Go For Growth

As a country, our GDP per capita has been virtually static for a number of years now. Overall, GDP has increased slowly – thanks to the immigration-lead population growth, rather than an improvement in productivity.

We hear the cry from politicians of all colours that we need to “grow the economy”, which is the most awful mangled expression. This is then followed by a list of things that need to be done to bring growth about, incorporating buzzwords such as ‘investment’, ‘productivity’, ‘getting the sick back to work’ etc. However, what is it that actually drives long-term sustainable growth and why does it remain so elusive?

We know from experience that politicians are vain. They like being pictured next to big flashy new projects, and tend not to have much in the way of long-term thinking. Neither are they particularly good at understanding what drives their fellow man and woman. They love talking about investment, but sometimes seem rather vague as to what a return on investment is.   They find it very hard to understand that for the public sector to exist and provide all the services we want and require, we need to have a productive sector that can pay a proportion of its profits to fund it. In other words, the public sector lives off the taxes raised on the back off the private sector. Any taxes raised via public services or the people working in them is simply the Treasury recycling a part of the money it has already spent. Another common failure among politicians is to understand the implications of regulation. They love to fiddle and interfere in their continual desire for a tidy world, and forever attempt to legislate to address all sorts of perceived wrongs in society. As a consequence, there is an enormous volume of legislation relating to how businesses are run and work with their employees.

One can easily measure the amount of tax paid, but the cost of regulation can be substantial. It acts as a restriction in how enterprises operate plus the cost of compliance, to sometimes pretty obscure and very specific legislation, that might appear to be great in theory when viewed in Whitehall, but is too rigid for most circumstances. All of this imposes a massive load on business both directly and indirectly, leading to risk aversion – and without risk taking there is little growth. Think of a car and trailer going up a hill, the hill being the effort required to service one’s market. When the trailer is empty the car will purr along quite happily. Growth is measured by how far up the endless hill the car gets, and speed of growth is measured by the speed at which the car climbs the hill. However, as you add load to the trailer in the form of taxes and regulation the car has to work harder and harder to drive up the hill. At some point the load becomes so great that the car stalls and the business goes bust, after which it will pay no more taxes nor provide employment. To maximise tax revenue and benefit to society as a whole, the load has to be kept to a minimum.

We recently had an unannounced visit from a lady from the Health and Safety Executive, which tied two of my colleagues up for over half a day whilst she went round telling them all the dreadful things we were doing wrong. We have not had any accidents other than the odd cut or bruise for many years and we hold the ISO Health and Safety Standard ISO45001, which is assessed every year so we do take the Health and Safety of our employees very seriously. That did not count with her and she ‘graciously’ said that she would not shut us down, but that we needed to make a considerable number of changes to the way we did things. For those who have never experienced this sort of thing, it is like a stranger coming into your house and telling you that you clearly can’t feed yourself because the food in your fridge is so awful, your house is dirty and you are clearly not competent to boil an egg. We are an engineering company, employing quite a number of people either trained engineers or with a considerable amount of mechanical experience.   We had a system for maintaining and testing our cranes and extraction systems that was fully approved by our insurance company, but apparently according to her we were not competent to do the work and had to employ a third party to do this on an annual basis. She even told us that we weren’t competent to change the grinding wheel on the bench grinders. It was on my lips to question her competence to judge, but decided that the desire to see the back of her overruled getting involved in an argument. She also told us that we had to put up signs on the outside of the building saying the roof is fragile, which it is not if you walk where you are meant to walk. When asked why she said that, it was in case vandals got on to the roof – which is 18 feet above the ground – and they might fall through one of the rooflights.

Three weeks later we received a letter listing all the things we had to do to comply, which interestingly was rather shorter than alluded to at the time of the visit. Even the signs required for the roof had been changed, requiring a warning to warn those working on the roof. We don’t work on our roof, so here was a petty official throwing her weight (considerable) around and wasting time into the bargain. For the privilege of her unannounced company and follow up letter, we were charged nearly £1,200 by the HSE and a further £175 for her to evaluate the letter and photographs sent demonstrating that we had done what she told us. This involved hiring a number of consultants, as we were told that we weren’t competent to do the required things, at a cost of nearly £12,000; an expense we could do without.

At least none of the consultants could fault anything we had been doing; all our equipment was deemed to be perfectly safe, and the way we were operating was also deemed to be in order. We are now going to be saddled with a cost of a few thousand pounds every year for the same consultants to come round and do all the checks that we have been doing ourselves, with the approval of our insurance company, for years. All of this ultimately has to be paid for by our customers, and simply adds to the cost of doing business and the load in our trailer. This was all the result of a single visit from one person representing a public body, for which she is investigator, judge, jury and executioner. The law is blunt; enacted by individuals who having been invested by Parliament to enforce it, are given power over their compatriots that is open to interpretation, and does not encourage any form of perspective or nuance. It encourages ‘persecution’ of the easy, and normally, good employers because they won’t push back, whilst the baddies are too hot to handle and therefore best avoided.

We have a government whose declared intent is to maximise economic growth, but whose policies include a large volume of new employment legislation that will tie employers’ hands even more. One of the plans is to give full rights from Day 1 which might sound fair, but makes it considerably more difficult to part company from a new employee if he or she is not a good fit for the business. How sad that Ms Rayner and her colleagues have completely failed to learn the lessons of the 1980’s, and instead view employers as exploitative rather than as one half of a contract between two parties who should both be perfectly capable of looking after themselves without legal micro-management from above.

I suspect that instead of growth a combination of recent tax rises on employers and impending extra regulation will tip the UK into recession, as business finds ways to avoid both in whatever way possible. This is entirely avoidable, and could be very different with better and more grown-up political leadership.

(Photograph: © UK Parliament / Maria Unger, CC BY 3.0 <https://creativecommons.org/licenses/by/3.0>, via Wikimedia Commons)

Alastair MacMillan runs White House Products Ltd, a manufacturer, distributor and exporter of hydraulic components to over 100 countries. He is a supporter of the Jobs Foundation.

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