics is in the back seat. Fiscal events are low key and economic advisors back room. To the extent the dismal science is discussed, it’s as a means to other ends, or a genuflect to “Karaoke Thatcherism.”

In short, I think Westlake is right: the Tories do not have an economic story and, post-Brexit, it would be desirable if they did. So we should thank both him and Sam Bowman (formerly of the Adam Smith Institute), who have attempted to fill the vacuum. In a rich and interesting new paper, the pair set out to diagnose our key economic ailments and develop a Conservative-friendly narrative and policy platform to ameliorate them, even suggesting reform of the Right’s institutions and think-tanks in pursuit of the goals.

Such an effort deserves to be taken seriously, though not everyone will agree with their starting premises. It is assumed, for example, that Conservatives believe in markets and want to maintain fiscal discipline, which bridles against recent musings from Onward or thinkers such as David Skelton.

But, again, the key economic problem they identify is incontrovertible: poor economic growth. Weak productivity improvements since the crash have been both politically and economically toxic, lowering wages, investment returns, and necessitating more austerity to get the public finances in structural order. And the nature of modern innovation, arising from clusters and intangible assets, means that growth that is experienced isn’t always broadly shared.

Their agenda’s aim then is to achieve both concurrently: maximize the potential of the economy by taking policy steps on planning, tax policy, infrastructure, and devolution, to increase investment levels, allow successful cities and towns to grow, and to connect “left behind” places to local growth spots through good infrastructure. None of their ideas are crazy. Indeed, I would support the vast majority of them.

And yet, something bothered me about their narrative. In line with the current zeitgeist, they too discuss “places” and their potential, as if towns and cities are autonomous beings. My fear is this focus – shared by those who want to regenerate “left behind” areas – creates unrealistic expectations about what policies can achieve in a way that undermines a pro-market agenda. Importantly, it warps what we should really care about: “left behind” people, not left behind places.

A people-centred narrative recognises that just as firms fail in the face of changing consumer demands and global trends, so high streets, towns, cities, and even regions will shrink too. As Tim Leunig once said, coastal
and river cities that developed and thrived in a heavy manufacturing, maritime nineteenth century world might not be best placed to flourish in a service sector era of air and rail.

A true pro-market policy agenda would admit -and that’s ok. Or at least, it should be, provided we understand that raising growth and sharing prosperity requires adaptation, not regeneration. That means removing barriers for people either to move to new opportunities or have control to adapt their situations to ever-changing circumstances. This might sound Tebbit-like (“get on your bike”), but really it’s just saying policy must work with market signals, not against them.

Today though, interventions actively work in a sort of one-two-three punch against inclusive growth and adjustment. First, we constrain the growth of flourishing cities. Tight land use planning laws around London, Oxford, and Cambridge contribute to very high rents and house prices, and prevent these places benefiting from growing to obtain thicker agglomeration effects.

This contributes to the “left behind” scandal, but not in the way people imagine. When rents and house prices are higher in London and the South East and we subsidse home ownership or council housing elsewhere, it’s low productivity workers from poor regions that find it most difficult to move given housing cost differentials. As a result, they get locked into poorer cities and towns that would otherwise shrink further. That’s why Burnley, Hull and Stoke are the most egalitarian cities in the country, whereas prosperous London, Cambridge and Oxford are the most unequal, even as inequality between regions has intensified.

Having restricted people’s mobility through bad housing policy, we then impose one-size-fits-all solutions and subsidies which dampen market signals further. National minimum wages, fiscal transfers, national pay bargaining, and more, might be designed to alleviate hardship, but they deter poorer regions from attracting new businesses and industries by trading on their market cost advantages. Then, to top that off, we compound the problem further by centralising tax and spending powers, preventing localities from prioritising their spending and revenue streams to their own economic needs.

Now, as it happens, Bowman and Westlake’s policy agenda is perfectly compatible with assisting  “people” rather than “places,” precisely because it’s market-based. They advocate planning liberalisation, a flexible right to buy, and stamp duty, all of which would improve labour mobility. They prioritise infrastructure spending based on benefit-cost ratios, making investments more profitable with sensible tax changes, and devolving more transport power to regions and localities. All, again, will help facilitate areas adapting to changed economic conditions, rather than reviving Labour’s failed top-down regeneration attempts.

But pitching this as a city and town agenda still risks creating the false impression that the net gains from “creative destruction” nevertheless can be achieved without the destruction, and that all places can thrive in the right policy environment.

One can understand why they framed it in this way. Their aim is to persuade the party and its MPs of their platform. Anti-market commentators would call them fatalistic and “abandoning” places if they acknowledged the downside, as if facilitating more free choice amounts to design.

Successful past Tory economic narratives, though, willingly acknowledged hard truths. Deficit reduction entailed tough choices to curb spending. Thatcherism entailed making the case for letting inefficient industries fail. If a new Tory vision is serious about raising productivity growth and spreading opportunity for people, it will have to confront the inevitable market-based adaptation for some places.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: In America, public spending conservatism is being lost. It could happen in Britain.

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Austerity is over. Theresa May told us so after the 2017 election, and again at the Conservative Party Conference last year. Philip Hammond tried restraining her from a blitz of high-profile spending announcements. Yet Team Johnson has now picked up the baton anyway. Today’s spending review from Sajid Javid will reportedly confirm significant money injections for schools, hospitals and the police. The Prime Minister said Monday it will be “the most ambitious spending round for more than a decade.”

Restraining government spending was always said to be a temporary deficit repair tool, of course. Those “tough choices,” added to net tax hikes, have helped bring down the budget deficit to just 1.3 per cent of GDP, from a gargantuan 9.9 per cent in 2010. Once near-balance, a spending squeeze was never envisaged to continue year after year. Despite Nick Timothy’s fear of libertarians under the bed, no recent Conservative leader has been ideologically committed to shrink the size and scope of government. Absent “thinking the unthinkable,” one eventually must release the spending grip given voter demands for high-quality services.

And yet…the zeal with which the Tories have turned heel on their spending narrative is surprising. Whatever one’s view on the efficacy or composition of “cuts”, they were central to the party’s offer through 2016, including the 2015 election win. Balancing the books was said to be about unburdening the next generation from dumping more debt on top of the iceberg associated with an ageing population. Any intergenerational justice message has now gone the way of the Titanic.

For the Government is not promising gradual targeted spending increases in these areas – a natural uplift from a reset baseline after years of restraint. No, proposed hikes in education funding would virtually reverse any real schools’ spending cuts over the past decade. May’s extra money for the NHS is a big step-change too. The spending review is celebrated as the “biggest, most generous spending review since the height of Tony Blair’s New Labour,” no less – a far cry from denouncing that era’s profligacy. In one swoop, the Treasury has undercut its long-held opposition to raising borrowing and junked the idea that public service reform trumps showering public services with money.

Javid attempts to thread the needle by arguing that more spending is still consistent with keeping the debt-to-GDP ratio on a shallow downward path. That maybe true. But a stated goal of policy was always to balance the books overall, even if George Osborne and David Cameron continually pushed back the deadline. A former Treasury fiscal policy director now says that borrowing will in fact start rising again, and soon be above two per cent of GDP. Manageable, yes – but a clear change in direction.

The public discourse effects of this reversal should worry fiscal conservatives. Cameron and Osborne’s consistent messaging helped entrench two crucial contours in discussions about government spending. First, that there was no free lunch (every Labour proposal for years was met with the question “how will you pay for it?”) Second, that what you did with the money (the organisation of public services) was as important as spending levels. After years of Tony Blair’s money throwing, the public were receptive to such apparently grown-up thinking. Now, both those claims-cum-restraints that ensnared Labour have been removed.

If large, real increases in education funding are synonymous with better schools, as Tories imply, Labour can coherently ask “why did you cut real funding beforehand?” Such corrective spending hikes look an admission of a past mistake. Doubly so if funded through borrowing that was previously considered intolerable.

Couching this as “an end to austerity” brings similar peril. These particular decisions don’t imply “we are going to return to affordable spending increases consistent with a low deficit.” If large spending hikes for education are seen as reversing austerity, then obvious questions arise: what about local authority funding? Prisons? Criminal justice? Have these not suffered more from the pain you admit was damaging?

Of course, Brexit is the important context here. It is sucking oxygen from normal economic debates – one reason why the logjam needs to be broken. A slowing economy, induced in part by uncertainty, means an obsessive near-term public finance focus is probably unwise. The very process of extrication requires budget flexibility, not least because the underlying public finances could look very different when future trade relations crystallise.

But all this would be a case for relaxing or suspending fiscal targets through the choppy Brexit seas, not bold new announcements.

No, it’s difficult not to conclude there’s not something bigger happening here. Much of the party has embraced a simplistic “left behind” narrative of the Brexit vote – that it was a cry for investment in public services. They are egged on by former government advisors, armed with polling, who see an opportunity to steer the party towards a “bigger government” vision for the party they’ve always spoiled for.

Academic evidence in fact shows new Brexit voters affiliating with the Tories quickly adopt traditional Tory views on other issues. There’s no need to pander. Yet when you see John Redwood railing against austerity, you realise how strong this view about the changing party voter base has set.

Whether Johnson shares that interpretation is less clear. Perhaps he sees funding boosts now in three major non-Brexit policy areas as short-term deck clearing before an election. Polling strength from these “good news stories” might even firm up pressure on the EU and rebel MPs on his central task. If it helps finally deliver Brexit, many of us will accept fiscal jam tomorrow.

I want to believe this, but the noises aren’t encouraging. And living in the US, where Republicans have gone from a Tea Party anti-spending force to delivering unprecedented deficits for peacetime, in just a decade, I’ve observed just how easily spending conservatism is lost.

Here, it started with big spending increases on priorities too. Republicans cut taxes, yes, but huge cash increases for defence were delivered, greased by money for some Democrat priorities. Once that dam opened though, the money poured. July’s budget deal threw off the last vestiges of spending caps delivered by the Tea Party Congress. Promises of Republican spending restraint in Donald Trump’s potential second term ring as hollow as claims he’s using tariffs as a path to freer trade.

Here’s the worrying consequence. As US conservatives have learned to love deficits, or at least use them, the left’s spending demands have only gotten more extreme. With constraints stripped away, Democratic Presidential candidates feel liberated to propose mammoth programmes and spending hikes – the Green New Deal, a jobs guarantee, universal childcare and more. When asked how the country can afford this, they point out to the red ink spilled for Republican priorities. There is no answer.

UK Conservatives are far from the Republican point of no return on spending, as yet. But the mood music has changed dramatically. America shows that when conservatives abandon spending constraint, they legitimise the left’s spending wild demands, to taxpayers’ detriment.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: In America, public spending conservatism is being lost. It could happen in Britain.

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Austerity is over. Theresa May told us so after the 2017 election, and again at the Conservative Party Conference last year. Philip Hammond tried restraining her from a blitz of high-profile spending announcements. Yet Team Johnson has now picked up the baton anyway. Today’s spending review from Sajid Javid will reportedly confirm significant money injections for schools, hospitals and the police. The Prime Minister said Monday it will be “the most ambitious spending round for more than a decade.”

Restraining government spending was always said to be a temporary deficit repair tool, of course. Those “tough choices,” added to net tax hikes, have helped bring down the budget deficit to just 1.3 per cent of GDP, from a gargantuan 9.9 per cent in 2010. Once near-balance, a spending squeeze was never envisaged to continue year after year. Despite Nick Timothy’s fear of libertarians under the bed, no recent Conservative leader has been ideologically committed to shrink the size and scope of government. Absent “thinking the unthinkable,” one eventually must release the spending grip given voter demands for high-quality services.

And yet…the zeal with which the Tories have turned heel on their spending narrative is surprising. Whatever one’s view on the efficacy or composition of “cuts”, they were central to the party’s offer through 2016, including the 2015 election win. Balancing the books was said to be about unburdening the next generation from dumping more debt on top of the iceberg associated with an ageing population. Any intergenerational justice message has now gone the way of the Titanic.

For the Government is not promising gradual targeted spending increases in these areas – a natural uplift from a reset baseline after years of restraint. No, proposed hikes in education funding would virtually reverse any real schools’ spending cuts over the past decade. May’s extra money for the NHS is a big step-change too. The spending review is celebrated as the “biggest, most generous spending review since the height of Tony Blair’s New Labour,” no less – a far cry from denouncing that era’s profligacy. In one swoop, the Treasury has undercut its long-held opposition to raising borrowing and junked the idea that public service reform trumps showering public services with money.

Javid attempts to thread the needle by arguing that more spending is still consistent with keeping the debt-to-GDP ratio on a shallow downward path. That maybe true. But a stated goal of policy was always to balance the books overall, even if George Osborne and David Cameron continually pushed back the deadline. A former Treasury fiscal policy director now says that borrowing will in fact start rising again, and soon be above two per cent of GDP. Manageable, yes – but a clear change in direction.

The public discourse effects of this reversal should worry fiscal conservatives. Cameron and Osborne’s consistent messaging helped entrench two crucial contours in discussions about government spending. First, that there was no free lunch (every Labour proposal for years was met with the question “how will you pay for it?”) Second, that what you did with the money (the organisation of public services) was as important as spending levels. After years of Tony Blair’s money throwing, the public were receptive to such apparently grown-up thinking. Now, both those claims-cum-restraints that ensnared Labour have been removed.

If large, real increases in education funding are synonymous with better schools, as Tories imply, Labour can coherently ask “why did you cut real funding beforehand?” Such corrective spending hikes look an admission of a past mistake. Doubly so if funded through borrowing that was previously considered intolerable.

Couching this as “an end to austerity” brings similar peril. These particular decisions don’t imply “we are going to return to affordable spending increases consistent with a low deficit.” If large spending hikes for education are seen as reversing austerity, then obvious questions arise: what about local authority funding? Prisons? Criminal justice? Have these not suffered more from the pain you admit was damaging?

Of course, Brexit is the important context here. It is sucking oxygen from normal economic debates – one reason why the logjam needs to be broken. A slowing economy, induced in part by uncertainty, means an obsessive near-term public finance focus is probably unwise. The very process of extrication requires budget flexibility, not least because the underlying public finances could look very different when future trade relations crystallise.

But all this would be a case for relaxing or suspending fiscal targets through the choppy Brexit seas, not bold new announcements.

No, it’s difficult not to conclude there’s not something bigger happening here. Much of the party has embraced a simplistic “left behind” narrative of the Brexit vote – that it was a cry for investment in public services. They are egged on by former government advisors, armed with polling, who see an opportunity to steer the party towards a “bigger government” vision for the party they’ve always spoiled for.

Academic evidence in fact shows new Brexit voters affiliating with the Tories quickly adopt traditional Tory views on other issues. There’s no need to pander. Yet when you see John Redwood railing against austerity, you realise how strong this view about the changing party voter base has set.

Whether Johnson shares that interpretation is less clear. Perhaps he sees funding boosts now in three major non-Brexit policy areas as short-term deck clearing before an election. Polling strength from these “good news stories” might even firm up pressure on the EU and rebel MPs on his central task. If it helps finally deliver Brexit, many of us will accept fiscal jam tomorrow.

I want to believe this, but the noises aren’t encouraging. And living in the US, where Republicans have gone from a Tea Party anti-spending force to delivering unprecedented deficits for peacetime, in just a decade, I’ve observed just how easily spending conservatism is lost.

Here, it started with big spending increases on priorities too. Republicans cut taxes, yes, but huge cash increases for defence were delivered, greased by money for some Democrat priorities. Once that dam opened though, the money poured. July’s budget deal threw off the last vestiges of spending caps delivered by the Tea Party Congress. Promises of Republican spending restraint in Donald Trump’s potential second term ring as hollow as claims he’s using tariffs as a path to freer trade.

Here’s the worrying consequence. As US conservatives have learned to love deficits, or at least use them, the left’s spending demands have only gotten more extreme. With constraints stripped away, Democratic Presidential candidates feel liberated to propose mammoth programmes and spending hikes – the Green New Deal, a jobs guarantee, universal childcare and more. When asked how the country can afford this, they point out to the red ink spilled for Republican priorities. There is no answer.

UK Conservatives are far from the Republican point of no return on spending, as yet. But the mood music has changed dramatically. America shows that when conservatives abandon spending constraint, they legitimise the left’s spending wild demands, to taxpayers’ detriment.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Brexit, Johnson, Merkel, Macron – and 30 days in the wilderness

“We were also over-reliant on Angela Merkel, even after she showed us that she wasn’t as dependable a supporter as we might have wished,” wrote Daniel Korski, in his account of how David Cameron lost the EU referendum.  “She certainly seemed to take much more of a back seat during the final, crucial weeks of negotiations, giving advice, offering support and laying out red lines, but not getting too involved.”

An entire library could be assembled of stories claiming that Merkel would, at one time or another, come to the aid of a British Government during its to-and-fros with the European Union.  The claim is that Germany – as another pro-free trade, pro-American, pro-market economy country – is a natural UK ally.  But when push comes to shove, Merkel has stuck with France and the EU Commission.

Korski reminds his readers that she deserted Cameron over the appointment of Jean-Claude Juncker as the Commission’s President, to which she was originally opposed.   As with Cameron, so with Theresa May: as recently as February, the German Chancellor called for “creative” thinking on…yes, the Northern Ireland backstop.  “We can still use the time to perhaps reach an agreement if everyone shows good will,” she said.

And as with May so, now, with Boris Johnson.  Once again, Merkel has said that there is time to agree a deal – 30 days, to be precise.  “The backstop has always been a fall-back option until this issue is solved,” she said on Wednesday, during a join press conference with the Prime Minister.  “It was said we will probably find a solution in two years. But we could also find one in the next 30 days, why not?”

Some have put that remark alongside Emmanuel Macron’s declaration that “the framework that has been negotiated by Michel Barnier that can be adapted,” and concluded that the EU is preparing to blink at the last moment, climb down on the backstop, and present Johnson with an amended Withdrawal Agreement – which will then at last pass through Parliament, thus bringing this chapter of the Brexit story to a close.

According to one version of events, the Prime Minister himself believes that such an outcome is still possible, while others in his top team don’t.  If so, the balance of the argument strongly suggests that they are right, for four main reasons.  First, the EU collectively takes its ideology seriously, and this demands sticking with the Withdrawal Agreement, or an agreement so like it as to make no difference.

Second, it must show Donald Trump, and the rest of the world, that if it takes a position on a major strategic issue, such as Brexit, it will hold to it.  Third, Germany and France must ultimately be sensitive to the concerns of smaller EU countries, of which one is in the Brexit front line: Ireland.  Fourth, they have reason to wait, along with the rest of the EU, to see if the Commons, when it returns in September, blocks Brexit yet again.

Finally, it is worth remembering that Merkel’s position is not as dominant as it was during the Cameron years; and even then, to quote Korski once again, she was prone to “not getting too involved”.  Seen in this light, Merkel and Macron’s words – which in any event must be considered in the context of everything else they said – look more like more gambits in a blame game than a genuine change of heart.

Johnson wants to signal that he’s up for a deal: that was the point of his visits before this weekend’s G7 summit in Biarritz.  Macron and Merkel do, too: hence their hints of flexibility.  But the sum of the evidence is that “nothing has changed”.  In any event, it is far from certain that even a revised Withdrawal Agreement would get through Parliament.  That would require a Bill, which would of course be amendable, and time is very short.

If the EU had prized mutual gain over protecting its project, it wouldn’t have insisted that the Withdrawal Agreement precede trade talks.  Perhaps there will be a last minute shift after all, if Johnson can demonstrate that Parliament cannot stop the No Deal Brexit that his Government is actively preparing for: the European Council will meet on October 17.  But it appears that all concerned are now bracing for No Deal.

Some in Number Ten are hopeful that, if it happens, the EU will go for mass mini-deals – and so oil the wheels of economic co-operation.  That would be a rational response to the threat of recession in Germany and elsewhere, and the hard border in Ireland that a No Deal Brexit would bring.  But the EU’s clinging to the backstop, despite its commitment to seek alternative arrangements by December next year, suggests that rationality is in short supply.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Patrick Spencer: What the new Government should do to ensure migrants are better skilled – and supported

Patrick Spencer is Head of Work and Welfare at the Centre for Social Justice.

The debate around immigration has become fraught to the point of complete intransigence in recent years. Events as close to home as the Grenfell Tower tragedy and as far afield as the Syrian civil war have brought the subject to the fore again. Inflammatory rhetoric here as well as in other countries hasn’t helped. As we leave the European Union, cooler heads must prevail.

The Centre for Social Justice (CSJ) is today releasing a report that brings a level-headedness to the debate that is sorely needed. Importantly, it places the interests of immigrants squarely at the centre of its proposals. Immigration policy should not just be about who is allowed to come and work in Britain, but also how we support those people who do, so that they can avoid the trappings of low pay, unsafe working conditions, crime, social marginalisation and poverty.

The reality is that uncontrolled immigration growth over the last 15 to 20 years has worked – to a point. Our services, manufacturing and agricultural industries have benefited from skilled and inexpensive labour from EU new member States.

However, the economic costs of low-skilled immigration have been both wage stagnation at the bottom end of the income spectrum – analysis at the Centre for Research and Analysis of Migration found that “an inflow of immigrants of the size of 1 per cent of the native population would lead to a 0∙6 per cent decrease at the 5th wage percentile and a 0∙5 per cent decrease at the 10th wage percentile” – and low levels of productivity boosting capital investment. High-skilled immigration has had the opposite effect though, increasing wages, productivity, innovation and capital investment.

In the long term, it is also likely that the British economy will demand less low-skilled labour. Automation, technology and changing firm dynamics are likely to mean a greater focus on hiring higher-skilled workers, and more fluid jobs in which individuals are expected to take on multiple roles and work across multiple teams. The CSJ argues therefore that is irresponsible to continue to operate an immigration system that is deaf to the demands of our changing economy, and risks leaving migrant labourers unemployed and at risk of falling in to poverty.

It is for this reason that the CSJ’s first policy recommendation for this Conservative Government post-Brexit is folding all EU immigration in to the existing Tier 2 skilled immigration system, and tightening up the eligibility for Tier 2 applicants so that they are genuinely skilled and can command a wage well above the UK median. Key to this recommendation is carving out occupations that are deemed of strategic interest to the UK economy, for instance nurses and doctors who come to work in our NHS, but do not earn above average salaries.

The Government’s responsibility to immigrants should not stop there. For those that do come to Britain legally, whether under refugee status or another route, we must make sure support is there to reduce the risk that they and their children become socially marginalised, end up in low-paid work or unemployed, and get stuck in the criminal justice system. It is naïve to think the immigration policy debate ends on day two.

In that vein, the CSJ also recommend more integrated support for refugees when they come to Britain, including better financial support, longer term housing options and help with English speaking skills. The report also calls for a beefing up of the Director of Labour Market Enforcement financial powers and reach. There are potentially thousands of foreign individuals kept in forced servitude in Britain today, and many more working in unsafe conditions for illegally low pay.

Finally, it is high time the Government addresses the huge disparities in economic outcomes among minority and indigenous ethnic groups. Generations of immigrants from some groups still perform poorly in the education system, labour market and criminal justice system.  The Joseph Rowntree Foundation found that poverty rates among Black and Minority Ethnic (BME) Groups are twice as high as for White British groups. Dame Louise Casey discovered that individuals of South East Asian and Caribbean descent were three times and twice as likely to live in deprived parts of the UK, when compared to White British groups. Just one third of Bangladeshi women living in Britain are in employment compared to three quarters of White British women. One in five Black African and Black Caribbean men and almost one in four Mixed Race men are economically inactive. Unless the Government addresses the problem with real gusto, it will persist.

This report calls for calmer and more long-term thinking on immigration policy that prioritises high-skilled immigration and increases support for parts of the country that have struggled due to uncontrolled low-skilled immigration. Public opinion reflects this – polling by Hanbury Strategy earlier this year found that 51 per cent of the UK public recognise that not all parts of the UK have benefited from immigration, while YouGov polling in 2018 found that ‘treating EU citizens who want to come and live in the UK the same as people from elsewhere in the world’ was supported by 65 per cent of respondents and scrapping the limit of high skilled immigrants was supported by 46 per cent of respondents.

This is a great opportunity for the new Government to fix this long-standing issue of contention in British politics for the long term.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

How Johnson could play the politics of an economic contraction

Yesterday, another of the Brexit Wars’ endless fronts opened up as both sides tried to put their spin on the news that the British economy shrank in the last quarter.

On the one side, Remainers keen to jump on anything which bolsters their view that our departure from the European Union will bring about severe economic disruption. Arrayed against them are Brexiteers who argue that this is either unrelated to Brexit or at least in part due to the previous administration’s botched efforts to get Britain out.

Who is right? On one level, it scarcely matters. Both sides are sufficiently entrenched by this point that it is difficult to imagine the voter who is politically-engaged enough to register a 0.2 per cent contraction and yet sufficiently agnostic on Brexit for it to swing them one way or the other.

For what it’s worth, experts such as Ed Conway of Sky News and Rupert Harrison, until recently chair of the UK Council of Economic Advisers, seem sceptical that yesterday’s figures were the lip of a precipice. Instead, they both seem to expect the economy to grow again in the third quarter (Q3), with the Q2 dip a result of the unwinding of companies’ No Deal planning, which inflated the Q1 figures.

Moreover, the publishing schedule for this economic data means we won’t even find out if the UK has entered a so-called “technical recession”, i.e. two consecutive quarters of contraction, until after October 31.

Of course, this doesn’t necessarily mean that the Government is out of the woods – Conway says that the numbers will be a “challenge” for Sajid Javid to explain, and the Prime Minister won’t want press speculation about economic bad news undercutting his attempt to rejuvenate the Government, and indeed the country, with his new, optimistic style. The UK is also exposed if trading partners on the Continent run into difficulty.

However, there may nonetheless be a few political opportunities in the story.

First, Britain continues to outperform its principle EU rivals, such as France and Germany, on a range of measures, and raising this story with ministers will offer them more opportunities to hammer home this message.

Second, speculation about a recession might lend Boris Johnson more political cover for his clearly-signalled intention to turn on the spending taps. What might once have looked like vulgar pre-election bribes can now be recast, or at least spun, as prudent investments to bolster the economy at a crucial moment. Handy, if you anticipate an imminent election.

Finally, it can bolster the Prime Minister’s push for a decisive resolution on Brexit. Some commentators have noted that certainty around the exit date, even including the possibility of a no-deal exit, is preferable to many businesses than running their stockpiles up and down whilst the Government prevaricates. There is now something to point to which illustrates the economic risks of kicking the can.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Daniel Rossall-Valentine: Tech now underpins prosperity in every sector – so to thrive, we need more engineers

Daniel Rossall-Valentine is Head of Campaign for This is Engineering at the Royal Academy of Engineering, and Deputy Chairman of Sevenoaks Conservative Association. He writes in a personal capacity.

“It’s the same formula: it is education, infrastructure and technology —those three things”, so said Boris Johnson in June when interviewed by the Evening Standard about his agenda for government. According to Boris, those are the three principles which informed his time as Mayor of London and will be his priorities as Prime Minister.

These priorities are very welcome because they recognise the essential connections between three vital elements of wealth generation, and represent a more sophisticated view of economic growth than the one-dimensional and idealistic catchphrase of “education, education, education” which prevailed under a previous government.

The UK is involved in a long running battle to raise its productivity. We have long needed a better vision of what we need to do to boost productivity and I believe that this vision is now being developed.

Engineers and technicians must be at the heart of this new vision. Engineers are essential for innovation, they design, build and improve technology and have become central to national productivity, economic growth and living standards. Engineers are the people who turn scientific principles into practical application, social benefit and economic value. Our world is being unified in a new way; by a series of threats that know no borders. We face big challenges, including overpopulation, environmental degradation, malnutrition, biodiversity loss, cyber-terrorism and global warming, and technology is central to building solutions for each of these and making our world work better for everyone.

In truth, technology is not a sector anymore; it is now the driver of productivity and economic success (and indeed survival) for organisations in every sector. The analytical and design skills of engineers have become more and more valuable as the rate of technological change accelerates. No sector of the economy is now protected from the forces of technological change; healthcare, agriculture, retail, and education are just four examples of sectors which are currently experiencing rapid technological change; change that offers significant improvements in productivity and benefits for users.

Growing our domestic tech capacity offers great benefits to the UK. Tech firms have shown that they can scale very rapidly. The rise of “tech unicorns” (recent startups valued at over $1 billion) demonstrates the economic and social potential offered by tech. Engineering has been proven to be a very effective multiplier of economic growth. The UK should not be modest about its future in tech because we have significant advantages, including a trusted legal regime, access to capital and credit, access to support services, unparalleled access to tech customers, an educated workforce, world class universities, stable taxation and intelligent regulation.

However, the UK has one great and persisting tech weakness which threatens to impede our growth, and that is an inadequate number of engineers and technicians. The UK needs to grow its pool of engineering talent, to ensure that UK-based tech companies can remain in the UK as they scale rapidly, and to enable engineering companies to win big projects. If the UK doesn’t expand its pool of engineering talent we risk losing tech firms, tech projects and tech investment and the huge economic and social value that they bring. The proportion of jobs that require technical skill is growing and Britain should aspire to a growing share of this growing pie.

Young people are avid consumers of technology, but we need more of them to aspire to mastering the engineering that underpins the technology so that they can become developers, makers and creators of technology, rather than mere users. We also need more young people who combine engineering skills with the entrepreneurial and managerial skills that will enable them to form and scale business enterprises; so that the UK can capture an increasing share of lucrative engineering value-chains; and provide the GDP and employment that flow from end-to-end technology development. Increasingly people who are not tech-savvy are at risk of being automated out of a job, so the need for upskilling the UK in technical skills is pressing.

This technical skills shortage has long been recognised and a multitude of projects have been started to encourage young people to consider engineering. And yet despite the number of initiatives, the shortfall of talent has not only persisted but seems to have grown larger over the last decade. We also need to diversify our talent pool and ensure we are attracting young people from all backgrounds; because only a diverse profession guarantees the diversity of ideas that technical fields rely on.

The UK has made good progress in raising the profile of engineering in the last few years. The Industrial Strategy and Grand Challenges of 2017 were very welcome developments at putting technology centre-stage. The Year Of Engineering 2018 led to a very significant change in the perception of engineering amongst school pupils. This year-long Government campaign also encouraged greater collaboration between the many professional engineering institutions that make up the UK’s complex engineering landscape. We can be optimistic that the UK has got into the good habit of paying far more recognition to the engineers and entrepreneurs who enable, create and democratise the technology which improves lives, saves time and generates wealth.

Too often we allow our natural British reserve about talking about wealth to prevent us talking about wealth creation. Social benefit and commercial success are too often portrayed as trade-offs, when they are mutually reinforcing; the best technology delivers for investors as well as society-at-large. Technological success is a stool with three legs; technical progress, commercial success and social benefit. Technology is more than technology: technology is inherently social, and inherently financial, and we need more technologists who look at the full picture rather than the purely technical aspects of technology. Without profit, technology is the greatest creator of loss and debt known to mankind, and without social benefit technology can be a force of social division, rather than a democratising force.

To maximise the benefits of technology we need to close the technology skills gap, and this requires action by many players. We cannot rely on Government alone to solve this persistent problem. We know that too few young people are studying engineering related degrees and apprenticeships. One major factor is the image of engineering. Unfortunately, a number of unappealing stereotypes have become attached to the profession of engineering. Many young people assume that engineering involves hard, manual work, and male-dominated workplaces. Too many young people also believe that engineering is a narrow specialism that offers only a limited range of job opportunities. The problem is particularly acute with female students. Inspiring more girls to pursue STEM subjects and careers will not only help us to address the skills gap in science and technology, but it will also help us to create a more diverse workforce that truly represents the world we live in.

The UK has a great tradition of innovation and enterprise but only by unlocking the interest of our young people by presenting a positive vision of business enterprise and technology can we continue to succeed in this increasingly competitive field. One recent example of success is the This is Engineering campaign which was developed by a number of the UK’s leading technology companies and launched in January 2018. The campaign presents young people with positive, modern, authentic images of careers in technology and engineering, through the medium of short films which are available on many social media platforms. The films also highlight the societal benefits that new technology delivers, the team-work that technology and engineering projects rely on, and the creativity that is required at every stage in the design and build process.

By helping to promote careers in technology and engineering we can ensure that more and more young people see technology not just as a range of products to be consumed but also as a range of careers to be considered.

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Adam Honeysett-Watts: After three years of gloom under May, it’s time for fun with Johnson

Adam Honeysett-Watts is Director of Conservatives in Communications and works in the financial technology sector. 

Before this leadership election got underway, I wrote that the next leader must be able to tell the Tory story – of aspiration and opportunity – and identified Boris Johnson as the person best-positioned to do that.

Having previously supported David Cameron and then Theresa May, I like to think I back winners – at least, in terms of those who reach the top. That said, while the former will be remembered for rescuing the economy – while giving people the power to marry who they love and an overdue say on Europe – the latter, much to my disappointment, has no real legacy. Johnson should avoid repeating that mistake.

His final column for the Daily Telegraph, ‘Britain must fire-up its sense of mission’, was jam-packed with the kind of Merry England* (or Merry UK) optimism that we experienced during the Cricket World Cup and that the whole country needs right now: “They went to the Moon 50 years ago. Surely today we can solve the logistical issues of the Irish border”. Quite right.

You’ve guessed it, I’m chuffed that Conservative MPs, media and members supported Johnson’s bid to become our Prime Minister. I’m looking forward to May handing him the keys to Number Ten and him batting for us after three, long years of doom and gloom. Sure, optimism isn’t everything – but it can set the tone. A detailed vision must be articulated and executed by a sound team.

Whichever side you were on before the referendum (or are on now), in the short term, we need to redefine our purpose, move forward with our global partners, unite the UK – and defeat Corbynism.

Mid-term, we should invest further in our national security and technology, improving education and life chances and encouraging greater participation in culture and sport, as well as boosting home ownership. Plus the odd tax cut here and there would be well-advised.

However, we must not put off having debates – for fear of offending – about controlling immigration and legalising drugs, and about funding for health and social care, as well as protecting the environment, for these issues matter and will matter even more in the future.

We should also avoid the temptation to ban political expression, alternative media and sugary foods, and celebrate instead free speech, press freedom and the right to choose.

Again, I look forward to Johnson peddling optimism and hope that people get behind him, because, ultimately, he will write our next chapter – and if we jump onboard and provide support, much more can be achieved by us all working together.

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Patrick Spencer: Some advice for the new Conservative leader. Stick to these three ideas to boost productivity.

Patrick Spencer is Head of Work and Welfare at the Centre for Social Justice.

The Conservative leadership contest has proved to be the battle of ideas that the party wants, needs and should probably have had back in 2016. Yes, Brexit has dominated the discussion, but in amongst chat of proroguing, No Deals and backstops, we have heard interesting ideas about, for example, tax reform, a national citizens’ service and early years support for young mothers. During the Parliamentary stage of the contest, the Centre for Social Justice hosted the Social Justice Caucus of Tory MPs, holding their own hustings event for the Conservative leadership, and the candidates didn’t disappoint.

The litany of new ideas stem from the fact that most of the candidates felt it is time to reshape the Government’s fiscal strategy. The last nine years have been defined by successive Coalition and Conservative government’s support for fiscal rebalancing. David Cameron and George Osborne successfully formed governments after two general elections on a platform of fiscal prudence.

However, the political landscape has changed. Younger voters who weren’t around to vote in 2010 now make up a sizeable chunk of the electorate. Years of austerity, job growth and a much healthier national balance sheet has meant that ‘austerity’ is increasingly unpopular.  Combine this with the perceived economic harm that a No Deal Brexit may cause, and the case for loosening austerity is compelling.

In this vein, Boris Johnson has argued for lower taxes on higher earners as well as increased spending on education. Esther McVey wanted to cut the International Aid budget and spend savings on the police and education. Dominic Raab called to raise the National Insurance Threshold and cut the basic rate of income tax. Michael Gove hoped to reform VAT so that it becomes a Sales Tax. And Sajid Javid said he would slow the rate of debt reduction, which would free up £25 billion for new spending commitments.

Even outside of the leadership circle, Tory MPs and right-of-centre think tanks are advocating for a new spending strategy.  Neil O’Brien has coined the ‘O’Brien Rule’, which allows for budget deficits as long as debt as a percentage of GDP is falling. This sentiment was echoed by Philip Hammond, who called on every leadership candidate to commit to keeping the deficit under two per cent of GDP as long as the national debt was falling.

Considering the appetite to do something, the next leader of the Conservative Party and Prime Minister should be warned that spending for spending’s sake is not a good idea. If the decision is taken therefore to loosen the fiscal taps, it should be carefully targeted so that this increases growth and more importantly, productivity.

The Centre for Social Justice released a report in 2017 that highlighted a clear policy agenda that used tax and spend policies to boost productivity across the UK. It is roundly recognised that the productivity conundrum in the UK has not been the result of any one issue but, rather, is a confluence of factors that have taken hold of our economic and social machine.

First and foremost, British companies do not invest and innovate enough. Compared to other countries we have lower levels of capital investment, lower uptake of new-generation technologies such as robotics, and entrepreneurs sell out too early. Britain has a proud history of innovation and technology, and yes we do have several world beating unicorn companies, but in recent years we have lost ground in the innovation stakes to the US, Germany and the Asian economies.

The CSJ recommended a raft of policies that could help reverse this, starting with a ramp up in public funds available for research and development. Public cash for R+D has a crowding in (as opposed to crowding out) effect. We also called (counter-intuitively) for the scrapping of Entrepreneurs Tax Relief. It is expensive and does little to help real entrepreneurs, and only acts as a tax loophole for asset strippers (this policy has recently been advocated by the Institute for Fiscal Studies and the Resolution Foundation). We also called for simplification of the tax system. Look at the Annual Investment Allowance, for instance, that was decreased by 75 per cent in 2012, increased by a factor of 10 in 2013, doubled in 2015, only for it to then be almost cut in half in 2016.

Second, the CSJ called for a radical increase in support for vocational education in the UK. While businesses needed some help to innovate and compete, the labour market needs support in terms of skills and competencies. Recommendations included a new spending commitment for FE colleges and more support for adult learners who are in low skilled work. The Augar Review called for the Government to make £1 billion available for colleges, a good start but realistically the Government will have to go much further in the future. here is an example of where public money can make a big difference in public policy.

Last, if the next Prime Minister wants to support productivity growth, they can look at rebalancing growth outside of London across Britain’s regions. London is home to less than a quarter of the UK’s population but contributes to 37 per cent of our economic output. It attracts a disproportionate number of high skilled and high paying jobs. Public spending on infrastructure in London dwarfs that spent in the North and Midlands. Reversing this trend will of course take a generation, but by boosting transport spending on inter-city transport (most obviously Northern Rail), tax breaks for companies that set up in struggling cities such as Doncaster, Wigan or Bradford, as well as more money for towns and cities to spend on green spaces and cultural assets (such as museums, public art, restaurants and bars) that attract young people.

These three productivity-generating policy areas will allow any Government to loosen the fiscal taps without bankrupting the country. When the next Prime Minister appoints his Chancellor, he or she would be well advised to stick to the basics of cutting taxes, spending more on education and rebalancing growth outside of London.

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Iain Mansfield: Brexit by October 31. Stop using the Left’s language. And stand for skilled workers. Essentials for our next Prime Minister

Iain Mansfield is a former senior civil servant, winner of the Institute of Economic Affairs Brexit prize and a Conservative councillor candidate. He writes in a personal capacity.

Our next Prime Minister will take office at the most challenging time since the 1970s. Not only is there Brexit – an issue of fundamental national importance, that has destroyed the last two Prime Ministers and poses an existential challenge to the future of the Conservative Party – but the old political assumptions are changing. Across the West, traditional voter coalitions are shifting, as citizens reject centrist compromises. Flatlining productivity, unaffordable houses and millions of voters feeling abandoned, either culturally or economically, are just some of the challenges they will face.

Many of those who voted for David Cameron in 2010 are lost to the party, alienated by Brexit. In Britain today, age and education level are better predictors of a person’s vote than class. To win a general election, our next Prime Minister must forge a new coalition of voters that unites the traditional Tory shires with the left-behind Leave voters in the Midlands and North. Even more importantly, they must deliver authentic right-wing policies that address the causes of ordinary working people’s dissatisfaction. People want change and, if the Conservative Party does not deliver it, they are likely to seek answers in the flawed blandishments of Jeremy Corbyn’s socialism.

In that context, there are three essentials that our next Prime Minister must prioritise for the good of the people, the nation and the party:

  • Leave the EU by 31 October, on WTO terms if needed.
  • Openly champion conservative values rather than speaking the language of the left.
  • Reposition the party as the natural home of the skilled working and lower middle classes.

Leave the EU by 31 October, on WTO terms if needed

Not only is delivering on the outcome of the referendum a democratic imperative, it is vital for the continued existence of the party. Recent polling shows that, if we have not left the EU, the Conservatives are likely to suffer devastating losses in a general election; these figures could be even worse if large numbers of members, councillors or even entire associations defect to the Brexit Party. Many members have held on over the last few months purely out of hope that the next Prime Minister would deliver where May failed: another betrayal in October would see these members permanently lost.

Leaving with a deal is preferable, if some changes to the backstop can be agreed and Parliament will pass it. If not, as I have argued previously on this site, we have nothing to fear from No Deal. Preparations for such should be put into top gear on the first day in office. The Prime Minister must make clear that they will under no circumstances ask for an extension; and that they are, if needed, prepared to systematically veto any measure put forward by the EU on regular business if the UK is for some reason kept in. While every effort should be made to secure a deal, if it cannot be reached, Parliament must be faced with the simple choice of permitting a WTO exit or voting no confidence in the Prime Minister – a gamble, admittedly, but one that is preferable to another disastrous extension.

Openly champion conservative values rather than speaking the language of the left

In recent years too many Conservative politicians have allowed our opponents to define the playing field. We cannot beat the socialists by adopting the language and assumptions of socialism. Our next Prime Minister must stop feeding the narrative of identity, grievance and division, with its assumption that an individual’s potential is defined by their characteristics, that so-called ‘burning injustices’ are solely the responsibility of the state to address, and that the government always no best.

Changing the narrative will be a long endeavour. The systematic appointment of those with conservative values into key ministerially appointed positions; an authentically right-wing approach to policy making in Whitehall; and the withdrawal of state funding from the network of organisations that maintain the left’s grip on the policy narrative are essential. But over and above this, the Prime Minister must be willing to personally stand up and champion individual liberties and freedoms; to condemn progressive authoritarianism and to be visibly proud of Britain, our culture and the rich global heritage of our citizens.

Reposition the party as the natural home of the skilled working and lower middle classes

Young, metropolitan graduates may once have been natural Conservatives, but no longer. There is little hope of reversing this in the immediate aftermath of Brexit. Instead of squandering our effort here, our new Prime Minister should instead make the party the natural home of the skilled working and lower middle classes, particularly in the midlands and north.

Such voters have a natural affinity to the traditional conservative values of low tax and individual liberty, but also greatly value and rely day-to-day onn strong public services. This places the Conservatives in a difficult position after a decade of austerity: Labour made hay campaigning on cuts to police numbers and falls in per pupil spending in 2017. But how to fund significant increases in core services without raising taxes or alienating core Conservative voters, such as via the disastrous proposals on social care in the 2017 manifesto?

To find the funding the next Prime Minister must be bold enough to slay the progressive sacred cows that soak up billions annually in public funding. Three immediately spring to mind:

With the additional £15 billion plus a year, the Prime Minister could at a stroke increase police funding by 25 per cent (£3 billion), boost school funding per pupil by 20 per cent (£8 billion) and increase spending on social care by 20 per cent (£4 billion). And then split the proceeds of further growth between public services and tax cuts.

As well as this, we should champion the interests of the high street, enterprise and small businesses and oppose crony corporatism. Multinational companies that make use of aggressive tax avoidance, abuse their market position or actively work against UK sovereignty should not enjoy government grants, procurement or time in No. 10. Fundamentally, our next Prime Minister should spend more time listening to the Federation of Small Businesses and less time listening to the CBI.

Conclusion

As members, we have two candidates set before us. Both are able politicians and tested leaders who represent the best the Parliamentary party has to offer. As we assess who should be not just our next leader, but our Prime Minister, we should do so against their ability to deliver these vital elements.

Both have committed to delivering Brexit by October 31 – but which one has the ability, the genuine will and the courage to do so by any means necessary? Both are true-blue Conservatives – but which one will truly champion our values, taking the battle to our adversaries with the eloquence and conviction of a Thatcher or a Churchill? Both recognise the importance of reaching out to new voters – but which one can devise and push through the policies needed to unite the Tory shires with the Leave voters of the north? Consider carefully and cast your vote.

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