Robert Jenrick is a former Minister for Immigration, and is the MP for Newark.
Why is it that the country which led the Industrial Revolution is now trapped in a cycle of low growth and relative economic decline?
There have indeed been huge global headwinds. Low growth is by no means unique to Britain. But the hard truth is that the UK is one of the countries where the post-2008 slowdown has been most pronounced.
I believe the reason is relatively simple. Rather than standing back and letting prosperity flourish, too often the state gets in the way.
Over our 14 years in government, we showed plenty of ambition for reforming the state. In many areas, we succeeded.
We restored the dire public finances we inherited from the last Labour government. We oversaw a revolution in England’s schools, overseeing a dizzying rise in standards. As Housing Secretary, I took on the blockers and got housing starts up to their highest level since 1987. And, of course, we delivered Brexit, providing us with the ability to design smarter regulations than our competitors.
But, we didn’t get everything right. While we steadied the ship from the Covid pandemic and energy crisis, we didn’t do enough to get it moving again. Now we must show the electorate that we have a credible plan to get Britain growing again.
It won’t be enough to point out that Labour doesn’t have one, or that the hostility to wealth displayed by Rachel Reeves is already scaring off investors. We need to make the case for how we will unlock Britain’s potential.
Here’s what we should be doing instead.
First of all, we need to get Britain investing again. British workers don’t produce less than their counterparts in Germany, France, or America because they’re slacking off. It’s because we aren’t giving them the tools they need to do their jobs as efficiently. Look at the league table for investment as a share of GDP at any point in the last 30 years, and most of the time the UK will be at the bottom of the G7.
It’s not the state’s business to tell firms how much to invest, or how to spend it. But we find ourselves in a place where we effectively tell companies they can’t invest.
Between our byzantine planning system and the uncertainty of our judicial review system which constantly upends decisions, getting planning approval to build a data centre or factory is markedly harder in the UK than elsewhere.
Investors are optimistic about Britain but we turn them away. Companies spend years pleading for the right to spend their money here creating jobs, only to be declined by the vetocracy. The cost of a planning application for a project in Britain can be more than building the project overseas.
I proposed the most substantial supply-side reforms of the last parliament to free up our sclerotic planning system, but they were only partially implemented. We must build on them to simplify requirements for environmental impact assessments and offset impacts on neighbours and the environment through larger monetary transfers.
And these reforms should be carried over to the housing sector. A huge part of boosting productivity is matching the right people to the right places, where they can take the jobs that best suit their skills. In the United States, economists have estimated that reducing restrictions on house building in just three large cities to the ‘average’ for the rest of the country could have increased US GDP by around 9 per cent in the 45 years leading to 2009.
The restrictions in Britain are if anything more stringent — and the potential returns to loosening them greater. We should make it far easier to densify our inner cities and smooth the process of adding additional stories to properties in the suburbs.
The first step is allowing people to invest again. The second step is encouraging them. The mini-Budget illustrated what happens if you lose fiscal credibility. However, it would be a mistake to assume that there is no hope of bringing the tax burden down from its highest level since 1948.
Unfashionable as it may be, I recognise that higher tax rates can lead to lower receipts. When in 2020 I persuaded the Chancellor to cut stamp duty, it spurred the largest-ever number of property transactions in a single year and benefited businesses throughout the supply chain.
We are now highly over-reliant on a small number of people to raise funds. The top 10 per cent of taxpayers account for 60 per cent of all income tax receipts; the top 1 per cent, a startling 29 per cent. Labour might be happy to drive these people overseas, but the rest of us should be asking how we fund the NHS when they’ve left.
Rather than raising taxes to fund a larger state, we need to shrink the state to suit a lower tax burden, restoring the incentives for companies to grow and invest, and for people to take risks and work hard.
Some of this can be done with a relatively light touch, addressing cliff edges within the tax system to avoid absurd marginal rates. But we will also need to look hard at the size of the state.
I’ve already set out my ambition to slash the number of civil servants to pre-Brexit levels. We must also make the most of our Brexit freedoms to secure our competitive advantages in areas like financial services and life sciences by building a leaner, more entrepreneurial state.
But it’s long past time we examined not just how the state goes about its business, but what it does, reevaluating functions as times change.
Too often, when the state has looked to save money, the capital budget has been the first place it looks. This saves pain in the short-term, averting the hard work of redesigning systems to work more efficiently. But it stores up long-term challenges.
In some European countries, healthcare workers have up to five times the equipment to work with than their British counterparts do. We need to give the NHS the capital investment it has long needed by cutting waste elsewhere.
One place to cut is in the benefits system. Just as we can increase GDP per capita by giving our workers more equipment to work with, we can increase it by bringing more people into work.
The explosion in the number of working-age people claiming benefits for health reasons — and particularly mental health conditions — suggests something is wrong. Too many indicators show that we are medicalising normal human stress.
The reforms introduced by Mel Stride to tackle this created savings that allowed us to cut national insurance. That serves as a blueprint for how to cut taxes responsibly
A smarter immigration system is also essential for growth. A tightly controlled, high-skilled immigration system that attracts the very top talent is one of the best tools we have for generating growth. But as the Office for Budget Responsibility has made very clear until recently our system attracted low-wage work and piled up long-term fiscal costs.
Unwinding 25 years of low-skilled mass migration won’t be easy. It requires a proper skills strategy, equipping the next generation to fill jobs with real skills, not low-value degrees. One in five graduates now ends up earning less than they would if they had never gone to university. This must end.
We must also bring down sky-high energy costs and make it our objective to deliver cheap and reliable energy. Between the cost of connecting to distributed renewable generators, and the subsidies offered for their production, our attempts to decarbonise our national grid have resulted in British industry paying some of Europe’s highest electricity costs in Europe.
Labour’s rush to complete decarbonisation by 2030 will only send bills spiralling higher. We should not be decarbonising faster than our major competitors.
Other countries, like South Korea, can build nuclear power stations at a far lower cost than we can. We will have the humility to learn from their example, following best practice in regulation and design to follow a smarter, cheaper path to decarbonisation, bringing down the price paid by energy users in the process.
Doing all of this offers a chance to close regional imbalances. Talent is spread evenly in our country but opportunity isn’t. Generating cheaper energy and investing in defence and domestic supply chains isn’t just good economics – it offers a chance to ‘re’ rather than continually ‘de’-industrialising our economy. With it, we can provide new, well-paid skilled jobs to places neglected by Westminster for far too long.
Underpinning all these ideas is a very simple idea: our economy needs a small state that works, not a big state that fails. Rather than treading further down the path to ever more government intervention — more regulation, more price controls, more nationalisation — we should instead take a lighter touch approach. The economy will only grow if enterprise is rewarded and the private sector does more of the work.
Britain is still a country of immense potential. It’s time we stepped back, and let it succeed.
Robert Jenrick is a former Minister for Immigration, and is the MP for Newark.
Why is it that the country which led the Industrial Revolution is now trapped in a cycle of low growth and relative economic decline?
There have indeed been huge global headwinds. Low growth is by no means unique to Britain. But the hard truth is that the UK is one of the countries where the post-2008 slowdown has been most pronounced.
I believe the reason is relatively simple. Rather than standing back and letting prosperity flourish, too often the state gets in the way.
Over our 14 years in government, we showed plenty of ambition for reforming the state. In many areas, we succeeded.
We restored the dire public finances we inherited from the last Labour government. We oversaw a revolution in England’s schools, overseeing a dizzying rise in standards. As Housing Secretary, I took on the blockers and got housing starts up to their highest level since 1987. And, of course, we delivered Brexit, providing us with the ability to design smarter regulations than our competitors.
But, we didn’t get everything right. While we steadied the ship from the Covid pandemic and energy crisis, we didn’t do enough to get it moving again. Now we must show the electorate that we have a credible plan to get Britain growing again.
It won’t be enough to point out that Labour doesn’t have one, or that the hostility to wealth displayed by Rachel Reeves is already scaring off investors. We need to make the case for how we will unlock Britain’s potential.
Here’s what we should be doing instead.
First of all, we need to get Britain investing again. British workers don’t produce less than their counterparts in Germany, France, or America because they’re slacking off. It’s because we aren’t giving them the tools they need to do their jobs as efficiently. Look at the league table for investment as a share of GDP at any point in the last 30 years, and most of the time the UK will be at the bottom of the G7.
It’s not the state’s business to tell firms how much to invest, or how to spend it. But we find ourselves in a place where we effectively tell companies they can’t invest.
Between our byzantine planning system and the uncertainty of our judicial review system which constantly upends decisions, getting planning approval to build a data centre or factory is markedly harder in the UK than elsewhere.
Investors are optimistic about Britain but we turn them away. Companies spend years pleading for the right to spend their money here creating jobs, only to be declined by the vetocracy. The cost of a planning application for a project in Britain can be more than building the project overseas.
I proposed the most substantial supply-side reforms of the last parliament to free up our sclerotic planning system, but they were only partially implemented. We must build on them to simplify requirements for environmental impact assessments and offset impacts on neighbours and the environment through larger monetary transfers.
And these reforms should be carried over to the housing sector. A huge part of boosting productivity is matching the right people to the right places, where they can take the jobs that best suit their skills. In the United States, economists have estimated that reducing restrictions on house building in just three large cities to the ‘average’ for the rest of the country could have increased US GDP by around 9 per cent in the 45 years leading to 2009.
The restrictions in Britain are if anything more stringent — and the potential returns to loosening them greater. We should make it far easier to densify our inner cities and smooth the process of adding additional stories to properties in the suburbs.
The first step is allowing people to invest again. The second step is encouraging them. The mini-Budget illustrated what happens if you lose fiscal credibility. However, it would be a mistake to assume that there is no hope of bringing the tax burden down from its highest level since 1948.
Unfashionable as it may be, I recognise that higher tax rates can lead to lower receipts. When in 2020 I persuaded the Chancellor to cut stamp duty, it spurred the largest-ever number of property transactions in a single year and benefited businesses throughout the supply chain.
We are now highly over-reliant on a small number of people to raise funds. The top 10 per cent of taxpayers account for 60 per cent of all income tax receipts; the top 1 per cent, a startling 29 per cent. Labour might be happy to drive these people overseas, but the rest of us should be asking how we fund the NHS when they’ve left.
Rather than raising taxes to fund a larger state, we need to shrink the state to suit a lower tax burden, restoring the incentives for companies to grow and invest, and for people to take risks and work hard.
Some of this can be done with a relatively light touch, addressing cliff edges within the tax system to avoid absurd marginal rates. But we will also need to look hard at the size of the state.
I’ve already set out my ambition to slash the number of civil servants to pre-Brexit levels. We must also make the most of our Brexit freedoms to secure our competitive advantages in areas like financial services and life sciences by building a leaner, more entrepreneurial state.
But it’s long past time we examined not just how the state goes about its business, but what it does, reevaluating functions as times change.
Too often, when the state has looked to save money, the capital budget has been the first place it looks. This saves pain in the short-term, averting the hard work of redesigning systems to work more efficiently. But it stores up long-term challenges.
In some European countries, healthcare workers have up to five times the equipment to work with than their British counterparts do. We need to give the NHS the capital investment it has long needed by cutting waste elsewhere.
One place to cut is in the benefits system. Just as we can increase GDP per capita by giving our workers more equipment to work with, we can increase it by bringing more people into work.
The explosion in the number of working-age people claiming benefits for health reasons — and particularly mental health conditions — suggests something is wrong. Too many indicators show that we are medicalising normal human stress.
The reforms introduced by Mel Stride to tackle this created savings that allowed us to cut national insurance. That serves as a blueprint for how to cut taxes responsibly
A smarter immigration system is also essential for growth. A tightly controlled, high-skilled immigration system that attracts the very top talent is one of the best tools we have for generating growth. But as the Office for Budget Responsibility has made very clear until recently our system attracted low-wage work and piled up long-term fiscal costs.
Unwinding 25 years of low-skilled mass migration won’t be easy. It requires a proper skills strategy, equipping the next generation to fill jobs with real skills, not low-value degrees. One in five graduates now ends up earning less than they would if they had never gone to university. This must end.
We must also bring down sky-high energy costs and make it our objective to deliver cheap and reliable energy. Between the cost of connecting to distributed renewable generators, and the subsidies offered for their production, our attempts to decarbonise our national grid have resulted in British industry paying some of Europe’s highest electricity costs in Europe.
Labour’s rush to complete decarbonisation by 2030 will only send bills spiralling higher. We should not be decarbonising faster than our major competitors.
Other countries, like South Korea, can build nuclear power stations at a far lower cost than we can. We will have the humility to learn from their example, following best practice in regulation and design to follow a smarter, cheaper path to decarbonisation, bringing down the price paid by energy users in the process.
Doing all of this offers a chance to close regional imbalances. Talent is spread evenly in our country but opportunity isn’t. Generating cheaper energy and investing in defence and domestic supply chains isn’t just good economics – it offers a chance to ‘re’ rather than continually ‘de’-industrialising our economy. With it, we can provide new, well-paid skilled jobs to places neglected by Westminster for far too long.
Underpinning all these ideas is a very simple idea: our economy needs a small state that works, not a big state that fails. Rather than treading further down the path to ever more government intervention — more regulation, more price controls, more nationalisation — we should instead take a lighter touch approach. The economy will only grow if enterprise is rewarded and the private sector does more of the work.
Britain is still a country of immense potential. It’s time we stepped back, and let it succeed.