The inscription at the gates of hell in Dante’s Inferno reads, ‘Abandon all hope ye who enter here’. It is what I am reminded of when I contemplate the recent Budget.
What element of encouragement is to be found there for the ideal of free enterprise? What motivation is there to strive and endeavour?
Winston Churchill said to his constituents in September 1959: ‘Among our socialist opponents there is great confusion. Some of them regard private enterprise as a predatory tiger to be shot.
Sir Rocco Forte: ‘Much of the “black hole” talk throughout the most recent Budget is pie in the sky’
‘Others look upon it as a cow they can milk. Only a handful see it for what it really is – the strong and willing horse that pulls the cart along.’
It is quite obvious how our present Government sees it – as the cow they can milk.
The narrative is that things had to become more settled, the economy needed to be stabilised. But there is simply no vision whatsoever for the future.
Much of the ‘black hole’ talk throughout the most recent Budget is pie in the sky and the idea that the British economy is not able to cover its costs over the medium term is nonsense.
If there was any instability, it was largely created by the Bank of England. Firstly by rising interest rates by 0.5 per cent instead of 0.75 per cent. This destabilised markets.
Then by announcing quantitative tightening on the same day as Kwasi Kwarteng’s mini-Budget. It compounded the error by not intervening decisively in the LDI debacle – the funding crisis in pension funds – Then by announcing quantitative tightening on the same day as Kwasi Kwarteng’s mini-Budget. It compounded the error by not intervening decisively in the LDI debacle – the funding crisis in pension funds – when it should have ensured the support was open-ended rather than temporary, allowing market speculators to move in.
That is without going back to its continuation of quantitative easing long after it should have ended and allowing the LDI situation to develop to the extent it did.
Now monetary policy is finally under control. The money supply is no longer growing and interest rates are at a realistic level. A squeeze on home-grown inflation is finally taking place and the economy is already in recession.
A fiscal squeeze on top of this was completely unnecessary and it is completely counter-intuitive to raise taxes during a recession. What we will see is a much deeper recession as a result. Many small businesses, the lifeblood of the economy, will disappear and any recovery going forward will be much more muted.
Brexit is being challenged and, before we know what has happened, we will find ourselves back in the European Union. I operate in the European Union, and things are even bleaker there than they are here. Inflation is just as high, growth is non-existent and the energy situation is worse than ours.
‘Unfortunately, there doesn’t seem to be a Mrs Thatcher around today’, says Sir Rocco Forte
Nothing has been done, partly due to Covid, but mostly due to the reluctance of civil servants and the weakness of Government to change anything since we left. European laws we do not need are still on the statute books and we are generally running our economy in tune with the EU.
Raising the rate of corporation tax at a time you are trying to encourage investment into the country is a fundamental mistake – and that is from the point of view of internal investment as well as external.
Emasculating the duty free ports that are being created so as to make them less attractive for investors, the abandoning of enterprise zones in those parts of the country that need investment are equally damaging.
The Treasury argues those policies merely transfer investment from one part of the country to another, and that it loses its tax revenue in the short term. But that does not hold water. Creating new enterprise and employment in areas where there is none will reap huge rewards in the medium term.
In Sicily, I built a resort, Verdura, on 550 acres of land with two kilometres of coastline in an area where there were no employment opportunities. The resort directly employs 500 people.
The Mayor of Sciacca, the local town, on giving me honorary citizenship, said that over 1,000 small businesses had been created on the back of Verdura. I would not have entertained the development if I had not received a substantial government grant but the region is reaping a huge reward as a result.
Back in Britain, personal tax thresholds were already too low before this last Budget and have been made worse by being frozen for six years – and, in the case of the highest rate of tax, reduced – the scandal of which has all been very documented in the pages of The Mail on Sunday.
The people this will affect are not rich. They may be regarded by some as well off, but they are now being picked clean by the Treasury for their hard work. In the US, for example, the top rate of tax is 32 per cent and it does not start until $500,000 a year.
Here, strivers are hit with a 40 per cent rate at just over £50,000 – which many more will soon be dragged into thanks to the twin curse of frozen thresholds and rapid inflation.
We are talking about junior and middle managers. What incentive is there for them to work harder?
I could go on but the whole thrust of the budget was against the creation of an enterprise economy. What Liz Truss and Kwasi Kwarteng wanted to do was right. Here at last there was a chink of light, moving away from the economic policies that we have followed for the past 20 years.
Their over-exuberance in wanting to implement them, but also the actions of the Bank of England I have described, forced the termination of those policies. The so- called establishment is against them anyway, so probably they would not have been allowed to happen whatever the circumstances.
We are told we are now in the hands of the grown-ups. I know plenty of grown-ups who have never achieved anything in their lives, who have had no ambition and been prepared to go along with the flow.
There were plenty of grown-ups in the 1970s when the country was in a bigger mess than it is in today and when decline was accepted like it is today.
It took a visionary to come along and change it. Unfortunately, there doesn’t seem to be a Mrs Thatcher around today.