A new UK economic policy

Econo-my.com outlines below a potential new economic and industrial policy for the U.K.

Industry

It is unrealistic to support ‘life expired’ industries for ever. In the same way that the industrial revolution transformed Britain in the 19th Century, our future economic development means it is unrealistic to expect manufacturing not to be transformed again. Recognising this, we should encourage a planned transfer of some industries to other countries, as part of our approach to tackling global poverty. This does not mean that manufacturing has no future in Britain. We need to create local business districts to allow new specialist industries to develop in local areas. Groups of small start ups need to be developed out of which new products and industries can emerge. Service sector development can operate in parallel supporting these development zones.
Much of the industrial policy in Britain, encouraged by Regional Development Agencies, has been to encourage inward investment from multinational firms. This tends to only be a short term solution but should only be a part of a regional economic policy. For instance, if a car plant closes then inward investment from a similar industry prevents local stagnation. However, relying mostly on inward investment in impoverished areas to improve them makes these areas more vulnerable to short term problems in the global economy. It has little long term impact on areas suffering from economic decline.

Euro

The 5 economic tests reflect the short term risks in joining the Euro. The further the UK is out of line of convergence when it joins the higher the economic cost for the following few years. In the long run however the Euro is a political rather than an economic decision.

Employment

There needs to be a shift in policies from unemployment to employment. This will start to address some of the issues that are known as "work - life balance". Services need to focus on more than the unemployed. Career and training support should be offered to those who are vulnerable to unemployment, for instance workers in industries that are likely to suffer from Globalisation. If we recognise that we cannot prevent change then planning for it can protect both individuals and the economy from the adverse effects.

Regional Policy

Local economic decisions should have local democratic control. Regional Development Agencies should be accountable to regional assemblies. It is important that decisions about on economic development take into account local needs, including the environmental impacts. However, central government should allocate resources to RDA’s based on a national industrial policy, with funding ring-fenced to ensure our objectives are met.

Taxation

The current income tax and benefits system works fairly well. We must however be aware of the social impact of indirect taxation. We should continue to resist increase in the rate or scope of VAT as this is socially regressive. Of more immediate concern is the increases in council tax and the taxation element in utility bills that hit the poor disproportionately. Local income tax would be one solution to this but is unworkable as it would be easy to avoid and would not have popular support. Our preferred solution would be to shift council tax to be based on property ownership rather than property residence.

We also would like consideration to be given to the idea that local authorities could choose to replace business rates with direct payment by companies for local services. Utility regulators should be given a duty of care so that competition and pricing regimes take into account the objective of reducing poverty. The poor should not have to pay more due to either low or high volume of usage. Examples of this are electricity prepayment meters and the water meter optant tariff differential.

Public Services

There is a balance to be made between ensuring that the increased investment we want to make in public services goes to the areas that need it most without centralising control over public services. Therefore we recommend that comparative value for money comparisons be used. For instance for health this would allow the inclusion of average earnings and age profile of the local population to be taken into account better in allocation decisions. Local control over services should be allowed with minimum standards and an overall ranking of performance. This is preferred to using a multitude of targets that ignore the environment faced by the public service. This would also allow a neutral choice to be made between public and private financing.

Economic Justice

Access to basic financial services should be available to all those who receive state support. Bank accounts associated with these should be automatically tax free. Other tax free savings vehicles such as ISAs should have a limited shelf life as they tend to only benefit the well off. Instead they should be used as an economic tool for stabalising growth, abolished during times when growth is slowing and then reintroduced when there is a risk of excessive growth.
Workplace standards should be protected by employment laws raised to the level of best practice in Europe.

Global Poverty

Reform of the Common Agricultural Policy is the most important step in tackling Global Poverty. Promoting international agreements on trade and the environment are required and Britain should show leadership in this area.