By James Boyd-Wallis, Fourteen Forty
New business secretary Kwasi Kwarteng MP is on paper one of the most pro-free enterprise ministers to run the Department for Business, Energy and Industrial Strategy (BEIS) in years.
He takes over the role at a time when businesses, of all shapes and sizes, are struggling. Many risk closure and collapse.
So, he must use the credibility that comes with running a major department to argue for the free-enterprise reforms that will lead the economy back to good health.
To be effective, he will need to extend his influence beyond BEIS and convince his cabinet colleagues of the critical role business will play in the recovery.
The right response at the right time
In response to the pandemic, the government has, quite rightly, deployed significant fiscal firepower. Such government spending has helped safeguard businesses across the country.
But, with continuing restrictions, many firms are on the brink of failure. According to the business lobby group the Federation of Small Business, some 250,000 small firms are at risk of collapse this year.
So, just as the vaccines provide a biological cure to the virus, the government must now focus its attention on implementing an economic cure.
Adopting first principles
Implementing the right economic cure means going back to free-market first principles.
One of the lessons of the past year is that those running our public services do not always do as well as they might wish. History shows us they will not be able to better direct business out of recession than businesses themselves.
Instead, Kwasi Kwarteng should set out to create the conditions firms need to grow. In doing so, businesses will be able to generate new jobs faster than they are lost. Certainly faster than centralised programmes from the well-meaning but commercially inexperienced people at the ministries.
Keep an open door
As business secretary, he first needs to continue his approach while energy minister at BEIS and keep an open door and listen to what business needs.
Make it easy to employ people
Next, when the Office for Budget Responsibility predicts 2.6m people out of work by Summer, Kwasi Kwarteng should make it as easy as possible for firms to employ people.
Removing unnecessary employment regulations, while continuing to protect workers’ rights, would create a more flexible labour market and boost employment.
For instance, easing some employment regulations for small firms would reduce their administration costs and complexities, making it easier for them to employ more people.
Reform tax and regulation
Kwasi Kwarteng should encourage the government to adopt regulatory and tax reform more widely, and especially for small firms.
Research from the think tank the Centre for Policy Studies shows that a complicated tax regime frustrates small business growth. So, he should work with the Chancellor to advocate for a simpler tax regime for small firms.
Also, he should refrain from reintroducing regulations the government has relaxed. For instance, he should continue to allow pubs and restaurants to operate as takeaways and serve food and drinks outside.
Reduce state intervention
Last, Kwasi Kwarteng must roll back state intervention in the economy.
Some may argue that Covid-19 has demonstrated the need for a permanently larger state. However, this is a misreading of the situation.
The government’s objective with the business support schemes and money it has provided has been to help firms survive during a period of deep freeze.
Leaving such schemes in place as the government lifts restrictions and the economy heats up would suppress, rather than stimulate, economic growth.
High hopes
As one of the most pro-free market business secretaries in recent memory, many in business will have high hopes for Kwasi Kwarteng.
But far from breathing a sigh of relief and taking a step back, business must become more engaged with government.
It must be better at arguing for what it needs. In doing so, it should reassert the role of free enterprise to provide the jobs and growth the UK needs to rebuild.
Getting the economy back to good health will depend on how effective Kwasi Kwarteng is at pushing through a free enterprise agenda and taking his cabinet colleagues with him. Business should make sure it reminds him of that at every step.