Building a New Philosophy

By Stephen Haddrill, Director General

Ever since the coalition days of 2010, subsequent UK Governments have been steadfastly centrist on almost everything.  OK, Brexit added a large dose of controversy, but beyond that issue, the level of disagreement on what to do has been pretty muted. Most of the noise centres on how competently the work is being done. The NHS has been cherished by all, spending on infrastructure, education and science has been strong, taxes have changed little, and all agree on net zero. Regulation has continued to grow steadily in all areas of business.

The new Chancellor’s Financial Statement last week did not immediately change the landscape, but it did have a single mindedness that has not been heard for some time. He has set out to convince the Whitehall policy machine that growth is the single goal.

The case for growth this is hard to deny.  UK capital investment is weak, below that of our OECD competitors. As a result, the productivity which ultimately drives our prosperity is weak too. Yes, it’s great that we have very low unemployment. But how much better it would be if more jobs were high value, with people using the latest equipment rather than standing in for it.

In the detail there is much that could genuinely bring about a better business and growth environment, and most certainly a better environment for the lending industry. Lower taxes should help both our business and retail customers. The willingness to review regulation is an opportunity that the FLA will fully engage with. The maintenance of investment allowances is good news too.

However, the thing about single mindedness is that it does not keep a broad church happy. This Government encompasses one of the widest spectrums of MPs ever seen on its benches. Its very success at the last election may well make unity harder to build around a single message – and those with some grey hair will remember that the reforms of the Thatcher government took some years to get seriously underway.

And then there’s the financial markets to consider.  The FTSE fell on Friday but then all markets fell on Friday. The real crunch was in the currency markets – a reminder that Britain is not an economic island.  High spending and tax cutting need to be funded, and the borrowing may well get more expensive for Government. We are after all not measuring up so well against others in terms of inflation – US rates are below ours and yet still the Fed has had to increase its base rate by 0.75% in recent days. That increase will put pressure on the UK to follow. And higher interest will feed into higher inflation.

So, we see a clear pro-growth philosophy that should work well for business over the longer term, but which will be buffeted by politics and global economics in the short term. The Chancellor has a difficult path ahead. At the FLA we will focus on the reforms that are needed to build sustainable markets for our members.

Published 27 Sep 2022

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