In a speech to business yesterday, the Labour leader rightly focused on this key economic issue, but his proposed solutions miss the markby George Magnus / March 31, 2015 / Leave a comment
In a well-flagged speech to UK business to mark the start of the election campaign, Ed Miliband yesterday made a sound appeal that Labour would not subject the country to the uncertainty of a prolonged EU referendum debate, not to mention the damage from the risk of a vote to leave the EU. There’s no question Miliband was knocking on an open door here, though how the business community weighs up the major parties on an EU membership campaign versus other leading business issues, such as tax, regulation and intervention, is a moot point.
What Milliband had to say earlier in his speech though was just as, if not more, important. He scored a bulls-eye in identifying the weakness of productivity as the UK’s number one problem, insisting that productivity is “key to the country we wish to be.” He cited ONS data that showed UK output per head was about 20 per cent below that of our major G7 competitors and that this gap was the largest in 25 years. This particular comparison was not wrong, but there are other ways to interpret what has gone wrong, and in discussing proposed solutions, he missed the target by a country mile.
For Labour the solutions lie predominantly in their now infamous “supply-side” reforms. He outlined how a Labour government would remedy skills weaknesses, for example through a technical baccalaureate, maths and english education to age 18, and the provision of high quality apprenticeships, which would be part of public contracts. He said it would create a British Investment Bank, which would support a network of regional banks in supplying finance to SMEs. A new National Infrastructure Commission would be set up, while other policies would focus on energy market reforms, executive compensation transparency, and a cut in business rates for small companies.
The British Investment Bank and Infrastructure Commission ideas are interesting but in proposing them, Labour is blowing the dust off proposals first aired in the trough of the 2009 recession when it was thought recovery would never happen. Six years on, the need for big…