It was previously applied to the London Docklands which gave rise – literally – to the Canary Wharf development. It is also bringing back the ‘enterprise allowance’, another Thatcherite scheme where if you have been unemployed for six months they give you extra money in lieu of benefit if you start your own business and get off the unemployment register. VAT has also risen 2.5 per cent which is exactly what the last Tory government did. All of which leads me to wonder: how is the economic policy of this Tory-led government different from all the previous ones? There is a big feeling of déjà-vu. A recent survey also reveals the biggest monthly drop in consumer confidence since 1992, putting it to where it was in the midst of the 1992 recession. Inflation is on the rise, interest rates are tipped to go up and unemployment is rising, so it is not only looking like a Tory government, it is starting to feel like one too.
Apparently there is no plan ‘B’. Given that most of their plan ‘A’ ideas aren’t new, it is not surprising that they have no back-up plan. I am not against all their ideas; in principle the enterprise zones and the allowance have their merits and did produce some successes. I also like the idea of the Office of Tax Simplification and the promise to reform IR35.
What I don’t like is the revival of another Thatcher-era policy: that of denying employee rights and pretending that it will help small business, in this instance, starting a consultation to increase the qualifying period for unfair dismissal claims to two years. It is, we fear, only the tip of the iceberg for rolling back all the employment reforms that Labour introduced on paternity, maternity and other rights at work. Anyone who has witnessed bullying in the workplace and seen unfair dismissals taking place will be very afraid.
But why is it that people can even tolerate the idea that we should waive our liberties and rights in return for wages? The Liberal Democrats go on about civil liberties, but what about our freedoms in the workplace? This will see a return to the days of hire and fire, not because of economic necessity, but because your manager or boss doesn’t like you – and there will be nothing you can do about it. Fair treatment in the civil society and in the workplace is underwritten by rights and shared responsibilities. These rights are our guarantor of fair treatment and they want to take them away.
These reforms are being introduced in the pretence of ‘helping’ small business. They say that the reason is that too many people are bringing disputes and it has to stop. In effect they are saying that in theory these rights are okay as long as people don’t exercise them. I am sure they would have said the same about votes for women and every other piece of progressive legislation over the last 100 years.
A good employer is a good employer whether large or small.
We say that helping small firms isn’t just about helping their owners but is also about helping those that work for them. The priority should be making small firms attractive places to work. A progressive agenda would seek to equalise rights between small firms and larger firms in a progressive, not a regressive, way and in practice not just on paper by spreading the cost of employment more equally between large and small firms. Outside of the public sector there is very little unionisation of the workforce; the only protection people have is the law, it is their guarantee of fair treatment.
The loss of these rights won’t mean a more dynamic flexible labour market, but a more stagnant one, because people will see stagnation in dull jobs or ones they have outgrown as a price worth paying for job security. This, in turn, will mean stagnation for small business and big business alike as it is people changing jobs that helps to bring dynamism and innovation to our firms, as many recognise that movement in the workforce helps to pollinate companies with new ideas. There is no doubt about it this is no spring for small business but a harsh winter and these measures will not create a dynamic flexible workforce. Quite the opposite.
It is a misnomer to say that these changes will help small business and there economy in the long term as they are economic equivalent of burning the furniture. But they can’t help it: they are a Tory government and this is what Tory governments have always done.
Enterprise Zones sounds like a good Keynesian way of bringing development to run down areas to me. Are there any problems with it I’m not spotting?
I agree on paper that ‘enterprise zones’ sound like a good idea and say so in the article. The European union has a recognised ‘assisted areas’ map mainly in the north and the midlands, previously Labour had run the Grants for Business Investment (GBI) scheme that aimed the provide aid to companies in these less prosperous parts. According to the government’s own figures, over the last six years GBI and its predecessors have provided £428m in grants to 1,787 projects in order to support £3.9bn of investment, helping to create or protect a total of 77,000 jobs in the English Assisted Areas. But… as Pat McFadden points out in an article in Progress the Government in their white paper on Local Growth the government has effectively abolished the scheme. See also :- this useful paper by the Industrial Communities Alliance As for enterprise zones the FT reports that “Sir Peter Hall, a professor of planning at The Bartlett faculty at University College London, told the Financial Times the strategy – likely to be unveiled in the spring Budget – was the embodiment of central government economic control. “We are told the government is in favour of localism, despite issuing edicts to local authorities on how to do things, but the fact was that Michael Heseltine did not believe local government was very capable,” said the planning expert. “He created the urban development corporations because he was a centralist.” It seems that the risk is going back to terrible Urban Development Corporations – like in Leeds – that effectively sat above local accountability (because all the councils were Labour) and many of the members of the quangos were Tories. Effectively the worst and most wasteful sort of quango.
There will be a plan B. By the very nature of the civil service there will probably be several alternative plans of action. As to how good these will be, i can’t say. It’s just not conducive to market confidence to wave about a plan B. To do so is comparative to a captain of a ship insisting on wearing a life jacket and holding a rubber ring when navigating through channel plagued with debris, yet still attempting to reassure a bemused, and unprotected crew “There is no chance of this course coming a cropper”. It makes no economic sense. You need the crew’s complete confidence if you’re going to weather the most tempestuous of situations. By this I not expressing agreement with the Tories current policy, in fact i disagree strongly with elements of it. But I can understand their stoic resistance to disclose any back up plan they may have lurking in their crusty, dust ridden minds. Certain aspects of economics are paramount to a confidence game. No matter how leaky the ship, or treacherous the course, to admit this to the engine room hands would be disastrous. However, I expect they are going to have too sooner or later. Cracks are already appearing in the hull. I just hope this plan b, that they haven’t got, steers the ship away from the danger that sticking to their current course has gotten us into. As any marina will tell you, if you’re entering a period at sea where the way ahead is fraught with icebergs, the worst thing one can do is become anxious for clearer waters, advance to fast, and penetrate to deep. To do so is often to the peril of both ship and crew.