Osborne: What he said – and will it work?
After the Shadow Chancellor's tough love and harsh words in Manchester last week, we ask key figures in the commercial world what they thought of his conference speech, and his rescue measures – no holds barred
Sunday 11 October 2009
What British business can expect from a Conservative government
*The Shadow Chancellor, George Osborne, used his speech to outline a proposed freeze of public sector pay expected to reduce government spending by £23bn over the next Parliament.
*The freeze will be applied to all but the lowest paid one million public-sector workers. Additionally military personnel serving overseas will benefit from a doubling of the Operational Allowance.
*A future Conservative government would outline plans to cut Whitehall costs by a third, saving a projected £12bn over the next Parliament.
*Cuts will apply to Whitehall as well as quangos.
*The Tories intend to reduce the growth of public sector pensions, reducing liabilities by "hundreds of millions of pounds over the next decade".
*The proposal would affect existing taxpayer-funded pensions worth over £50,000 a year as well as stopping all such pension plans in future. The cap would apply not only to the Government but also Quango managers, council executives and senior civil servants.
Child Trust Funds
*A future Conservative government would axe Child Trust Fund payments for those families among the wealthiest two thirds.
*The programme would instead focus on the poorest one-third of families as well as the families of disabled children. The proposed changes would save an estimated £300m a year.
*A Conservative government would review the state pension age and consider raising it from 65 to 66 by 2016 for men and 2020 for women.
*The party points to a report by the National Institute of Economic and Social Research indicating that for every year by which the state pension age is increased, government borrowing is reduced by roughly two-thirds of a per cent of GDP. The plan is projected to save around £13bn a year after the increase for both men and women.
*Ken Clarke promises "a net 5 per cent reduction in the regulatory burden".
*This will be achieved through the creation of a Star Chamber chaired by Clarke which will enforce a new "one in – one out" rule whereby new laws will be required to cut old laws.
*In his speech, Clarke referred to a report by the Federation of Small Businesses which claims that the average small firm spends seven hours a week complying with red tape and paper work.
*A cull of unnecessary quangos will follow a Conservative victory.
*"Sunset clauses" will be applied to all regulators and regulatory quangos which will be made to prove their relevance to businesses or face abolition.
*Businesses will be able choose legislation to be axed.
*The 30 "most hated" regulations will be chosen by a public vote and if no one objects in a 12-month feedback period, the regulations questioned will expire.
*The Conservatives claim that 34,583 new regulations have been introduced by Labour since 1997, 14 for every working day since coming to office.
*The power of Government inspectors will be cut sharply.
*Firms will be permitted to arrange their own external inspections and could refuse official inspections if they pass without problems. The inspection reporting process will also be changed to detail specific problems, limiting overzealous enforcement.
*The Conservatives have proposed a consultation on employment and discrimination tribunals.
*They aim to create a system that will be "fast, cheap and accessible" as well as "fair to all sides".
Chris Watling, Chief executive, Longview Economics
With this country facing its worst fiscal crisis in peacetime, it came as a huge relief last week to hear the Chancellor in waiting, George Osborne, speak frankly about the challenges this country faces. There are three broad-brush principles which need to be embraced by the next government in order to deal with Britain's broken economic model. Osborne fully embraced at least two of those three while touching upon the third.
First, he talked about the Conservatives being a party of "sound money and stability". That should always be the first principle of any government's macro-management of the economy. The Tories say they want the economy to move from one "built on debt to one sustained by saving and investment". This is not a view I have heard espoused by the Labour Party.
Second is the principle of the government balancing its books. And cutting the deficit was the meat of Osborne's speech. The Conservatives appear to have serious intent with respect to dealing with this problem.
The third principle is that of encouraging wealth creation and entrepreneurialism – the only way to create sustainable long-term prosperity. Wealth creation is driven by productivity. And that is driven primarily, and in the long term exclusively, by the private sector. Government's role is to stand out of the way and create a "bureaucratically light" burden allowing business to flourish.
While Osborne's speech was disappointingly light on this matter, it is instinctively Tory ground and it was encouraging to hear of Osborne's, and the Conservative's, desire to let the world know that "Britain is open for business".
Richard Farleigh, Ex-Dragons' Den star and serial entrepreneur
I liked George Osborne's idea of one in, one out: every time a piece of legislation is brought in that affects business, one is moved out so that the code doesn't get more complicated. Another good idea is that new legislation has to be assessed after a period of time. Both those things limit how complex things can be for small business.
The things on the retirement age won't make a big difference to most businesses and, with an ageing population, it makes sense to make the retirement age older. A lot of the credit crunch was caused by the wealthy so the 50 per cent rate is fair. I don't see the urgent need to change that. I think there will have to more cuts. Interest rates will rise and it will affect small businesses.
An independent authority should set the size of the government's deficit or surplus. It's hard now that we've had the credit crunch and bail-outs to get back into surplus as the economy is weak at the moment and it makes sense to run a deficit. The damage was done in the past when we had a strong economy and weren't running surpluses. The Conservatives are trying to save a lot of money to spend. It's hard enough for me to know which company to back but when you have a government official trying to back a project through a grant it can go horribly wrong.
I don't think they should go any further than the Business Link approach – for example, when someone doesn't know how to pay VAT or they don't know what to do to raise shareholder funds. All of those issues can be helped.
But I wouldn't go further than the current Business Link. I wouldn't suggest that the Government needs to go out splashing lots of cash which will end up costing more in the long term.
Business Link has got it right actually. I wouldn't change anything too dramatically. I think that is a tick for the Labour Government.
Peter Meinertzhagen, Former chairman, ABN Amro Hoare Govett
No shadow Chancellor has ever had to make such an unpopular speech. The public sector deficit and unemployment had to be at the start of Osborne's speech as he knew that it was important for a future Tory government to show that proposed measures would satisfy overseas buyers of our public debt.
Implicit in what he said was the warning of a serious further run on sterling, leading to higher interest rates at a huge cost to our deficit and economic recovery. The totality of what he said should indicate to everybody how long it will take to reverse the deficit.
Changes in the pensionable age and reduction in taxation (not defined) for pension funds and personal savings was correct.
However, I was disappointed there was no mention of the private sector debt time bomb where I had hoped he might introduce incentives to reduce credit card and other debt, thus freeing up liquidity for banks to lend to fund for future growth. Contrary to public perception, most of the City wants to be successful and wants to help corporate UK fund future growth – although the retention of the 50 per cent tax rate is very demotivating.
Ken Dytor, Managing director, Regeneration Investments
In this country, we have some of the finest design skills in the world. It is one of the reasons that the UK has remained a major home for investment into property. But pressure is already building for both firms and individuals in the property design industry to move abroad to the Middle East, India and China. This potential loss of skills is a major issue for the UK building industry.
I found it hard to see in the Conservative conference much support for our underlying companies which we need, not only to prepare for the upturn but to maintain the progress we have made in the past decade in regenerating our towns and cities. We also need to sell the benefits of UK plc's towns and cities to international investors in a new way so that we can take advantage of the current property market.
It would be tragic if we allowed the regeneration agenda to slip away. The results would be frightening social decline. To prevent this, we need to ensure that the growing shortage of affordable housing, allied to full infrastructure investment are fully addressed.
Part of the solution would be to break down the silo effect in government to allow capital streams for projects such as the £50bn Building Schools for the Future and health property funding to fund mixed infrastructure more efficiently.
This would maintain the health of our urban environment by getting people back to work quickly while simultaneously cutting costs.
Ardeshir Naghshineh, Property entrepreneur; owner of Centrepoint building, London
It is encouraging that the Tories are aware of the many quangos created by this Government and that they are proposing a tough policy of reducing their number and the red tape that goes with them. Our industry, commercial property, is being held back by a planning process that takes far too long and has too many layers of bureaucracy. That increases the risk faced by developers and impedes regeneration. We would like to see the process streamlined. I am not sure what Tory policies are in this area but what they have said seems a good start.
We are yet to see how the Tories will tackle our enormous debt problem. The world is growing and London and the UK have a big role to play in this growth. The solution to tackling debt is to continue encouraging international business to locate in the UK, prosper, and help the country by doing so. The Tories must recognise this problem when they are in government. There are plenty of talents the Tories can draw on – Boris Johnson, for example, has shown he wants to make London the great city it can be.
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