Home > Commentary, Findings, Uncategorized > Plan C – Slicing the new Gordian knot? Leave Europe behind and build HS3 instead….

Plan C – Slicing the new Gordian knot? Leave Europe behind and build HS3 instead….

When Alexander the Great attempted to untie the unfathomable Gordian knot way back in 333BC, he found a simple yet radical solution by slicing it in half with his sword. Maybe the time is now right for simple radical solutions to our never ending and unfathomable economic crisis? The so called Plan C maybe?

What these radical solutions might be was the subject of the last Forum meeting, held prior to the Chancellor’s recent 2011 Autumn Statement.

Without it sounding like ‘we told you so’, it proved very difficult to actually suggest much that hadn’t been suggested by the Forum over the last three years.

Back in February 2009 we were clearly concerned that we were heading for a decade of austerity and that bold visionary political leadership would be needed to save us from the so called ‘zombie’ economy. Inflation, the Euro crisis, the necessary public sector cuts and rising unemployment would be key drains on economic growth but that there were other opportunities for growth from investing in the infrastructure, manufacturing, localisation and ‘green’ technologies – provided that essential investment financing and employment reforms were undertaken.

So why ‘Plan C’ and not a development of ‘Plan A or B’?

In the Forum’s opinion a combination of both Plan A, the so called coalition’s austerity plan was needed as was Plan B, the opposition’s spend more and pay later plan. Unfortunately at the moment the current versions weren’t delivering the right results because they weren’t sufficiently radical, far sighted or well implemented.

We had warned previously that the austerity cuts weren’t extreme enough or properly targeted and the recent example of solar panel subsidies ending prematurely is a classic own goal example, as is maybe the NHS structural reform at this time. Back in Nov 2008 we had warned about the public sector pension and employment conditions reforms needed and had always forecast 500,000 public sector job losses were likely. The coalition’s early cutbacks here weren’t as dramatic as required and are now having to be increased. In the meantime there has been left an impression of a lot of talented, experienced people leaving voluntarily with expensive pay-offs, no effective radical reformation in service delivery taking place, and only cutbacks and relentless wasteful restructuring happening. The recent example of public sector workers striking to protect pensions irritates many in the private sector where they are struggling to ensure they have a job as their first priority and is maybe an excellent example of how the ‘cuts’ haven’t been well implemented managerially.

The spending planned hasn’t been focussed strongly enough both on infrastructure or the right ‘green’ technologies and as a consequence growth here was limited. The only headline investment was HS2 which we thought was a liability and not a benefit to the North. In a similar vein we had stressed the importance of feeding essential finance through to the small and medium sized businesses that needed it – this hadn’t happened either as the banks were just hoarding reserves instead and benefitting from the state aid granted to them.

So what essential ingredients did we think should constitute Plan C – the Gordian Knot solution, other than simply saying we want more of a focussed aggressive Plan A to pay for more of a focussed inspirational Plan B?

First of all create the right entrepreneurial infrastructure. Here the radical solution is to leave the European Union and join EFTA. We see the UK as having the potential to once more develop the culture of enterprise and aspiration through work, savings and study as opposed to welfare, crime and lack of personal responsibility. Leaving Europe would grant us the legal freedoms to implement the appropriate employment, human rights, financial and state aid reforms required and move on plus remove us from the bickering and paralysis that will ensue as it inevitably moves towards fiscal and political union. We are sure that China would see the UK then as key investment and manufacturing partner for exporting into Europe then too.

We also considered that the need to leave Europe in the future may be driven more by immigration issues and the likely need to stop and reverse the influx of migrant/welfare/health seekers. Alongside this we suggested that to overcome the displacement of local workers, benefits should be strictly limited and based on a social workfare scheme where people work for their benefit and if necessary benefit payments could be made to a new employer for a period of time to assist them into some form of work.  Immigration is still desirable in certain sectors but there should be a financial penalty attached in that tax and NI should be paid on all earnings hence making immigrants more expensive to employ, thereby forcing us to address the issue of attitude and skill retraining for the indigenous workforce.

Secondly there is a need to simplify taxation, provide a fair pension for everyone, limit executive excesses and finance businesses directly.  Why not scrap VAT and corporation tax and have a simple small non-refundable sales tax on all UK transactions with no exemptions?  That way banks and other corporates could not hide behind off shore accounts and paper losses to avoid paying tax. Local authorities could maybe apply local sales taxes as required to supplement Council taxes and business rates. A national pension scheme could be set up into which all employees can pay and employers can match. Tax relief would be granted up to a pension pot equivalent to the national average wage after which only the employee can pay in from taxed income. That way everyone can change jobs with no loss of benefits and everyone is equal whether public or private sector. Executive pay could be constrained by introducing the concept of ‘partnership liability’ for anyone earning a multiple above say 15times the company average – that way they potentially pay for their mistakes too! Finally we have said many times we would like to see a new business banking structure, directly funded by government, and based on credit union type principles with operating costs limited to a tapered percentage of turnover to limit excess profiteering.

Thirdly we need to stimulate growth as we have said through infrastructure spending. We need to build more social housing in particular but also invest in understanding how to exploit shale gas safely and responsible, open coal mines and re-develop clean coal technologies, research and develop Thorium nuclear fuel reactors, build tidal power plants and incentivise home owners to use solar power etc amongst many others. We could be world leaders again if we had the vision and ambition to.

The regions outside London desperately need stimulating. HS2 we did not believe would deliver benefits. We still believe in developing Doncaster as Heathrow’s third runway in order to bring tourism, freight and business directly to the Northern regions. Why not start a new HS3 concept here linking Scotland, the North East, Yorkshire, Humberside and the East Midlands directly to London and the Channel Tunnel but more importantly straight through to Essex and a new Thames Estuary airport?

Finally let’s move the Bank of England to Leeds and redistribute wealth that way…….

The full mind map of findings is available for download here.

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