By Michael Moszynski, co-Founder and CEO of LONDON Advertising.
In 2009, our ‘prudent’ Government spent £178bn more than it earned. On top of this, it printed a further £200bn (under the laxative-like term of ‘Quantative Easing’) to boost the economy.
As a result, in the final quarter of 2009 we secured economic growth of a staggering 0.1%.
So what will be the engine to generate the 3.5% economic growth, as forecast by the Chancellor from 2011, which will halve the £1,000,000,000,000 total Government debt by 2014?
(Even if we can pull this off, our debt will still be more than it was when Dennis Healey had to go cap in hand to the IMF in 1976.)
Will it be more Government spending? No. Whoever wins the election will have to significantly cut back or our AAA credit rating will be withdrawn, resulting in a run on the Pound and eye-watering interest rates last seen in the 1990’s. In fact, we are going to see a ‘public sector’ credit crunch that will have a negative ‘multiplier effect’ on the private sector.
Will it be manufacturing? No. Our Government’s policies on renewable energies, (compounded by the EU’s), will mean further energy price rises that will displace even more of our manufacturing output to China (see Nigel Lawson’s book “A cool look at Global Warming”).
Will it be the service sector? Well possibly, but there is a limit on the number of incremental hotel rooms etc that we can sell.
This forecast growth can only be achieved by unleashing our talent for innovation and entrepreneurship, which throughout history has been the source of the UK’s competitive advantage. Whether James Watt, Frank Whittle, Tim Berners Lee, James Dyson, Charles Saatchi, Stelios or Mike Lynch, the UK has a fantastic track record of creative entrepreneurs who have transformed their industries and changed the world.
Lord Mandelson talks about doing things to ‘unleash’ our entrepreneurial culture. Why then has the Government created a marginal tax rate of 62% for people earning over £100,000? Why are they increasing the cost of employing people through the raise in Employer’s NI contribution from April?
Why have they increased corporation tax resulting in the likes of WPP and Vodafone leaving our shores to relocate to Ireland? Why have they increased the effective rate of Capital Gains Tax on entrepreneurs who grow share value of over £1m by 80%?
I speak on this subject with a modicum of passion as I left, with my creative partner, a very well-paid and comfortable job with M&C Saatchi two weeks after the collapse of Lehman Brothers to set up our own company.
Within three months we had secured clients on every continent including the Mandarin Oriental Hotel Group, based in Hong Kong. By the end of our first year, despite the toughest economic environment in our lifetime, we made a profit when most new businesses struggle to breakeven by year three.
This was possible because our business was predicated on three key insights:
1. Companies around the globe look to London as a hub of creative talent
2. UK agencies were not very good at securing and managing this type of business
3. The global ad agency model had not fundamentally changed in 50 years
We instigated a root and branch overhaul of how a global agency should be organised in the age of the internet without the need for a ‘bricks and mortar’ network of local offices.
If our industry’s business model can be transformed by creating a global agency with one office, which uses the internet to develop, produce and supply any form of communication, in any media, in any language, in any country – all from London – then others can follow suit.
Most importantly, if we are generating income and jobs in the UK by attracting business from overseas, then so too can others.
The Government think it needs to ‘do’ things to make this happen – issuing subsidies, forming new committees or establishing working groups on ‘entrepreneurship’
The answer is that Government simply needs to do less to encourage more people to do so - less barriers, less taxes on employing people and less taxes on the results of the risks we are taking (given that even in good times, 8 out of 10 new enterprises fail).
If the Government does less, we will do more, resulting in greater employment and a bigger total tax take for the benefit of all.
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