It is still the economy, stupid
All parts of the UK need growth urgently. Business is ready to invest. Where is the long-term plan from government?
“IT’S the economy, stupid”. This year marks three decades since this, the most oft-quoted political phrase of modern times, was coined by the American political strategist James Carville.
His point, directed at colleagues on the 1992 campaign to elect Bill Clinton as President of the USA, was that, whatever they considered the most interesting and relevant issues to them, it was nickel and dime questions on growth and wealth creation that really mattered to the great American public.
Thirty years on, I can’t help but think Mr Carville’s words need to be shouted loud and clear into the faces of our political masters here in the UK, and sharpish.
The cost-of-living crisis is biting hard. Behind it, recession looms. Only yesterday, an influential survey of more than 1,000 British companies suggested growth has already ground to a halt. The sugar-rush high as we emerged from the pandemic just a few months ago now feels distant. Instead, broken global supply chains and the war in Ukraine have combined to put the skids on our recovery, and a surge in inflation. Consumer confidence is collapsing.
A long period ahead with no wage growth and no extra funds for public services is looming. Yet, in Scotland, we have a government driven by a First Minister with no plan for growth, focussed only on her monomaniacal pursuit of a referendum on independence. In London, it is little better, as Boris Johnson and Rishi Sunak dither over exactly how to respond. Search for a long-term strategy that might help restore tolerable levels of growth back into the pockets of ordinary families and you will, I am afraid, go empty-handed.
We need a plan, stupid; and neither of our governments seems to get it.
Listen to the plaintive voice of business leaders who responded to a revealing survey published earlier this week by the think-tank, the Centre for Policy Studies.
Started in the 1970s by Margaret Thatcher, the CPS takes an unapologetic pro-enterprise stance on the issues of the day. It decided to speak off the record to more than 100 top CEOs, entrepreneurs and funders who deal in trillions of pounds on their assessment of the direction of Britain plc.
The good news is that they see the UK as “still a more attractive place to do business than its European counterparts”. We are more open to investment and remain a better place to do business than most other locations on the continent.
But, the report added, the view from boardrooms is that “we have been losing ground” and have “become too reliant on, and complacent about, our existing advantages.” The report concluded: “If the Government has a story to tell investors about why post-Brexit Britain is the best place to come, it is not one that enough of them have heard.”
One telling anecdote emerged from their interviews: if a CEO was thinking about investing in France, they barely had to touch down at Charles du Gaulle airport before President Macron was on the phone inviting them to the Elysee Palace. The same could not be said for Boris Johnson.
Perhaps that’s no surprise when your government is spending its waking hours trying to work out what constitutes a party and whether you were there or not.
It points to the culture change needed in Britain. For all the talk of building a new “global Britain”, it is time for Mr Johnson to actually go and sell it. There are opportunities in Brexit, on regulation and trade: strangely the man who “got it done” has so far failed to take them up.
But if you think he has been slacking on the job, then you haven’t been to Edinburgh. As has long been observed, Nicola Sturgeon has no real instinct for business. Her record in government shows she believes her job is not to support firms in the mucky business of making money but to cure it of its baser instincts so instead they perform “progressive” aims.
As an aside, given the case for independence relies almost entirely on stronger economic growth, I would rank her failure to prioritize this as her greatest strategic error; it was not a mistake Alex Salmond made.
Far from the First Minister learning from her mistakes, however, if anything, it’s now getting worse.
One leading Scottish entrepreneur told me yesterday: “Scotland is now basically a no-go area for investment. It’s not so much the referendum because nobody thinks it’ll happen. It’s because of the anti-business agenda here.”
A much trumpeted “National Strategy for Economic Transformation” unveiled by Finance Secretary Kate Forbes a few months ago was, frankly, embarrassing. Rumours circulate Edinburgh that the First Minister gutted the document of anything interesting.
Perhaps not unrelatedly, what allies she had in the business community are no longer quite so supportive. In 2020, Benny Higgins, the former CEO of Tesco Bank, stood alongside the First Minister to unveil a report on Scotland’s post-pandemic economy.
Last month, while insisting he remained a “big fan” of Ms Sturgeon, he berated the “poor” relationship between Holyrood and business. There was, he added “an excess of focus on social justice and more recently on public health. These are important things, but I do believe a vibrant, resilient economy is what we should be aiming for and business has an essential part to play.”
He is, of course, right. The problem is that Ms Sturgeon’s agenda actively blocks this agenda from taking root. Take, for example, a project Mr Higgins was involved with at its birth, the Scottish National Investment Bank. This was intended to support firms which needed capital to develop their businesses. Yet this week, a report by St Andrews University Professor Ross Brown for the think-tank Reform Scotland concluded that the new bank was “unfocussed and ill-conceived”. Its remit doesn’t just focus on growing the economy, but on supporting the SNP Government’s green agenda. This confused remit means it has become completely ineffectual.
At some point, we will all pay for this lack of direction. Without economic growth, the money coming in to pay for public services in Scotland will fall relative to the rest of the UK. Perhaps this wouldn’t matter in a time of plenty. But hard times lie ahead. And the SNP keeps signing cheques. By 2026, its huge commitments on benefits will require the Government to find an extra £760m. Good luck with that one.
Speak to business leaders across the UK and they will tell you they are keen to help. As noted above, Britain and Scotland also have so much going for them: a University sector which punches above its weight, a skilled workforce, the stability of Sterling, and much else besides. A return to pre-crash growth is eminently within our grasp.
But both north and south of Hadrian’s Wall it is possible to pick up a growing frustration with politicians whose attention span lasts only till next week, and with governments which love spending the proceeds of growth without a clue as to how to get it in the first place.
Short-term, Britain needs a plan to stave off recession. Longer-term, it’s time to change our culture of decline, and to exploit the advantages we have. Who knows, it might just convince many independence support Scots that the Union is worth sticking with after all.
It's not that stupid, really. It just needs to happen.
ENDS