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Much to do if Britain is to manufacture its way out of trouble

16 February 2010

3:33 PM

16 February 2010

3:33 PM

The City had hoped that Britain would export its way out of trouble. Dream on City Boys: Britain’s trade deficit is £7.3bn. It is perverse that the Thatcher government is blamed for manufacturing’s decline. Certainly, deficits were a feature of the Thatcher years but Labour came to power with a £1.8bn trade surplus and the gap has widened every year thereafter; Britain was £56bn in the red by 2006. With a possible inflation crisis louring in the distance, precipitated in part by weak sterling and a dependency on imports, British manufacturing needs to be stimulated. John Redwood has a typically incisive post:      

‘It is quite possible to make things in Britain, make them well and make a profit. The fact that so few do these days tells us something else. For all the fine politicians’ words about manufacturing, government often does not want industry. Planning controls, regulations and tax regimes are hardly encouraging. Nor is our culture any longer proposing we be the workshop of the world. In schools discussion is likely to be of pollution and industry’s large contribution to global warming, rather than to the importance and the rewards of making things for ourselves.

The UK seems to be happy to import its lifestyle from China and borrow the money. It has the added moral luxury that we can then blame China for the pollution she creates for us, and can enjoy the benefits of low wage labour intensive production. That does not require us to be mean to our UK neighbours over how much they are paid. We borrow the money to pay the benefits bill instead.

The gnawing worry I have is how much longer will China go on working so hard and lending us the money to live at such a higher standard than they enjoy? Isn’t it high time government turned fine words into less government action to thwart or put off would be manufacturers and investors who could start to get Britain working again? China doesn’t have the high corporation and income taxes we have, and it does not take months or years to get a planning permission.’

The current government expend Zeppelins of hot air about finding an ‘alternative to the City’, but car plant and chocolate plant closures are all that Mandelson has delivered. Redwood’s analysis suggests that the tax and regulation systems are anti-competitive. The deregulation of small businesses and cutting corporation taxes are existing Tory policies, but much more needs to be done. Cutting the basic rate of income tax, employers’ national insurance contributions and further cuts in corporation tax would aid Britain’s competitiveness; and the overhaul of planning applications for business would also assist. The more I think about it, the more I’m amazed that the Vulcan isn’t closer to the front bench.


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