Two-and-a-half years ago, David Cameron and Nick Clegg stood together in the Downing Street rose garden to unveil a Government ready to “build a new economy from the rubble of the old” a phrase in the coalition agreement that has stuck in my mind.
As this Government and Parliament reach the halfway mark, many in the business community are looking back at those initial promises to evaluate whether our elected officials have lived up to these lofty aspirations, and genuinely delivered a more dynamic and pro-enterprise environment.
The verdict we hear from companies across the real economy is “some progress but must try harder”.
Where has the Government got things right? In the eyes of business people, its biggest success to date has been the maintenance of the UK’s market credibility in the midst of a global storm. Although many companies would like to see spending further reprioritised away from welfare and current spending toward infrastructure and growth measures, there is strong support for the deficit-reduction strategy. Britain, like its businesses, must live within its means.
On a range of smaller measures, the Government has also delivered positive change. Reform of employment tribunals and health and safety laws have delivered real confidence to many businesses, particularly at the smaller end of the spectrum.
More central-government procurement has been opened up to SMEs, even if some agencies and local authorities have not yet made as much progress as the Cabinet Office. There has been a significant reduction in the flow of new regulations hitting businesses.
And the Government should be applauded for its work in reforming restrictive planning laws, along with its support for the High Speed 2 rail link, which will be welcomed by business people up and down the country.
Yet in the eyes of business, three worrying features are visible as they think about the Government’s mid-term performance.
The first is lack of strategic decision-making in the long-term national interest. Take aviation and energy policies as clear examples. The Coalition agreement, wrongly, ruled out new runways and the Government has effectively abdicated responsibility on aviation issues at a time when new air links to emerging markets are crucial to our economic prospects.
Then, there are the Government’s muddled energy policies, which are causing massive price rises for businesses, pain for consumers, and uncertainty for potential investors. Business wants real decisions on runways, nuclear power and other infrastructure priorities, not endless dithering for fear of political and popular disadvantage.
The second is that the Government, despite its pro-growth rhetoric, remains wedded to some decisions that actually damage UK competitiveness. We have an immigration policy, led by headlines rather than evidence, that prevents many companies from competing with global rivals for essential specialist skills and undermines our spectacularly successful export performance in higher education.
We also have a stubborn determination to implement the eighth change to parental leave in a decade, just when it could most damage business confidence particularly among the SMEs that are being asked to hire more workers and to invest. If every department of government is meant to support economic growth, some require a mid-term intervention to remind them of it.
Businesses’ third and final concern is a real, and growing, capability-expectations gap. While few business people doubt ministers’ zeal for economic reform and private sector growth, many question the Whitehall machine’s seeming inability to implement the changes that would turbo-charge the real economy.
We do not doubt the Government’s desire to cut regulation, reform the planning system, increase private investment in infrastructure, or increase the flow of credit to growing small and medium-sized companies. Yet the regulations being axed are often marginal, so the planning system reforms have yet to speed up development, pension funds and others remain wary of the political risk around infrastructure projects, and business- lending remains stagnant at best.
And while ministers announced the creation of a business bank, which we campaigned for over many months, its actual launch date and ultimate remit are still to be clarified.
Similarly, businesses tell me they do not doubt the commitment, from the Prime Minister down, to the export and international trade agenda. Yet when we spend only one quarter of 1pc of our national wealth promoting British business excellence overseas and attracting inward investment,
we need to ask whether we are making the truly radical commitment needed to rebalance the British economy.
At a time when Chambers of Commerce and others are working with thousands of companies seeking to enter the world’s new and growing markets, Britain’s international trade performance must be as high-profile a metric to judge our government’s performance as the state of the public finances and the employment statistics.
The Chancellor’s Autumn Statement , due in two weeks, is an important opportunity for the Government to redouble its commitment, and deliver on the Prime Minister’s party conference exhortation to “make Britain the best place in the world to start a business, grow a business, and help that business take on the world and win”.
The Government must use the second half of its term to be even bolder and more decisive in support of economic growth, investment, and jobs. At a time of global and national uncertainty, half-measures are not enough.
From the business perspective, a successful second-half performance requires the determination to take unpopular decisions, including a shift of resources from welfare spending toward infrastructure, housing and shoring up our international trade position.
It also requires a laser-like focus on implementing promises made in the first half of the Government’s term, including the delivery of key infrastructure projects; the creation of a business bank that heralds a radical and long-term change to how companies access growth finance; and the cancellation of proposals working their way through the Whitehall machine that actually add more red tape.
Finally, a successful second-half performance requires moves to bolster business confidence the key to unlocking the private-sector investment revolution that can propel our national growth prospects forward.
Such a programme will take courage, commitment and determination. Now at the halfway point of this Parliament and just ahead of the Chancellor’s big moment is the time to show that commitment.
John Longworth is the Director General of the British Chambers of Commerce