Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales.
The Chancellor got the new growth strategy off to a good start, mainly by removing the tax errors of his predecessor. The UK needs to be globally competitive with its company profit tax rate, investment incentives and with its levels of individual income taxation to attract senior executives, their companies and their investments. It did not need an additional tax on jobs.
He also needed to borrow to support real incomes against a background of global slowdown and the big energy price hit. There was no option to borrow less. A more austere tax-based policy would end up with a longer and deeper recession with a bigger deficit to finance.
The Bank of England, which has lurched from an inflationary ultra-loose money policy to a tight one, has done enough to bring prices down next year, as its forecasts suggest. It should not now overdo the tightening, and add a recession to its list of policy errors following an unwanted inflation. There is no need for it to start selling some of the bonds it owns to record some big losses.
The Government should be more worried about the balance of payments deficit than about the government deficit. The state deficit can be financed at home in sterling, where the Treasury and Bank have considerable levers to ensure in normal circumstances borrowings at sensible rates of interest.
The big gap between what we import and what we export needs financing in foreign currencies which we cannot create ourselves, and which need buying in volatile foreign exchange markets. Sterling is weak enough against the Euro, which has been falling with it against the dollar. We cannot rely on the goodwill of foreigners. We need to start to close the gap and reduce our demands on foreign currency markets.
This requires the growth strategy to grant the licences and the planning permissions to boost capacity in a wide range of areas. We should start with energy. We can produce more of our own oil and gas, coal, renewable energy and reliable electricity from biomass and gas. We must do so, as importing from an energy-short Europe is both risky and expensive. We need to review the carbon tax which acts to cut down UK energy production and production of energy intensive products, only to import from abroad generating more CO2 in the world as a result.
We need a steel, glass, cement, aluminium, ceramics, petrochemcials and fertiliser industry at home. Indeed, we used to have good ones. Producing more at home would again save CO2 on importing them by sea transport. It would create more better paid jobs and generate more tax revenue to pay for public services. It would narrow the balance of payments gap.
We should aim to restore our lost market share in food production. Investment in more glasshouses and polytunnels would enable us to produce much more of our own salad crops, fruit and vegetables. Some of the subsidies currently offered for wilding, to cut our home grown food output should be switched to foster more food. Where the EU gave us grants to grub up our orchards we need grants to replant them. We can encourage more grain and dairy output. Food is best fresh and local production is popular.
As the Government rolls out its ambitious plans to plant many more trees, so it should harness the private sector to invest and allow sustainable forestry. Why do we import wood for the big Drax power station when we could grow it at home? Why do we import so much of our timber for construction, furniture and other industrial users?
We demonstrated how the UK could harness government action, public sector purchasing, UK university expertise and global company organisation to build a new vaccine industry here. This model can be used for more health and care products to cut our dependence on foreign supplies. The huge buying power of the NHS gives us leverage which could create competitive supply in the Uk for more items.
The UK needs a lot more transport capacity. To the national motorway network, we need to add the strategic local highways networks of important A roads. These need more bypasses, with improved junction and widening schemes to allow them to take the growing volume of business traffic a growing economy generates. Wherever possible there needs to be cycle and walking routes and local traffic routes away from the through routes, to increase safety at the same time as increasing opportunities for traffic jam-free journeys on the strategic roads. Some of our productivity shortfall stems from people needing vans and trucks for business not being able to get there on time and booking less work as a result.
The UK needs more homes. Finding the right locations is difficult, though there are already many outstanding unused planning permissions where construction could start. Government needs to explore with the housebuilders how more of these plots can be used, instead of allowing a profit chase of purchases and resales of land without doing the building. Using redundant or surplus public sector land is good, as it frees cash for the state at the same time as finding the land for the homes. Controlling numbers of legal and illegal economic migrants would also help relieve some of the housing pressures, and would assist in helping more people already settled here into jobs.
The UK is good at various areas of technology. The Ministry of Defence could do more to design and commission vehicles and equipment that were good export propositions to friendly allies, as with the Australian contract for submarines. The Energy department will have a lead role in getting small modular nuclear off the ground. The UK needs an approved design which can be reproduced for many projects both at home and abroad as soon as possible. If that needs additional government pump priming so be it, but the government then needs to protect taxpayer interests with a share in future profits or royalties.
None of this is easy and much is not new. This new team of Ministers has promised us they will cut through, shorten the delays in following up these decisions in principle, and get things moving. I wish them well. They need to do a lot of them to lift the growth target as much as they want.