31 January 2023 – Last Friday, Jeremy Hunt has unveiled his economic growth plan, which, he says, aims at showing the financial markets that the UK is a responsible nation that can be trusted.
The Chancellor has kept a low profile since his autumn statement, where he set out his plan for the UK economy following the upheaval caused by his predecessor’s announcements.
Mr Hunt admitted that the plan doesn’t contain any concrete measures. Instead, the economic growth plan should be seen as a framework that can be used to assess individual policies against.
Despite this, the Institute of Directors (IoD) has called the Chancellor’s plan “empty”, as it doesn’t show concrete plans on how economic growth will be achieved.
Economic Growth Plan – The Four Es
In Friday’s speech at Bloomberg, Mr Hunt addressed the so-called declinism about Britain, which he said doesn’t exist. He claimed that some of the gloomy statistics that have been reported on don’t show the whole picture.
To prove his point he used statistics that show that the UK performed just as well as Germany since 2016 and better than Japan, Italy and France since 2010, at least on one measure of GDP.
But despite this, he did also make it clear that no tax-cuts should be expected in the spring statement, which is due in March. After recent calls from within his party for tax cuts, it is thought that the speech was meant to stifle these voices.
The biggest tax cut that we can give the British people is to halve inflation, that means the value of their weekly shop won’t continue to go up, the value of their pay packet won’t continue to be eroded and that’s what we are focused on.Jeremy Hung, Chancellor of the Exchequer
Many commentators also think that the speech is an attempt by the Chancellor to silence critics, who have lamented the Government’s lack of long-term growth plan for the UK economy.
In terms of the economic growth plan itself, the Government’s strategy is based on four Es: enterprise, education, employment and everywhere.
While he did not give any further details about the plan, he did say that tackling poor productivity is a high priority.
This includes enticing people who retired early out of retirement and back into work. But he also wants to target those who, after the end of the furlough scheme, have difficulties finding a new job.
He also emphasised the opportunities Brexit is providing, saying it encourages risk-taking and the change of regulation. Even though many businesses have reported a wide range of challenges when trading with the EU.
Mr Hunt also said that he aims at growth in several sectors, such as digital technology, green industries, life sciences, advanced manufacturing and creative industries.
All in all, the Government’s economic growth plan is very light on detail and concrete measures, which has drawn a lot of criticism.
The Government Has “No Plan”
The chief economist of the IoD called the plans “empty” and said what is needed is government action, which should include the continuation of the capital investment super-deduction as well as tax credits for companies investing in addressing skills shortages.
The Federation of Small Businesses said that while Mr Hunt has focused on the right elements in his speech, only time will tell if his plans will come off.
Labour’s shadow chancellor Rachel Reeves has also criticised the Government’s lack of a detailed economic strategy.
13 years of Tory economic failure have left living standards and growth on the floor, crashed our economy, and driven up mortgages and bills. The Tories have no plan for now, and no plan for the future.Rachel Reeves, Labour’s Shadow Chancellor
Without concrete details, it is difficult to judge if the Government’s economic growth plan will achieve its goals.
But more importantly, it makes it very difficult for small businesses to plan ahead. Without clarity on what the business landscape will look like in future, many business owners will struggle to see which path their firm should follow.
Already almost 60% of small businesses worry that they will have to close down this year due to economic instability, according to research by insolvency firm Begbies Trynor.
The study shows that 610,405 businesses in the UK are in “significant financial distress”. This is 4% more than last year.
Especially small businesses are vulnerable, because many of them needed COVID support loans to get through the pandemic. These are now due for repayment, which can be more expensive due to recent interest rate rises.
On top of that, energy prices have increased sharply and inflation is still at a 40-year-high with over 10%. Consumer demand continues to weaken, making it even harder for small businesses to survive.
This shows that a concrete economic growth plan is needed that gives small businesses the confidence to plan ahead and look positively into their future. If this Government can deliver this remains to be seen.