Introduction I am delighted to be here this morning, to talk about the Government’s strategy for achieving sustainable, long-term economic …
I am delighted to be here this morning, to talk about the Government’s strategy for achieving sustainable, long-term economic growth.
I believe - this Government believes - that growth will come from private enterprise, from businesses investing, hiring, exporting and expanding.
To achieve this, however, government needs to be an effective partner and focused on clearing away the barriers to growth.
That’s why we set out a Plan for Growth, alongside the Budget - the first phase of a comprehensive Growth Review that will run for the life of this Parliament.
Because our job is to create a stable business environment, within which companies have the confidence to start, invest and grow.
The Coalition understands this. And that’s why we have made growth our overriding priority. But to achieve it, we need to fundamentally rebalance our economy.
As the past decade has proven, we cannot rely on a small number of economic sectors, often centred in London and the South East, for our national prosperity.
Instead, we have to encourage innovation and investment across a much wider range of economic sectors - advanced manufacturing; the creative and digital industries; low carbon technologies.
At the same time, we also need to rebalance the economy geographically and enable other regions to thrive and grow. This will boost our overall capability and productivity to everyone’s benefit.
In short, we don’t just want growth; we want to achieve sustainable growth, across more sectors and more regions.
In the first 12 months, we have already acted decisively. So we have:
- Cut corporation tax by 2 per cent to 26 per cent, with further reductions to 23% in the pipeline;
- Introduced a moratorium on new regulation for micro-enterprises, and dropping proposals for new regulations that were going to cost £350 million a year;
- Set out plans for 21 new Enterprise Zones, with extra tax breaks and superfast broadband;
- Boosted tax reliefs on new investments by reforming the Enterprise Investment scheme, and increasing small firms Research and Development tax relief to 225% by 2012;
- Doubled the lifetime limit for Entrepreneurs Relief to £10m. It’s to reward endeavour.
But it’s not just a question of giving tax breaks to small and growing companies - important as that is. Government also needs to give business the freedom and space it needs to innovate, expand and flourish.
As someone who ran my own company, I understand what a problem regulation has become - especially for small businesses.
The UK is 4th in the World Bank Doing Business report 2011. However we are 36th when it comes to ease of taking on workers and creating new jobs. That’s why we are conducting a comprehensive employment law review. We’re determined to ensure we are not doing anything to hold back job creation.
But employment rules aren’t the only problem. Red tape is endemic. Hence, One In, One Out:
- We have adopted a ‘one in, one out’ principle - before a Minister can introduce a new regulation, he or she must first examine the costs to business and identify a corresponding cut to existing regulations.
- We have put a stop to this gold-plating by introducing ‘copy out’: no more interpretation, but a straight transposition of the rules into domestic law.
- And we are making it mandatory for all new Whitehall regulations to contain a sunset clause, so it will have to be reviewed regularly. Where the regulation is no longer needed, or where it imposes disproportionate burdens, it will be removed.
We also need to listen to the voice of business. So, through our Red Tape Challenge website, we are inviting business to review the entire stock of rules and regulation, over 21,000, that affect the way companies operate.
And our presumption is that, if the rule cannot be justified, it should be scrapped - no ifs, no buts. But we need businesses to continue telling us which regulations need to go.
Another serious barrier to growth is this country’s sclerotic planning system. Since 2005, over 3,200 pages of national planning guidance have been issued, costing the economy an estimated £3bn a year in delays to developments.
So we have set out plans to make sweeping changes to the system. We are introducing a powerful presumption in favour of sustainable development, so that in future the default answer to planning proposals will be yes.
We will also streamline planning applications and related consents regimes, removing bureaucracy from the system and speeding it up.
This will include a 12-month guarantee for the processing of all planning applications, including any appeals.
We are also making progress in our commitments to simplify guidance - the current 1500 pages will come down to less than 100. And we will be asking for comments on the draft National Planning Policy Framework, which brings all of this work together, in the summer.
Together these reforms have the potential to transform planning and development control in this country.
Of course, unblocking the planning system will also enable us to address the clear business need for better infrastructure. This is essential for boosting competitiveness, reducing costs, diversifying production and creating jobs.
The OECD has shown the way: between 1970 and 2005, investment in UK roads, rail and electricity generation had a stronger positive effect on GDP per capita, than other types of capital investment. We know that failing to make the right choices ultimately threatens our international competitiveness.
So we are committed to prioritising essential investments in the economic fabric of our nation.
We have published the first ever National Infrastructure Plan for the UK, and shown how we will unlock £200bn worth of public and private sector investment over the next five years.
The Spending Review made a substantial down payment - allocating over £10 billion to new road schemes and maintenance; £14 billion for improvements to the rail network; and guaranteed the future of Crossrail. All to keep the workforce and the economy moving.
Of course, we also have to invest in human capital if we are to secure growth and get ahead of our international competitors. A skilled workforce is one of the key foundations of economic success.
So we are investing heavily in apprenticeships to increase the number, range and quality of those on offer. The apprenticeships budget in 2011/12 will be over £1.4bn, sufficient to train 360,000 - up from 280,000 last year.
There are 85,000 employers offering Apprenticeships, across some 200 different roles. This includes targeted support for SMEs to access 10,000 advanced level and higher apprenticeships.
These ambitious plans mean this Government will deliver at least 250,000 more apprenticeships over the next fours years than the previous Government planned.
And we are off to a flying start - delivering an extra 100,000 apprenticeships in the last year, twice as many as previously expected.
Growth review phase two
But, despite the good progress we are making on a number of fronts, this Government recognises that we still have a long way to go before the UK has the resilient, sustainable model of economic growth that we all want to see.
As I said at the start, our Growth Review will run for the whole of this Parliament - and phase two was launched on June 9.
This next stage is focusing on six themes, and builds on the work that’s already been done in a number of areas.
More work is being done on upgrading Britain’s infrastructure - Infrastructure UK will conduct an in-depth analysis looking at how to eliminate barriers and encourage greater investment.
Similarly, there will be further examination of our education and skills system - looking at the whole system, from schools, FE colleges, universities and other training providers to consider how to maximise economic growth.
In addition, four new areas have been identified for detailed analysis.
Logistics - covering rail, road, shipping and air freight interests and cutting across the wholesale industry. This review will look at opportunities and barriers to growth as the logistics sector evolves in response to the increasing complexity and globalisation of supply chains.
Open data - investigating the potential growth benefits (and risks) of opening up access to public sector data assets.
The rural economy - scrutinizing the constraints, opportunities and risks impacting on economic growth in rural areas, and considering specific issues, including labour market characteristics, to support the Government’s commitment to rebalancing the economy.
Mid-sized business review
Finally, mid-sized businesses - examining businesses that have expanded beyond the definition of SMEs, and considering how to increase the number of firms that show significant growth at this level.
I shall be leading this piece of work. I know that John has described these firms as ‘the forgotten middle’ (and ‘the forgotten army’) of UK business. I think you may well be right and I want to work with you to resolve the problem.
There’s much evidence to suggest that our mid-caps lag behind those in the US, Japan and Germany in terms of management capability, measured across a wide set of management practices, (including people and performance management).
We also know there is a strong correlation between management capability and business performance. One estimate suggests management skills account for 10% of the productivity gap with the US.
Clearly, there will not be any easy fixes to this issue, but I am confident this review can shine a light on what we should be doing differently or better. I would like to hear your views on these issues as work gets underway.
Indeed, I hope business will work with this Government on this and every other issue of common interest, as we strive to achieve the vision for economic transformation and renewal laid out in the Plan for Growth.
We are fully committed to working putting enterprise at the very heart of our strategy for growth, since it is the only real route to achieving a strong, balanced and resilient economy in Britain.
Ladies and Gentlemen, in our first 12 months, I believe we have made a good start in facilitating investment, encouraging innovation, and offering incentives for growth.
But we will be relentless in our efforts to clear hurdles out of the way wherever we can, and working hard to open up new opportunities, so our businesses and our economy may grow and flourish in the future.