Twelve ideas for regenerating a UK economic recovery after lockdown
What should the Government do to encourage rapid economic recovery from the lockdown while pledging its one-nation commitment to spreading prosperity across all sections of society?
In this report, David Green, Director of Civitas identifies how the coronavirus crisis has highlighted some structural weaknesses in our economic life – and offers twelve policy recommendations:
1. Renewal of cities: localising investment power
- “The primary objective should be to empower people who live locally to solve their own problems by restoring investment power to localities.”
- The Government should support reformers now actively setting up a network of local mutual banks.
2. Retention of existing enterprises and reshoring production
- “…when a company is struggling we should ask first whether it is because of its own failings or because government policies have made matters worse and they alone tip the competitive balance.”
- “For example, energy policy has put energy-intensive sectors, including steel, ceramics and chemicals, at a disadvantage.”
- “It will also be clear to many that we went headfirst into the Covid-19 crisis without a large-scale domestic protective equipment and medical device manufacturing industry to draw on.”
3. Enforce international rules of trade
- “When we resume membership of the World Trade Organisation (WTO) in our own right, we should make full use of our powers to uphold competition.”
- “The most urgent issue is not only evaluating China’s role in the global trading regime after the Covid-19 crisis but how to respond to hidden subsidisation and dumping by Chinese companies.”
4. Ensure the exchange rate is competitive
- “The exchange rate has been ignored for decades, but an over-valued currency can wipe out all the efforts of our companies to reduce prices by improving their efficiency.”
- “The IMF has regularly reported for several years that the pound is over-valued, which not only puts exporters at a disadvantage but weakens home producers who face import competition.”
- To boost our economic competitiveness after lockdown, one approach would be to widen the goals of monetary policy to include supporting a stable exchange rate.
5. Establish an agency to appraise foreign direct investment (FDI) – while strengthening the takeover regime
- “The Covid-19 crisis has generated growing public and parliamentary scepticism about Chinese business investment and asset-stripping of UK firms.”
- “If we examine countries that have successfully attracted beneficial FDI we do not need to look further afield than Ireland. For many years their Industrial Development Agency attracted inward investment that added to productive capacity.”
6. Extend the role of the British Business Bank
- The British Business Bank has been operating since 2014 but its role is limited and should be extended to allow it to lend direct to promising enterprises.
7. Abolish corporate taxation
- “Corporation tax is already being lowered, but we should consider its complete abolition.”
- “It is a tax on company profits and globalization has meant that it is a simple task to understate income, exaggerate expenses, and relocate profits to tax havens.”
8. Energy policy: carbon reduction or job creation?
- “A serious challenge in creating favourable conditions for enterprise is to recognise that policy since 2008 has made matters worse.” The Government should more actively support building a network of small modular nuclear reactors.
9. Making companies committed citizens: company law and commitment
- “…the ‘core institution of contemporary capitalism’ the limited liability shareholder corporation has ‘inherent failings’, the most important of which is that companies are not effectively owned.”
10. Increase defence spending
- “We should signal to the world that we are committed to full international engagement by increasing defence spending to well above two per cent of GDP.”
11. Link aid to trade
- “We should keep the commitment to spend 0.7% of GDP on overseas aid but link all development assistance to trade with Britain.”
12. Create enterprise corporations
- “The UK Government could establish a new corporate structure – an enterprise company. Such companies must be headquartered in the UK and would not be liable for corporation tax so long as profits were retained in the business as reserves or reinvested in the production of goods and services.”
Economic recovery after the lockdown