We must reboot Britain as an enterprise nation
Government investment is needed to create an innovation ecosystem and unleash the economy’s full capability to generate prosperity and growth.
Covid-19 gives us the chance to examine deeper questions about the nature and direction of our country’s economic policy. I believe it is time to rethink our economic philosophy as a Conservative party, and rediscover some fundamental Conservative principles which are, and always have been, much broader than support for market economics. We need to embrace an active enterprising state, reformed and reforming, that can help drive an enterprise nation forward. And one with strong environmental credentials, which can deliver an everlasting environment.
Much of current Conservative economic thinking was set in the Thatcherite revolution, succinctly described by Nigel Lawson in 1984 as “increasing freedom for markets to work within a framework of firm monetary and fiscal discipline”. This articulates a simple truth at the heart of macroeconomics.
However, the greatness of Thatcher was not ideological. It was because she was radical in reaching solutions for the economic problems of that time in ways rooted in the Conservative principles of freedom, opportunity, self-reliance and prosperity on the basis of hard work. We need to do the same today.
The economy should benefit the person with ideas rather than inheritance. It should support families and communities rather than allowing multinationals to rip them apart in the name of efficiency. It should help British businesses grow and scale here at home.
Finally, as climate change worsens, we should aim to make the UK the cleanest economy in the world, conserving our green and pleasant land for our descendants.
There are a number of fundamental problems facing our economy: poor investment and productivity growth; too much SME debt and too little equity; growing fiscal challenge; unbalanced growth – the need to level up; and climate change. Most of these problems are not new. To deal with these we need an enterprising state, powering an enterprise nation.
Conservatives know that prosperity does not come solely from government. It comes from fostering an enterprise nation
An enterprising state should be a macro-enabler, using its strategic clout to enable innovation. It should invest to a much greater extent in skills; it should utilise more innovative and localised forms of investment, including empowering local government to invest in local infrastructure and non-economic things like libraries and village halls; it should create a Sovereign Wealth Fund combining existing and future UK funds and assets, and acting, among other things, as an anchor investor and source of equity for UK firms; and it should give all regions the fiscal autonomy to exercise more strategic direction over local economic growth.
But we Conservatives know that prosperity does not come solely from government. It comes from fostering an enterprise nation. We need to nurture and encourage new entrepreneurs. We need to make setting up and scaling a business easier and provide more direct financial incentives for those who do so. We should reduce National Insurance for new hires and resist long-held Treasury desires to equalise the tax regime between the self-employed and employees. We should also maintain the difference between capital taxes and income taxes. Capital taxes should be low because it reflects those who have taken risks, created opportunities and wealth, and they should be rewarded for that.
We can build on the achievements of the past 30-odd years by addressing our modern weaknesses. We have every chance of leading the world in a new type of Conservative economics just as we did in the 1980s. All to ensure a prosperous future for Britain. An enterprising state. An enterprise nation. An everlasting environment.
Bim Afolami is Conservative MP for Hitchin and Harpenden.