Healey’s adviser warns ‘you won’t grow the economy just by spending more’
John Healey’s entrepreneurship adviser has warned that growth cannot be achieved by government spending and policy announcements, in a rebuke to the Chancellor and Andy Burnham as they draw up their first budget.
Alexandra Depledge, the founder of property start-up Resi, who has been reappointed as entrepreneurship adviser to the Chancellor, wrote on Linkedin that ministers need to unleash the private sector rather than relying on spending more and announcing policies.
The comments will be seen as a warning shot to Burnham’s government after the Prime Minister said this week that his growth plan would be “driven with the full authority of the very centre of government”.
Since taking power in July, Burnham has repeatedly pledged to seize greater “public control” of utilities and claimed that economic power became too privatised in the 1980s under Margaret Thatcher. He has claimed that devolving power to regional governments will help boost growth around the country.
But Depledge, who served in same role under former Chancellor Rachel Reeves, said ministers should instead focus their efforts on building the number of scale-ups in Britain and driving economic growth through the private sector.
“Growth doesn’t happen because the government spends more or announces more. It happens when businesses become radically more productive, and a small fraction of them do most of the work,” she wrote, adding that scale-ups account for around 0.6 per cent of UK SMEs but generate roughly 55 per cent of small business turnover.
“Grow the number of firms capable of scaling globally from Britain, and the rest of the economy grows around them,” she added.
Healey under pressure
Healey is facing a cocktail of economic pressures as he prepares to deliver his first Budget on the 28th October and is facing calls to boost defence spending and announce fresh support for households in dealing with the cost of living.
Burnham and Healey have refused to rule out further tax hikes at the Budget and are reportedly weighing fresh levies on capital gains, banks and oil and gas companies.
However, the pair have been warned that a hike to capital gains tax will drive entrepreneurs out of the country.
Lord Jim O’Neill, the former Goldman Sachs executive who advised Andy Burnham on economic policy, said he expected the government to raise capital gains taxes although he said it should be the “last thing that should be happening when we want more growth”.
“It will force even more genuine risk takers to be discouraged and think about either moving or not doing as much of this kind of thing as they’ve done,” he said in an interview with LBC.
In his first outing at Prime Minister’s Questions yesterday, Andy Burnham refused to rule out further tax rises or increased borrowing when challenged by Tory leader Kemi Badenoch, saying only that the government was already “taking the action needed to get debt down”.