Starts at: September 30, 2013 15:30
Ends at: September 30, 2013 17:00
Reform private roundtable policy seminar at the Conservative Party Conference with...(continued)
Starts at: September 16, 2013 18:30
Ends at: September 16, 2013 20:15
Reform private policy dinner at the Liberal Democrat Party Conference with Rt Hon...(continued)
Starts at: October 01, 2013 16:00
Ends at: October 01, 2013 17:00
Reform roundtable policy seminar at the Conservative Party Conference with Rt Hon...(continued)
Starts at: October 08, 2012 18:00
Ends at: October 08, 2012 19:00
Reform Fringe, Mark Hoban MP, Minister for Employment, Department for Work and Pensions;...(continued)
Starts at: October 16, 2012 19:00
Ends at: October 16, 2012 21:30
Policy discussion, Jeremy Browne MP, Minister of State, Home Office.
Tuesday 16 October...(continued)
Reform roundtable seminar introduced by Nadhim Zahawi MP, Member of Parliament, Stratford-on-Avon, and Co-Founder and former CEO, YouGov, on Wednesday 22 February.
By Lauren Thorpe
Business must drive the economic recovery of the UK. Exactly how to “make Britain the best place in the world to start and grow a business” was the subject of a roundtable breakfast Reform held with Nadhim Zahawi MP, Member of Parliament for Stratford-on-Avon, earlier this week. This event was held under the Chatham House Rule.
The key message that emerged from the discussion was that growth is a long term game. There is no silver bullet and a stable economic recovery cannot be achieved in one Parliament. The Government’s approach should include increasing access to finance, improving education and skills, supporting infrastructure and creating a flexible labour market.
Rather than always looking for the next new thing the Government must focus on delivering on policies already announced. Businesses need more certainty. Uncertainty means many businesses are reluctant to hire or make investment decisions. Others are struggling to find sources of finance or fail to appreciate the role that debt and equity can play in growing their business.
The anti-capitalism rhetoric that is damaging business sentiment must end. The debate over rewards for failure and poorly matched incentives is dominating the public debate, yet it is necessary to recognise that at times rewards for success perform a significant function in our economy. Meanwhile, banks are stuck between a rock and a hard place: they are criticised for not lending enough to small and medium sized business, while at the same time new banking legislation over capital requirements constricts the amount that they can lend.
The Government has recognised that the burden of employment regulation needs to be reduced. Yet progress needs to be made more quickly. Businesses are reluctant to hire due to employment laws which burden them with a workforce which they may not be able to scale back if trading conditions worsen. Ideas from the “Beecroft Review” should be looked at again, and lessons can also be learned from abroad. The flexibility of the labour market in the United States is one factor contributing to the turnaround in that economy’s performance. Another issue for businesses is the struggle to find the talent that they need given restrictions over visas and skills shortages, particularly in STEM (Science, Technology, Engineering and Mathematics) subjects.
Domestic businesses need to think beyond UK markets, and it needs to be easier for businesses and individuals to make inward investment to the UK. We must encourage businesses to increase their export potential across the world. UKTI has an important role to play in this and, while there are positive signs about how they are approaching their role, too many small businesses do not know how to access the support they can provide.
Businesses face many challenges and need to think creatively in order to survive in these tough times. But the same is true of Government. Policy makers need to approach the challenges of lifting the long run growth rate in a flexible way and to listen to and work more closely with business.
Reform roundtable seminar introduced by Dr Adam Posen, member of the Bank of England’s Monetary Policy Committee, on Thursday 29 March.
By Lauren Thorpe
Long-time students of central banks are often surprised at the degree of interest, and strength of feeling, that this topic currently generates. But this should be no surprise. Since the Bank of England started its Quantitative Easing (QE) programme in March 2009, it has pumped £325 billion into the UK economy. Any intervention on this scale will have major economic effects.
To provide an insight into thinking on QE and its likely economic effects, Reform held a round table seminar on Thursday 30 March with Dr Adam Posen, member of the Bank of England’s Monetary Policy Committee. This event was held under the Chatham House Rule. Some of the key points raised included:
- 1. Impact on pensions of QE. The National Association of Pension Funds (NAPF) recently published an estimate that the latest £50 billion asset purchase added £45 billion to the deficit of UK companies’ final salary pension schemes. The challenge is to assess whether any gain to the economy from QE exceeds these losses to pensions (there are no easy answers to this). To understand the full implications of QE it is also important to consider the counter-factual. What would the UK economy (and thus pensions) look like if QE had not have taken place?
- 2. Regulatory impact on pensions. There was concern that the effects of QE on pensions may have been increased by a lack of response from the regulator. Pension schemes report receiving inconsistent messages from the authorities, with pressure to transfer their investments into riskier assets while at the same time being encouraged to de-risk. Finding the right approach to regulation will become more important when the Bank of England needs to unwind its position and return gilts to the market.
- 3. Role of bank lending. An asset purchase programme should increase the amount of money in the economy and encourage bank lending. Yet there is a concern that banks have used much of the money to shore up their own balance sheets, rather than injecting cash into the real economy. This highlights two issues. First, is credit allocation by UK banks good enough? One view is that institutions in the US do a better job of this than our capital markets, given the larger reliance on bank lending in the UK and lower levels of competition in the sector. Second, QE should cause an increase in asset prices by allowing corporates to raise debt more cheaply, in turn generating wealth creation as consumption increases. While this has happened, evidence suggests that the impact is much smaller in the UK than in the US.
- 4. Circumventing the banking system. It has been suggested that the Bank of England could issue money closer to the market, by-passing the banks. In the US this can happen more readily given the existence of government backed organisations such as Fannie Mae and Freddie Mac. Yet there are two challenges to going in this direction. The first is scale – to match the tranches of QE already completed the Bank of England would need to buy a significant majority of the UK corporate bond market. The second is political. It would require “picking winners” which has well-known challenges.
These discussions aside, there is also a wider concern over the potential impact of QE on expectations. Will it increase moral hazard in markets? If QE is successful, are we likely to behave differently in the knowledge that the Bank of England can prop up the economy in this way? It is perhaps these dimensions of QE that will have the longest long-term effect.
By Nick Bosanquet
Emeritus Professor of Health Policy, Imperial College.
Consultant Director, Reform.
A blog by Catherine Wyatt, intern at Reform.
A blog by Annie Leigh, intern at Reform.
A blog by Katy Sawyer, Researcher at Reform, following a roundtable seminar on the theme "Delivering fiscal responsibility: how to...