The UK doesn’t make things anymore, and it has left the economy in a bleak place. Policymakers have tried to fill the void left by the demise of manufacturing with high immigration and a services-based economy, only to see productivity grind to a halt and a worklessness culture become entrenched in former working-class powerhouses.
Conservative MP Nick Timothy argues for a break with this failed economic model. He joined Brendan O’Neill on a recent episode of his podcast, The Brendan O’Neill Show, to discuss what needs to be done – and why Labour cannot be trusted to do it. What follows is an edited extract from their conversation. You can listen to the full thing here.
Brendan O’Neill: What do you think will happen to the economy under Labour?
Nick Timothy: I think the British economic model has run out of road. The problem comes down to something that is quite simple to observe, but very difficult to fix – namely, a country can’t keep on consuming and importing more than it produces and exports. We need to reindustrialise, we need to produce more of what we consume at home and we need to export more. And that involves a lot of change – not least to our crazy energy policies.
This is something affecting many Western countries. China is systematically destroying Western productive capacity. In the end, that will lead to impoverishment and weakness internationally. We need big ideas, and they’re certainly not coming from this government.
O’Neill: Is the Labour government constitutionally ill-equipped to revive the old, pro-growth mindset?
Timothy: Labour created 27 quangos in its first few months in office, then announced it was getting rid of one and expected a medal for it. This is who Labour is.
Now we have a chancellor writing letters to other government departments asking them for ideas on how to grow the economy. I don’t think anyone, in the history of humanity, has got an idea for growth from a regulator.
Then we’ve got the Home Office, which is doing nothing about the huge inflow of fiscally negative migrants into the country. Angela Rayner has introduced employment-rights legislation that would add at least five billion pounds a year to business costs, and Ed Miliband is deindustrialising the economy with his energy policies.
Labour’s rhetoric has moved to growth, making the state leaner and getting rid of red tape. But if you look at what they’re doing, that’s not the case at all.
O’Neill: According to Labour, the UK is just a small country on the edge of Europe. This kind of talk must have a palpable impact on growth, surely?
Timothy: I think it does. And I think it’s connected to other worrying mindsets. You hear it said among thinkers and economists that the UK has reached a later stage of capitalism, and that manufacturing is mainly for developing economies. If that were true, you would think we would be richer than countries with a bigger industrial base, like the US, Germany or Switzerland. But that’s not the case.
It’s obvious that the productive capacity of a country is strongly connected to its prosperity. We’ve tested to destruction the idea that you can have an economy that’s based on advanced business and financial services, then redistribute the proceeds a little bit around the country.
O’Neill: We’ve seen an enormous growth in things like incapacity payments in recent years. What do you think accounts for that?
Timothy: It’s always a temptation for the state to park people on some kind of incapacity benefit, because they don’t count towards unemployment statistics and will be the most difficult to get back into work.
If you have a services-dominated economy, you end up with a barbell-shaped labour market. There are a reasonable number of very well-paid jobs at one end and a reasonable number of low-skill, low-pay and often low-dignity jobs at the other end. There isn’t very much in the middle. Lot’s of people don’t fit into that and are excluded from work.
O’Neill: What role do you think immigration plays in this discussion? Have we become too reliant on cheap labour?
Timothy: The economy has become used to easy-access, low-pay foreign workers. It’s killed incentives for businesses to train and retrain British workers, and for businesses to invest in labour-saving technologies. It’s no surprise that productivity is so poor – productivity requires investment, which has been avoided by cheap labour.
I think we can reduce immigration drastically with visa changes and strict caps. But we have to reform other parts of the state to make sure that, when immigration is reduced, we can absorb the effect.
Education post-18 needs to be overhauled. It’s not acceptable for universities to survive just selling immigration, not education. We need to train far more of our own people, not just at 18, but also later in life. We definitely need to reform welfare.
And we need to be clear to businesses that they’re not going to have this option anymore. They must work with the state to get the skills and training they need, if they want the kind of workforce they think is needed to compete internationally.
Nick Timothy was talking to Brendan O’Neill on The Brendan O’Neill Show. Listen to the full conversation here:
