On Friday 23 September the Chancellor of the Exchequer made his ‘Growth Plan’ speech. While the news has been full of the market reaction to unfunded tax cuts, boards, investors and stakeholders might want to pay more attention to the ‘plan’ itself.
Let’s look at the Chancellor’s view of how economic growth is achieved, and his vision – or lack of it – of a thriving company sector deploying the nation’s human and natural capital.
Kwasi Kwarteng described his plan for promoting economic growth in a speech of 3300 words. He did not use the words ‘wealth creation’ or ‘productivity’ at all. He mentioned ‘companies’ once. He did mention ‘businesses’ three times, albeit only in the context of promising to reduce their tax burden.
He said:
The interests of businesses are not separate from the interest of individuals and families.
In fact, it is businesses that employ most people in this country.
It is businesses that invest in the products and services we rely on.
Every additional tax on business is ultimately passed through to families through higher prices, lower pay, or lower returns on savings.
That is all he had to say about how wealth gets created in companies and how, company by company, there would be more of it created under his plans.
‘Entrepreneurs’ were mentioned once, the context being the continuation of existing tax arrangements.
The word ‘entrepreneurial’ was mentioned 4 times. Most significantly
We want this country to be an entrepreneurial, share-owning democracy.
That’s it. No further mention of the role of investors or shareholders.
But wait. Weren’t we promised announcements later about ‘supply side reform’. Indeed we were. Over the coming weeks, the Chancellor went on to say:
My Cabinet colleagues will update the House on every aspect of our ambitious agenda.
Those updates will cover: the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure.
No mention then, of training, education, apprenticeships, R&D or innovation, either in the speech or the announcements to come about ’supply side’ reforms.
Here, it seems, is a plan for growing the economy and its productivity which has omitted altogether any reference to human capital!
What about natural capital? There is overwhelming evidence that the future health of our economy rests on protecting bio-diversity. Not mentioned. Climate change mitigation? Not mentioned. Green growth? Not mentioned.
This was truly a twentieth century response to twenty first century challenges..
In February the Director General of the CBI, Tony Danker, made a speech about the key drivers of improved economic growth. He mentioned five things that business was looking for from the government. Reduced corporation tax; a skills levy; green growth; future-focused regulation (not deregulation); and investment in education.
The Chancellor ignored four of the five on the CBI’s list.
What about Labour? In his conference speech Sir Keir Starmer wasn’t launching a plan for economic growth. Disappointingly, though, he didn’t offer us much sense of his vision of wealth creation and a healthy and more productive company sector, but at least he had lots to say about skills and training and green growth.
Tony Danker has until now been an admirable advocate for longer term government policies. Yet in spite of this silence on most of the CBI’s priorities, Danker mystifyingly welcomed the Chancellor’s speech and described it as a turning point for the economy.
If this speech is in any sense a turning point, it is because it turns us back to the 1970s and 1980s.
The failure of governments to think long-term and systemically is becoming truly unnerving. It is now reported that Liz Truss is planning to scrap the sugar tax. Obesity costs the NHS £4.2 bn a year According to research published in the BMJ this tax has reduced sugar consumption by 10% without reducing the total amount of soft drinks sold in the UK.
It isn’t difficult to describe the steps a UK government could take if it wanted to lay the foundations for improved productivity and economic growth in a systemic way.
I have argued before that if the UK is to stop its economic drift it needs an injection of energy that touches every stage in the life of companies from their birth, infancy, early financing; growth; nurturing by effective ownership and leadership; and ultimately global competitiveness.
This reinvigoration can only be led by entrepreneurs, owners, lenders and leaders. It can, however, be facilitated by government and supported by finance and education. .
A comprehensive government approach to wealth creation would encourage:
- Diversity of people and of corporate form
- A commitment to business as a force for good
- Long-termism by boards and owners with an eye on the next generation
- High standards of regulation and enforcement, again with a focus on future generations
- A tax regime that encourages re-investment and long-termism as well as employee share ownership
These – and many more ideas – can enrich our wealth creation future and thereby improve productivity. At the moment, not only do we have no agreement on that vision: the subject barely figures in our political debate.
Mark Goyder is Founder of Tomorrow Company and Senior Advisor to the Board intelligence Think Tank. He is the author, with Ong Boon Hwee, of Entrusted – Stewardship for Responsible Wealth Creation, published by World Scientific in 2020.