It frustrates me that elements of the media and opponents of the Occupy movement are quick to criticise but rarely offer anything positive to the debate about economic growth and social change. I respect that Occupy protesters are being positive and offering tangible solutions however, understandably because they represent such a diverse cross-section of society, I do not necessarily agree with all that they say. So I’m offering my own list of steps I believe the government could take to improve the economy and the welfare of us long suffering British citizens. It’s not intended to be an exhaustive list but rather to stimulate positive debate about practical measures to improve the economy:
Reintroduce incentives for start up businesses – small grants, seed corn finance packages, tax breaks or overhead subsidisation – just some of the incentives that would make it easier to start new Small and Medium-Sized Enterprises (SMEs) which are the engine of economic growth. As an entrepreneur, I was dismayed that such incentives were the first to be cut be the Coalition government, precisely at the time when investment into developing new businesses was most needed.
- Invest through social investment banks – if private banks continue to be unwilling to lend to small businesses then scale up lending through Community Development Finance Institutions (CDFIs) who have proven the efficiency of their model through lower default rates than high street banks – thanks largely to their ‘old fashioned’ style of banking whereby the lending manager, rather than a computer, assesses the viability of the business. Key Fund, Social Investment Business and Charity Bank are three examples of highly successful CDFIs.
- Simplify the tax system – the UK has the longest tax code in the world at a staggering 11,520 pages and more accountants than the rest of the European Union combined! It is the unnecessary complexity of this tax code that enable the richest in society to exploit loopholes and avoid paying their fair share of tax. Simplification would not only reduce tax avoidance and bring about a more fair and equal society but would also reduce accountancy costs for businesses at a time when many are in dire need of cost savings.
Pay the long term unemployed to perform a public service – the father of modern economics John Maynard Keynes once famously said that during a recession the government should “pay people to dig holes and then fill them in again”. Now I’m not suggesting the government take this literally, but surely it makes more sense to pay long term unemployed people a wage to undertake work that benefits society rather than just pay them benefits. The Future Jobs Fund, introduced by Labour and immediately cut by the Coalition, is one example of such a scheme. In my former life working for community group Point Blank, we employed over 30 people through FJF and for some the results were life changing. Individuals who often lacked the confidence or skills to gain employment independently were given an opportunity to overcome these skill deficits in a supportive environment and demonstrate their value to potential future employers. Furthermore such a scheme would have significant additional benefits including improved health & well-being (resulting in lower costs to the NHS), reduction in crime and domestic violence (cost saving for the police) not to mention positive impact on the work of struggling community projects across the country. Note: this solution is not the same of the government’s current Work Programme which is tantamount to state subsidisation of large private businesses.
- Invest in public works programmes – a continuation of the above principal, by investing now in labour intensive public works programme e.g. building homes, building schools, improving transport infrastructure etc the government can create jobs and support domestic industry. The key word here is ‘invest’ – through the accelerator and multiplier effects investment now should result in economic gains, both immediately and into the future, which outweigh the resultant higher debt interest payments in the short term.
- National Insurance tax break for taking on new employees – at present we risk creating a ‘lost generation’ as a result of the scale of unemployment – and in particular unprecedented youth unemployment. There is an urgent need to help people into work before they become embroiled in a culture of worklessness through no fault of their own. A fixed period National Insurance break would make it easier for employers to take on new employees during uncertain times.
Invest in social enterprise – I believe social enterprise has the potential to be one of our economy’s most prized assets. The UK is leading the way with pioneering new models which combine community benefit with sustainable business models. The investment could be offset by the cost savings to public services resulting from the social added value delivered by the enterprises. The best of many fantastic examples of social enterprise I have encountered is Create which delivers an innovative work-based learning programme for homeless people across the north of England financed entirely by profits from its food businesses.
- Overhaul government procurement procedures – last year the government paid on average £3500 for each PC – ten times the commercial value. This is far from an isolated incident of obscene overspending. Furthermore services are being outsourced to large private companies to an astonishing degree without any regard for transparency or accountability. Serco, for example, deliver over £4bn worth of contracts across a wide range of sectors each year. As the country struggles to pay its bills the profits of companies like Serco soar and yet the Office for Civil Society have publicly admitted that SMEs and the Third Sector are precluded from bidding for the vast majority of public contracts. Overhauling the procurement procedures would not only save the country a considerable amount of money but would reduce our dangerous dependency on a small number of private companies and enable smaller companies and community groups the opportunity to deliver more public services.
Make irresponsible banking practice a criminal offence – in the same manner that irresponsible driving is a criminal offense as it may cause harm or death to others, surely the same should apply to irresponsible banking which has caused harm to an entire nation, and a considerable number of deaths through the poverty it has created. If a doctor or solicitor perform their job badly they may face prosecution so why do bankers appear to be exempt. If such a disincentive were in place then unscrupulous bankers would be more inclined to carry out their business legally, even if not entirely ethically.
- Continue with the proposed public sector cuts – you may think this is a surprise inclusion given my obviously left-leaning political stance however… in my experience of working with local authorities, and with many friends who have worked in the belly of the aforementioned beast, I believe that local authorities should be able to cut 20% from their budget without affecting frontline services whatsoever. A vast layer of bloated middle management only impede the delivery of the frontline services which have the potential to be unaffected by the cuts if implemented properly. Parkinson’s Law reveals how this situation arises. Beyond local government, yes, it will be difficult to cut without affecting frontline services but I do believe this is sadly a necessary pain we have little choice but to endure in order to bring the deficit back to manageable levels. As always however, equality and fairness is needed with regard to the manner in which they are implemented. Deprived areas such as Barnsley and Doncaster should not have their budgets cut more severely than the likes of Chelsea and Kensington for example (as has recently happened), nor should the public sector bear a greater burden that the private sector, or the poor be required to pay more than the rich.
Not all of these measures are simply about increasing Gross Domestic Product (GDP). Some of them focus more so on increasing social welfare, increasing the Genuine Progress Indicator (GPI) or Gross National Happiness (GNH), which values people more than money, well-being more than things. You’ll notice the title of this article is ’10 Steps to Improve the British Economy’ and not ‘Grow the British Economy’. I believe we could actually reduce GDP per capita in this country and yet actually improve social welfare. A cultural shift would be needed however. And, with such a bleak future being painted by politicians, economists and the media alike, perhaps cultural shift is inevitable. The only question may therefore be whether this shift will be a positive or negative one, whether we choose as a nation to value social welfare or simply economic prosperity…
For an alternative view on how an economy can operate check out the article Economics of Happiness: The New Economy.