Sir John Redwood is a former MP for Wokingham and a former Secretary of State for Wales.
Kemi Badenoch has made a great start, with a successful visit to Washington and a friendly and productive meeting with Vice President JD Vance. If you want the UK to grow faster and do better it’s Washington, not Brussels, you need to visit.
The Opposition is rightly highlighting the fundamental weakness of the Government’s economic approach. All hinges on their promise of G7 leading faster growth, but there is no sign of them putting in the policies you need to achieve it.
Ministers are right that faster growth would bring in more tax revenue without tax rises. It would cut public spending by creating many more jobs that UK citizens could fill. It would lead to more private sector investment to help us extend and modernise our infrastructure more quickly.
The trouble is the budget bombed and a range of other policies have been putting people off creating new jobs or committing to new investments. Higher National Insurance hits care homes and hotels, shops and entertainment, Inheritance Tax threatens family farms, and VAT on school fees destabilises some private schools.
It is a pity Rachel Reeve did not look across the Atlantic, to a Democratic president much to her liking, and copy some of his better ideas. During his four years in office Joe Biden allowed more oil and gas drilling – on top of the 50 per cent increase under Donald Trump – permitting more cheaper energy to be made available to American business.
He had a strong onshoring policy for more industrial investment, again building on Trump’s successful push for more home-based industry. Like his predecessor, Biden used tariffs and bans against China where he thought they were competing unfairly or undermining American national security interests.
It is true his party still lost the election. This is because he did allow a major inflation to set in, failed to control the large budget deficits, and presided over high taxes.
The Government has only proposed one real pro growth policy: the pledge to build 1.5 million new homes in five years, compared with one million pledged and delivered by the past government. The Deputy Prime Minister tells us this can be achieved by increasing the number of planning permissions granted for houses whilst, bizarrely, cutting back on the volume to be achieved in key cities.
This just will not bring it about. There are many planning permissions available this year to build more homes, but housebuilders are not doing so. Homes are dear, and mortgage rates have just gone up again thanks to the budget. Not enough people can afford to buy a new home, so many plots with planning permission sit there with no work underway.
Meanwhile the Government allows large numbers of legal and all too many illegal migrants to arrive, all needing housing. This drives up the price of private rented accommodation as landlords see the opportunity to subdivide a property into more smaller rooms and to part charge the taxpayer for the rents.
At the same, of course, ministers toughen rules and raises taxes on landlords – cutting supply and driving rents even higher.
Meanwhile the policy of shutting down our steel industry, banning all new diesel and petrol cars from 2030, banning all new oil and gas exploration, closing all our coal, most of our nuclear, and some of our gas power stations and relying more on imports and the policy of dear energy generally is losing us many manufacturing jobs and revenues.
The UK also watches as other countries woo digital and microprocessor company investment, whilst allowing Ireland to attract so much more of this work by setting much lower Corporation Tax rates than us. As a result, Dublin has a budget surplus and has just had an election discussing how to spend all the extra revenue.
Ireland has proved again that if you set much lower rates for business you can collect so much more revenue per head as you attract and retain much more business investment in your jurisdiction.
The Government sees the US and even some EU countries putting together attractive packages of support to fabricate microprocessors, and then farms out defence work for foreign contractors where others make at home. It wants to reduce petrochemicals and oil refining for net zero reasons, in ways which will increase world CO 2 output as we import instead.
It is surprising that the Labour Party, steeped in the traditions of industrial and mining workforces, should be so negative about mining, drilling and making things in the UK. All this makes three per cent growth unachievable.
Trying to get modest improvements in our EU trade deal will not solve the problem, as so many of the things we used to export are banned or priced out of the market. I back a growth strategy to get us growing faster than the US. The Government needs to review why the US is growing so much faster and do something about it.
Ministers need also to grasp the nature of British trade. We trade more with the rest of the world than with the EU; our trade with the rest of the world has been growing faster than with the EU both in our later years inside the EU and now out of it. The majority of our trade is trade in services, not in goods, and service trade is growing quickly, increasing the gap.
Naturally, British firms often have an edge in English speaking countries with common law systems, not Napoleonic and Treaty law-based continental systems. As we negotiate trade treaties for ourselves, as we did successfully with the CPTPP, so we introduce more service sector-friendly clauses which were often absent from those trade treaties the EU did manage to agree.
The Government, however, is looking the wrong way seeking closer alignment with the EU when our best trade prospects lie elsewhere. It is seeking to align with a slow growth highly regulated trade bloc when we can do much better by being more global in our vision.
British exporters need to follow EU rules when selling to Europe, but they need to follow US rules when selling to the Americas. That means we need maximum flexibility, and to avoid compulsory alignment with either bloc.