The Coalition has been very slow to formulate a growth policy that doesn’t just rely on low interest rates and quantitative easing. It’s come very late to the idea of stimulating the economy to create wealth.
Cutting the size of the state is not enough for the economy to succeed. And quantitative easing is likely to lead to inflation and higher interest rates just when the economy starts to recover.
What we need is growth and not inflation. We need to build confidence in the economy. We must motivate private sector entrepreneurs and small business owners to grow their businesses.
Small businesses are the engine for growth
Small businesses employ about two thirds of the workforce in the UK. Their combined annual turnover is around £3,200 billion. These are the wealth creators whose taxed personal and corporate income gives the Treasury a majority of its funds.
Yet small businesses are held back by regulation and taxation. Running a small business means paying up to seven different taxes, including VAT, excise duty, corporation tax, income tax, rates, PAYE and national insurance. Taxes are simply too high and discourage private sector growth.
Is it any wonder that our productivity is falling? If the private sector is to drive recovery, we must focus on our 4.6 million smaller businesses as the engine for growth.
We can increase employment, save money on welfare and drive down the deficit if we work with these small businesses to develop an industrial policy that incentivises growth.