The Grey Chancellor’s Ten Commandments

Since entering Number 11 Downing Street, Jeremy Hunt has managed to be as dull as his political pinup, Sir Geoffrey Howe. The markets have responded positively to this assault of grey, especially when compared to Trussonomics.

There’s a problem, though. Kwasi Kwarteng’s blueprint was one of revolution and change which got the market moving; unfortunately that movement was rapidly toward the exit. Hunt has done the opposite. The steady day-to-day management was aimed to inspire confidence from international markets. The UK is now stable but very drowsy. If this carries on, we could become an aspiring Nordic economy; nothing wrong with that, some might argue, but it’s not very dynamic.

So Hunt the Grey went to Bloomberg’s London HQ to deliver a speech about his plan for the UK.

First, he told us that the UK wasn’t in as bad a position as “they” say it is. By they, he meant people like his hosts, Bloomberg, who four days ago ran the headline UK Recession Risks Grow With Record Deficit and Output Slump. Bloody experts. He then went on to say that it was actually pretty bad, so the UK tax burden had to remain for the foreseeable future at the highest point since the early 1950s.

We then got to the vision bit. And first off, well done Mr. Hunt for having a vision. Austerity, Brexit, Covid, Ukraine have all contributed to the most extraordinary squeeze on living standards and a lost decade of growth. During that decade we haven’t really had a joined-up growth agenda from government, apart from Truss and Kwarteng’s attempt — a ‘Spinal Tap approach’ to running the British economy by turning everything up to 11. It ended in humiliation.

What Hunt delivered was eminently sensible. That’s because Hunt is eminently sensible. His “4 Es” — enterprise, education, employment and everywhere — were the stuff of centre-ground sensibleness. The IoD added a fifth E for empty: where’s the plan for these 4 Es they asked?  Sensibly, Hunt has said it’s coming, with the Budget in mid-March. The problem is these sorts of sensible long-term plans take a minimum of 10 years, if not more, to work out. Even then, it’s hard to really figure out whether it worked or not.

Four Es are not enough. The reality is Hunt needs something right now, as the British economy is constipated. Nothing’s moving — other than the pain of public sector strikes.

So here are six more short term E’s which, together with Hunt’s four, will get the economy moving — the economic equivalent of a healthy dose of prune juice.

My first E is Exporting. You can’t really, genuinely grow an economy without exporting to other markets. It’s the economic first principle which has been around since Adam Smith.

My second E is the Elephant in the Room or Europe. Pretty much every economist worth their salt states that Brexit has had a negative impact on the UK economy. If the UK needs to get exporting, it needs to sort out the blockage with Europe. Brexit, as it stands, isn’t working and has to be softer if there is to be any dynamism in the economy.

Third, economic value chains. The levelling up agenda (or as Hunt puts it Everywhere) is just pork barrelling; using government funds to create projects which will win votes. It’s wrong. What Hunt needs to do is use the tax system to level up between the main stakeholders in the economic ecosystem – owners, consumers, employees, suppliers, financial institutions and shareholders. Quantitative easing has been used for the last 10 years to pump money into the nation’s financial system by encouraging banks to lend or invest more freely. This has worked well for shareholders and financial institutions at the top of the structure, but not so well for the rest of the ecosystem. It needs balancing up.

So my fourth E is Entrepreneurs, not enterprise. Before the pandemic the UK economy was powered by more small, micro and soul trader companies than any other developed country. Since the pandemic the number of small companies in this country has rocketed. The World Economic Forum puts the UK growth in small businesses at plus 101 per cent in the first year since the pandemic. The nearest competitor to the UK is the US, at plus 86 per cent. The nearest competitor in Europe is Germany, with plus 62 per cent.

These aren’t just wannabe tech billionaires as the Chancellor would have you believe, but window cleaners, plumbers, cabbies and publicans. There’s a dirty underbelly as, in part, this is driven by the gig economy, but it’s much more to do with the British sense of entrepreneurial risk-taking – immortalised by Arthur Daley and Del Boy. If the Government shoved as much money at these people as they do at the big banks, the results would be better — and enjoyed across the country.

My fifth E is for Employees, and specifically public sector ones. Give them an income tax holiday. Not all of them, just the front line ones – nurses, ambulance drivers, and teachers earning under £30k. It would put money directly back into the economy: these people will spend the money, not offshore it into flash saving schemes. It would completely wrong-foot the unions, Labour won’t know what to say and nor would the Right of the Tory party. I haven’t costed it out, but it would probably be self-funding, as it would save the money lost to strikes.

Surprising packages come in grey bundles. As Denis Healey famously noted, an attack from Geoffrey Howe was like “being savaged by a dead sheep”. That dead sheep suddenly morphed into a roaring lion when he fatally mauled Margaret Thatcher in his 1990 resignation speech. Could Hunt change into a roaring lion? The answer is almost definitely “no”, but thank God the Grey Chancellor is actually thinking aloud about the future. He has an opportunity now to set the economy on the right track, regardless of the next election — the tenth “E”. For fear of that tenth E, which will almost certainly end in disaster for the Conservatives, shouldn’t stop Hunt pursuing the other nine.

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