A corporatist economic growth plan that won’t rescue UK Plc
IT is impossible not to like Michael Heseltine. He is an astonishingly successful individual, a great entrepreneur, a passionate speaker who genuinely cares about the poor, and a man who almost became Prime Minister. The tragedy is that while his goals are laudable the means he wishes to use to achieve them are generally deeply misguided. His obsession with European political centralisation is badly dated and he is a corporatist – a supporter of close ties between the state and business – rather than a free-marketeer.
Lord Heseltine’s plan for growth, commissioned by the government, contains some good ideas – but unfortunately plenty of bad ones too. Let’s start with the good: it is right that schools should engage more closely with business, and that the bureaucracy around work experience be simplified. The UK should indeed be run in a more devolved manner, with larger, unitary authorities. We need more airport capacity in the south east, and the government needs to indicate its preference on the way forward as soon as possible. Immigration bureaucracy needs to be torn up and we need a new energy policy. There is an excellent passage in the report on the need to develop the Thames Gateway and a reflection on the success of Canary Wharf and the Docklands, thanks to the 1980s London Docklands Development Corporation.
But Heseltine is too fond of grandiose strategies, wrong to see local government spending grants as the solution to growth and is excessively enamoured with the idea of government supporting (rather than merely enabling) companies. He is too concerned with political structures and committees; he fails to focus on the roles of bad tax and spend and monetary policies in damaging the UK’s performance. That is the biggest and most central flaw in his report.
He wrongly wants to give business associations a statutory role. He even wants to consider forcing firms to join chambers of commerce, enshrining old-fashioned, almost medieval-style, corporatism, creating a quasi-licensing system for business.
It would also be a terrible mistake were the government to listen to his advice and routinely run public interest tests for foreign companies seeking to buy UK firms. He wants ministers to use existing powers more readily. Yet one of the UK’s greatest strengths is its openness: foreigners should be allowed to continue to buy whatever they want here, with extremely limited exceptions relating to genuine national security interests. Powers of intervention would inevitably be abused by politicians seeking to “protect” jobs, capital would be misallocated and inferior business models allowed to continue unchecked, reducing productivity, growth, wages and job creation. Investors as well as workers would lose out over time.
Heseltine is concerned that only 25 per cent of the top 100 investment funds in the City are headed by a CEO from the UK, according to research he cites. I disagree: it is good for London to attract the best and brightest, and I doubt that foreign fund managers would seek to discriminate against the UK. Astonishingly, Heseltine refers uncritically to the fact that France assesses mergers against a general interest test, despite the rabidly nationalistic and economically irrational decisions that have resulted.
The UK needs pro-growth policies. My list would include education reform, much lower and simpler taxes, reduced public spending, a supply-side revolution, less regulation, a reform to planning law and much else besides. Heseltine makes some good points but his own recipe would never deliver the goods.