As the dance towards a new Conservative leader moves ever so slowly, Bill Jamieson finds reasons to be cheerful
There’s slow. There’s dead slow. And there’s slow that defies all sense. After the most monumental decision taken by voters for a generation, we are waiting – and waiting – for a Prime Minister to emerge and give leadership. It is almost beyond comprehension that as uncertainty piles up in the wake of the Brexit vote, action has to await the outcome of a Conservative leadership election that is scheduled to drag on… until September.
Has Westminster travelled back in time to some grand Georgian ballroom as dancers perform an elaborate, slow-motion quadrille? In this courtly display the skill appears to be moving as slowly as possible and not leaving the floor until the very end. And, as is the case now, those sitting it out have to remain stock still – though helped these days, perhaps, with a good book, a long drink and an alarm clock.
We should always be wary of rushing our choice of leaders. This is especially so in times of turbulence. But the Tory leadership process was drawn up without regard to the length it would take in holiday months, and in times that could not have envisaged the extraordinary position the country is now in.
The pound continues to weaken on the foreign exchanges, hitting a new 31-year low today. Households and businesses alike are clamouring for guidance and clarity from the country’s leaders as to the road ahead. Decisions on business expansion and investment are held in limbo. The result is that the very recession everyone is anxious to avoid looks ever more likely with every day.
Quite why this election should proceed at such a funereal pace, oblivious to time and unruffled by anything so vulgar as “events”, seems truly extraordinary. It looks even more so considering that Theresa May, the front runner, has 165 votes, well ahead of her nearest rival Andrea Leadsom with 66, and with two initial contenders leaving the contest and subsequently pledging their support to Mrs May.
An early membership vote could surely have been put in place and a result determined well before September. Instead, we have to wait, it seems, until the party’s constituency veterans return from their leisurely summer holiday cruises to the Seychelles. It may be argued that nothing can be done until the new leader – and Prime Minister – is in situ, has chosen the Cabinet and had time to digest appropriately detailed advice from departmental heads and experts.
Now while all this is deeply frustrating, we should bear in mind that this is, for the moment, a political crisis. It is not – or not yet – a financial crisis or an economic crisis – though it could quickly morph into these. As matters stand, the intense hand-wringing and lurid warnings of economic damage that are amplified and echoed in this leadership vacuum could well become self-fulfilling.
We need not await the slow motion Tory leadership quadrille to unwind before taking steps that would help steady the nerves of businesses and households alike.
Thankfully, Bank of England Governor Mark Carney has indicated that he will ease special capital requirements for banks, freeing up a potential £150 million for lending. He also hinted that interest rates might be cut this summer. Business will certainly feel that the combination of looser monetary policy and the lifting of constraints on UK spending and borrowing should help to counter a sharp downturn in investment and calm consumer nerves about a rise in borrowing costs.
The latest pronouncements from George Osborne is that the budget deficit reduction targets have been scrapped, the UK government will now be borrowing to invest, and Corporation Tax may be cut – the very opposite of what he threatened in a post Brexit punishment budget. .
Sterling’s 14 per cent fall against the dollar also opens up opportunities for exporters and should also help Scottish Development International in attracting overseas direct investment.
Here in Scotland, the SNP government has announced plans to launch an EU business advice hub, as called for by the Federation of Small Businesses in Scotland. Said Andy Willox, FSB’s Scottish policy convenor: “By filling the information gap, Scottish ministers can help to boost confidence. Further, by establishing a listening post, the government can spot both problems and opportunities.”
The administration might also wish to take heed of the main recommendation of a Scottish Enterprise assessment of the Brexit consequences for manufacturing released last week. “Overwhelmingly negative” was SE’s bleak summation. It barely considered the potential gains arising from freeing up the SME from EU regulation, the boost to Scottish tourism and the spur to exports from the sterling devaluation. Many of Scotland’s biggest companies export worldwide and stand to be beneficiaries.
The lamentably negative SE document notwithstanding, it recommends the administration looks at EU-funded programmes it would wish to see continued as a potential EEA/EFTA member state. That is a constructive point amid the gloom. Another recommendation – that the Scottish government sets up a Manufacturing Strategic Policy Unit – is drearily déjà vu and would risk being overtaken by events.
There is also much on the positive side that the Scottish Government should be doing rather than high-fiving photo opportunities in Brussels. Ensuring that SE itself and Business Gateway organisations run by local authorities are working as effectively as they should would be a start. And given Osborne’s new aspiration to reduce Corporation Tax yet further, let’s bear in mind that for the first time firms now fork out more in business rates than they do in Corporation Tax in the UK. Scottish Retail Consortium figures show that for every £1 retailers pay in Corporation Tax they stump up £2.31 in business rates.
A cut in the business rate burden? What a positive step that would be.
And there is much that Westminster could say and do rather than waiting until September. All EU grants already awarded to UK firms and regions till 2020 should, as Business Secretary Sajid Javid has signalled, be guaranteed. New plant and machinery should be exempted from business rates and the investment allowance raised back up to £500,000.
And we should remember, too, that it is the activity of the risk-taker entrepreneur – in the public as much as in the private sector – that will play a major role, as has historically been the case, in lifting us out of this impasse. This was true in the downturns of 1980-81, 1991-92, 2002-03, and 2009-12. These are striking catalysts for change. Perspectives change. Doors open. Opportunities arise. It is a phenomenon that is almost always overlooked by a mechanistic approach to economic forecasting that makes no allowance for human response, and that projects a timeless adversity and linear regression without end. We need a positive focus while the Tory quadrille languidly pirouettes through this anxious, apprehensive summer.