Economic growth, the ‘holy grail’ how, or who, will make it happen? Government, the Banks, perhaps it will be Father Christmas? No I don’t think so either. Certainly the Government and Banks have an important part to play and, depending on their actions, they are likely to have an effect, whether it be positive or negative remains to be seen but, at the end of the day, there can be little doubt that it is only businesses and their customers who will turn the economy around.
Depending on your point of view one might argue that we should welcome Government initiatives such as those designed to remove red tape, reduce onerous planning conditions and to enable small businesses that are struggling to obtain finance from an increasingly risk averse banking sector. Though, it will take time for benefits to become apparent every little helps. Red tape impacts disproportionately on small growing businesses and many are deterred from expansion as a result of concerns, real and imagined, with the planning system. I am also very aware of the Banks claims to ‘have plenty of money and are eager to lend’ but in truth I have seen no evidence to suggest that such claims are being translated into action.
Those of us who are a bit longer in the tooth will remember the days when banking was about locally based people who understood local businesses and were prepared to manage risk not, as seems to be the case today, to eradicate it entirely. Time will tell if the Governments initiative makes a difference but, whatever the merits, I suspect that very few people are expecting the ‘complete’ solution.
In the past the answer was easy, throw more public money at it, sadly there isn’t much left. Nonetheless, there appears to be some being made available to parts of the country where unemployment and other issues remain a consistent problem no matter how much money is lavished upon them. This might make some social sense but in reality it is highly questionable as to whether the impact is anything other than short term. Perhaps it is time to take a different approach, how about reducing the amount of money being poured into these areas, where without incentives businesses are reluctant to locate, to create jobs that have all the sustainability of a chocolate teapot. Instead, what about investing it in areas that are able to produce long term benefits that are likely to be economically sustainable for some time to come?
Where should the Government invest our money? Where it will have most effect of course? How about places like Hertfordshire? Places where businesses want to be; places where good long term jobs can be created; places which have the communication and transport links that are essential to success in the global economy. Taking funding, as we have historically done, from areas that are generally successful and pumping it into areas with a track record of failure might deliver short term social benefits but in the long run, from a business perspective, makes no sense at all.
The other essential part of the equation requires encouraging customers to spend money, raising the taxes of those who are able to do so won’t achieve this nor will maintaining some of the other barriers that discourage them from doing so. Half hearted efforts to ignite the housing market for instance will not work if, in this part of the world at least, stamp duty remains at current levels. Why move from one asset that is not accruing in value to another when the cost of doing so is added to by high levels of indirect taxation.
Clearly the Government is not in a position to start flinging cash, nor can it afford to choke off regular income lines, but surely with a little imagination there are actions that could be taken to encourage consumer spending without adding further pressure on the National Debt.
The removal of stamp duty; extending the National Insurance holiday on small businesses taking on new staff to include this part of the country; using some of the enormous amounts of business rates that are collected here and spent elsewhere to accelerate business growth and encourage research and investment in areas that are able to sustain it; might provide fertile ground in the search for solutions. Clearly the decisions of Government are difficult and challenging but to paraphrase what a wise man once said ‘if you keep doing the same things expecting different results you are likely to be very disappointed’. Actually he said that this was a definition of madness but you know what I mean.