Building the businesses of the future

The real issue for Britain is our long-term competitiveness.

Today's Autumn Statement, as I argued last week on Conservative Home, needed to be a bold one. Worrying figures from the OECD and OBR this week have further exposed that Britain is walking an economic tightrope, from which any deviation could cost the Government its hard won credibility with the financial markets. Against this backdrop, the Chancellor's Statement needed to boost confidence, to encourage businesses to invest and reassure families that there is light at the end of the tunnel. Much of the political commentary, which I am sure will run for years to come, will focus on whether these proposals constitute part of Plan A, A+, B or any other letter of the alphabet. But the long term test of the Government's strategy will be whether or not it boosts our international competitiveness against the likes of the BRIC's (Brazil, Russia, India & China), on whom ironically we will also depend for our growth. Indeed, it is only by being competitive that Britain can maintain decent public services.

At present, 40 per cent of our exports go to Eurozone countries. But a decade of slow growth in Europe might change this, and it is the consumers and savers in some of those countries we have hitherto seen as developing that will be critical to our prosperity. Jim O'Neill, in his recent book The Growth Map, has noted that personal consumption in China has risen $1.5 trillion in the last decade, the equivalent of creating another UK within China's borders. Creating the environment for UK companies to export to these countries is imperative. And as I wrote yesterday, attracting cash-rich institutions like the China Investment Corporation to invest, and help build Britain's infrastructure for the future, is vital. Investor and businesses rely upon confidence, and that is what the Autumn Statement has achieved.

To compete in the long term, Britain needs to be a place where entrepreneurs and the spirit of adventure can flourish. This cannot be done by the Government picking winners and supporting them, but relies on people with new ideas choosing to launch companies in the UK. Creating the right environment for entrepreneurs today will allow Britain to incubate the start-ups that will be the Google and Facebook of tomorrow. That is why I am pleased that the Treasury has looked at the raft of tax incentives that would encourage people to invest in innovative ideas. But tax is not enough and if there is one thing that has come out of the financial crisis, it is that banks do not always help. Supporting non-bank lenders through the Business Finance Partnership and looking at a the idea of a bond market, both of which I called for in the Beyond the Banks report co-authored with NESTA, should transform the finance landscape for these businesses.

None of this fits neatly into the political dividing lines around which most of the commentary will be focused, but in the long term it will decide whether or not we can compete internationally and pay our way.

Sam Gyimah is Conservative MP for East Surrey

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Why Theresa May won't exclude students from the net migration target

The Prime Minister believes the public would view the move as "a fix". 

In a letter to David Cameron shortly after the last general election, Philip Hammond demanded that students be excluded from the net migration target. The then foreign secretary, who was backed by George Osborne and Sajid Javid, wrote: "From a foreign policy point of view, Britain's role as a world class destination for international students is a highly significant element of our soft power offer. It's an issue that's consistently raised with me by our foreign counterparts." Universities and businesses have long argued that it is economically harmful to limit student numbers. But David Cameron, supported by Theresa May, refused to relent. 

Appearing before the Treasury select committee yesterday, Hammond reignited the issue. "As we approach the challenge of getting net migration figures down, it is in my view essential that we look at how we do this in a way that protects the vital interests of our economy," he said. He added that "It's not whether politicians think one thing or another, it's what the public believe and I think it would be useful to explore that quesrtion." A YouGov poll published earlier this year found that 57 per cent of the public support excluding students from the "tens of thousands" target.

Amber Rudd, the Home Secretary, has also pressured May to do so. But the Prime Minister not only rejected the proposal - she demanded a stricter regime. Rudd later announced in her conference speech that there would be "tougher rules for students on lower quality courses". 

The economic case for reform is that students aid growth. The political case is that it would make the net migration target (which has been missed for six years) easier to meet (long-term immigration for study was 164,000 in the most recent period). But in May's view, excluding students from the target would be regarded by the public as a "fix" and would harm the drive to reduce numbers. If an exemption is made for one group, others will inevitably demand similar treatment. 

Universities complain that their lobbying power has been reduced by the decision to transfer ministerial responsibility from the business department to education. Bill Rammell, the former higher education minister and the vice-chancellor of Bedfordshire, said in July: “We shouldn’t assume that Theresa May as prime minister will have the same restrictive view on overseas students that Theresa May the home secretary had”. Some Tory MPs hoped that the net migration target would be abolished altogether in a "Nixon goes to China" moment.

But rather than retreating, May has doubled-down. The Prime Minister regards permanently reduced migration as essential to her vision of a more ordered society. She believes the economic benefits of high immigration are both too negligible and too narrow. 

Her ambition is a forbidding one. Net migration has not been in the "tens of thousands" since 1997: when the EU had just 15 member states and the term "BRICS" had not even been coined. But as prime minister, May is determined to achieve what she could not as home secretary. 

George Eaton is political editor of the New Statesman.