31 Oct 2012

Heseltine report criticises government growth strategy

The government’s strategy of tax cuts and deregulation needs to be reassessed, says a government-commissioned review by Lord Heseltine.

The former Conservative Party deputy prime minister, warned in his six-month study on the government’s economic policy that “continuing as we are is not an acceptable option.”

Lord Heseltine called for a “war psychology” to overcome the economic crisis and urged for an end to ministerial uncertainty on crucial issues such as energy and aviation because “the world will not stand still – and nor must we”.

The government asked for the sweeping economic review and despite the report’s cutting remarks into every aspect of Britain’s low growth, welcomed the report.

Good, well designed, regulation can stop the abuse of market power and improve the way markets work to the benefit of business employees and consumers. Lord Heseltine

“I wanted Lord Heseltine to do what he does best: challenge received wisdom and give us ideas on how to bring government and industry together,” said Chancellor George Osborne. “He has done exactly that. This is a report bursting with ideas and we will study it very carefully.”

Boost regions’ growth

The report challenges government policy on a vast range of specific issues such as immigration, ways to boost infrastructure spending and the lack of a decision on where to build a four runway airport around London.

It also claims that more money should be spent on boosting economic growth in the UK’s regions and that the government should allocate up to £250,000 of new public funding to local enterprise partnerships (LEPs) over the next few years.

In the 228-page report, entitled No Stone Unturned, Heseltine makes 89 recommendations, including the need to strengthen controls on foreign takeovers to block deals deemed unfavourable to Britain.

Mergers are formally assessed if the company being taken over has an annual turnover of £70m or more, or if the new entity would control 25 per cent or more of its market. If not an issue of national security, the assessment is largely seen through the interests of the consumer as opposed to the wider strategic needs of British industry.

He backed the government’s economic strategy, and said it was taking the right path to recovery.

‘An urgency’

But later, in an interview with the BBC’s Today programme, Lord Heseltine said there was “an urgency” about stimulating growth. “Across the world there are emerging economies that want our jobs and our wealth,” he said.

He wanted to “unleash the power of our big cities. London did not make the UK. London has acquired too much power. Cities like Manchester and Birmingham made the UK. We need to mobilise the skills of provincial England.

“I want to shove power out of Whitehall, into the provinces.”

Lord Heseltine admitted his ideas would go down like a “lead balloon” in parts of Whitehall because he was suggesting government departments should lose some of their power.

Asked whether his conclusions might be at odds with thinking in the Treasury, Lord Heseltine said: “I do not work for the Treasury, I work for George Osborne. And George has been behind this initiative.”

He added: “I have got baggage, they know my views. There are bound to be things where they say, ‘oh my god, here he goes again’. I have told it as I see it, but I have told it in a way that is very supportive of the government.”

John Cridland, CBI director-general, said: “His key point is that we need more local action and leadership, which must be right.
“To successfully rebalance the economy towards private sector growth, every part of Britain needs to grow – we mustn’t just rely on the usual suspects of London and the South East.”