It is unrealistic
to support life expired industries for ever. In the
same way that the industrial revolution transformed Britain in the
19th Century, our future economic development means it is unrealistic
to expect manufacturing not to be transformed again. Recognising
this, we should encourage a planned transfer of some industries
to other countries, as part of our approach to tackling global poverty.
This does not mean that manufacturing has no future in Britain.
We need to create local business districts to allow new specialist
industries to develop in local areas. Groups of small start ups
need to be developed out of which new products and industries can
emerge. Service sector development can operate in parallel supporting
these development zones.
Much of the industrial policy in Britain, encouraged by Regional
Development Agencies, has been to encourage inward investment from
multinational firms. This tends to only be a short term solution
but should only be a part of a regional economic policy. For instance,
if a car plant closes then inward investment from a similar industry
prevents local stagnation. However, relying mostly on inward investment
in impoverished areas to improve them makes these areas more vulnerable
to short term problems in the global economy. It has little long
term impact on areas suffering from economic decline.
The 5 economic tests
reflect the short term risks in joining the Euro. The further the
UK is out of line of convergence when it joins the higher the economic
cost for the following few years. In the long run however the Euro
is a political rather than an economic decision.
There needs to be
a shift in policies from unemployment to employment. This will start
to address some of the issues that are known as "work - life
balance". Services need to focus on more than the unemployed.
Career and training support should be offered to those who are vulnerable
to unemployment, for instance workers in industries that are likely
to suffer from Globalisation. If we recognise that we cannot prevent
change then planning for it can protect both individuals and the
economy from the adverse effects.
Local economic decisions
should have local democratic control. Regional Development Agencies
should be accountable to regional assemblies. It is important that
decisions about on economic development take into account local
needs, including the environmental impacts. However, central government
should allocate resources to RDAs based on a national industrial
policy, with funding ring-fenced to ensure our objectives are met.
The current income
tax and benefits system works fairly well. We must however be aware
of the social impact of indirect taxation. We should continue to
resist increase in the rate or scope of VAT as this is socially
regressive. Of more immediate concern is the increases in council
tax and the taxation element in utility bills that hit the poor
disproportionately. Local income tax would be one solution to this
but is unworkable as it would be easy to avoid and would not have
popular support. Our preferred solution would be to shift council
tax to be based on property ownership rather than property residence.
We also would like
consideration to be given to the idea that local authorities could
choose to replace business rates with direct payment by companies
for local services. Utility regulators should be given a duty of
care so that competition and pricing regimes take into account the
objective of reducing poverty. The poor should not have to pay more
due to either low or high volume of usage. Examples of this are
electricity prepayment meters and the water meter optant tariff
There is a balance
to be made between ensuring that the increased investment we want
to make in public services goes to the areas that need it most without
centralising control over public services. Therefore we recommend
that comparative value for money comparisons be used. For instance
for health this would allow the inclusion of average earnings and
age profile of the local population to be taken into account better
in allocation decisions. Local control over services should be allowed
with minimum standards and an overall ranking of performance. This
is preferred to using a multitude of targets that ignore the environment
faced by the public service. This would also allow a neutral choice
to be made between public and private financing.
Access to basic
financial services should be available to all those who receive
state support. Bank accounts associated with these should be automatically
tax free. Other tax free savings vehicles such as ISAs should have
a limited shelf life as they tend to only benefit the well off.
Instead they should be used as an economic tool for stabalising
growth, abolished during times when growth is slowing and then reintroduced
when there is a risk of excessive growth.
Workplace standards should be protected by employment laws raised
to the level of best practice in Europe.
Reform of the Common
Agricultural Policy is the most important step in tackling Global
Poverty. Promoting international agreements on trade and the environment
are required and Britain should show leadership in this area.