Do you think the members of the Coalition Government deserve a happy Christmas? Based on their huge salaries, expenses and pensions plus outside earnings, they will certainly have one (I hope the editor allows this little rant).
But let’s take a fair look at the economics of their performance.
The biggest crime is a clear lack of direction. The Department for Business, Innovations & Skills is dominated by Vince Cable’s instinctive wish to control and regulate and to tax even retrospectively. So much of what he has tried to introduce has failed. The Growth Capital Fund simply isn’t funding growth companies. The SEED/EIS early stage equity facility is a disaster because nobody asked the regulators about it. The Inland Revenue, of course, has made it so complicated that any funds raised will need to include spending on legal and accounting advice.
The supporters of enterprise, namely Andrew Tyrie MP, Chairman of the Treasury Select Committee and latterly Michael Fallon are offer rhetoric and some piecemeal measures. They are nowhere near any market solution ie. the revival of IPO issues.
Financial regulation is heavier than at any time in the last twenty years. The Financial Services Authority budget for 2012/2013 is over £500m. The transfer of power to the Bank of England is yet to be proven. The CBI says that for every £3 saved from costs, £5 has been added because of EU requirements. Measures such as the minimum price of alcohol will hit retailers badly. There is absolutely no evidence that the State has shrunk.
In fairness, and all credit to the Chancellor, the reduction of the Corporation Tax Rate to 21% by 2014 is a great move. The swopping of shares for employees giving up their rights is a rather less inspiring measure. His tax avoidance measures are window dressing. The ‘funding for lending’ scheme has not achieved any increase of credit to small businesses. Many leasing companies have withdrawn from the SME sector.
One respected commentator has called the Coalition policies ‘aspirational’ and there certainly has been a deluge of words with little action.
However, many of us believe in the power of the market cycle. It is possible that regardless of coalition policies the exchange value of money is being restored by the power of austerity. Unemployment is less of an issue than expected, the pound is respected as a currency and Europe is still holding together.
On 22 January 2013 the members of ‘The Drury Report’ Group will be presenting the ten recommendations in its report to the Treasury Team.
We hope they have had a Happy Christmas.