This is how we reboot Britain's decimated economy

Telegraph

5 days ago

It was meant to be turning Britain into the fastest-growing economy in the G7. It was meant to be shaking up planning laws, picking the fast-growing new industries to prioritise for investment and unlocking a wave of inward investment by restoring 'stability' and 'grown-up' government.
Labour made plenty of bold promises during the election campaign last year. And yet, as this week's shocking employment data made painfully clear, the British economy is stagnating. Even worse, gilt yields are far too high, with the markets increasingly deeming HM Government's to be a risky credit.
The two main parties of the Right, the Conservatives and Reform, must urgently start devising a compelling free-market, pro-growth alternative, an adulterated version of the sorts of much-needed changes pushed through in Argentina by Javier Milei.
Whatever its other faults, and there were plenty of them, over the past 20 years the British economy was at least very good at generating lots of jobs. They were not necessarily very skilled, or productive, but they were plentiful. This is not the case anymore.
On Wednesday, the Office for National Statistics published the latest employment data. It made for depressing reading. Another 40,000 people dropped off the payrolls in June, the fourth month in a row that the number of employees has fallen. Over the past year, almost 200,000 net salaried roles have vanished, the most significant decline since the Covid pandemic.
The vacancy data is even more worrying, with the number of openings falling for 36 consecutive months. The welfare rolls are the only metric that is booming. The public sector is still expanding as if money would keep flowing forever. But the private sector has stopped hiring.
The reason is simple: GDP is barely going up, and yet the cost of employing workers is rising. The minimum wage has been pushed too high for many companies and the Chancellor made a catastrophic error of judgment when she increased employers' National Insurance contributions and lowered the threshold at which these have to be paid. NI is a tax on jobs; it is no great surprise that we now have fewer of them. It is only going to get worse over the next few months.
It takes time for the companies to slim down their workforce, as most of them prefer 'natural wastage' to risking the hassle and expense of an employment tribunal by laying people off. As people leave they won't be replaced. And the Deputy Prime Minister Angela Rayner's draconian extension of employment rights will further undermine the economy. Why risk hiring someone if you can't get rid of them?
Without new jobs, the economy can't grow; while it will be impossible to shift people off welfare benefits, the tax base will shrink; and the burden on the Treasury will grow ever larger. Britain will be tapped in a doom loop where taxes crush employment, leading to lower revenues, which in turn means taxes have to be pushed even higher, starting the whole dismal cycle all over again. There is only one way to fix the malaise. The Conservatives and Reform have to make the case for a free-market revolution.
It is not exactly hard. The time has come to stop pushing up the 'living wage' by more than the rate of inflation every year. We need to deregulate the labour market, repealing Rayner's idiotic reforms and also blocking the madness of judges effectively setting wage rates by using equalities legislation. It is better to be hired and fired than to never be hired at all. We need to rein in the public sector to reduce the deficit and allow room for supply-side tax cuts. We need a radical programme of liberalisation to fire up the animal spirits of entrepreneurship once again. Net zero should be scrapped. The lower capital gains rate for entrepreneurs should be restored in full, and the lifetime limit put back to £10m. We need a better monetary policy that actually targets price stability.
Planning laws should be genuinely liberalised so that firms can start building. Ridiculous laws left over from the European Union, such as the GDPR rules (perhaps the worst piece of internet legislation ever devised), should be repealed to allow start-ups to flourish. 'Opportunity Zones' based on the successful experiment from president Trump's first term should be launched, with lower taxes and lighter regulation, to reboot run-down urban areas.
Each one of these policies would help fix some of the damage from Labour's disastrous first year. Taken together, they would get the economy moving again, laying the foundations for the long project of restoring the nation's prosperity.
The campaign needs to start now. For too long, the British political establishment has complacently assumed the economy could withstand whatever taxes and regulations were thrown at it. We learnt this week that is no longer true. Like much of the rest of the country, it is now broken.