The UK government has announced that it will not be giving out visas to low payed, low skilled foreign workers once the new immigration laws come in after Brexit. Priti Patel’s public reaction to this was to calm businesses by announcing that there are 8 million economically inactive Brits ready to take the place of low skilled migrants.
I’m not sure that a minimum wage summer job picking fruit is what most of the Brexit voters had in mind. I’m less sure that ‘economically inactive’ parents or carers in one worker families are ready to relocate to Kent to do this. But worst of all are the fundamental economics of this plan.
Businesses employing low skilled, cheap workers want this practice to continue so they don’t have to shell out for automation technologies or to hire consultants to improve the efficiency of their workflows. In their world they are quite happy for productivity per worker to remain constant so that every year they can return the same old profit. Priti Patel seems encouraged by this guarantee of future economic stagnation, provided that it puts a few crumbs on a British table. Southern Oatcake is not encouraged at all!
Instead of perpetuating bad business practices, the British government should seize on this moment to actually “level up” the economy (although this strikes me as a strange phrase, as when you level up in most games your enemies get tougher and you get closer to a brutal final boss battle).
Rather than allowing them to underpay the British people instead of the Europeans, the government should give these small and medium sized businesses the opportunity to tranform in to technologically driven, efficient enterprises via capital investment. Perhaps the best way to do this would be to launch a state-backed corporate bond buying programme for businesses in need of technological improvement. This could be done via a vehicle similar to NS&I, which was first set up so that the government could borrow money from savers. By offering an attractive rate of interest (which can be as low as 1-1.5% these days), this could attract significant capital from the nation’s savers, whose deposits could be protected by the Treasury (as with NS&I) or via an insurance mechanism like the Financial Services Compensation Scheme.
This loan scheme, the SOTAF (my catchy abbreviation for the Southern Oatcake Technological Advancement Fund), would improve the futures of savers by offering them an attractive return, would provide low interest rate (say 5%, compared to Barclays offering of 9.9%) loans to businesses with credible growth opportunites and would cost the government very little- perhaps only set-up costs and a small fraction of deposits for loans that can not be repaid. It may even cost nothing over its lifetime (next paragraph). At the same time it would improve the productivity per worker of the nation, a metric that we hear about time and time again as the reason why economic growth is so low. If the government believes in British business, it must believe in the SOTAF! And to critics saying this will deprive the poorest people of jobs, history says you are wrong. A stronger economy provides a larger number of well paying jobs!
We can make some assumptions to have a quick check of the financial viability of this scheme. If there are 30 million adults in the UK, and the average investment per adult was just £33 (the equivalent of saying a £1000 saving deposit for one in 30 adults, which does not sound crazy), then there would be £1 billion of deposits. If these were used to buy 5 year corporate bonds with a yield of 5%, while paying out to savers at a market shattering 2% APR, then the scheme would be left with an additional £172 million at the end of year 5. Assuming a constant inflation rate of 2%, £104 million of this is ‘lost’ in real terms. However this still leaves £68 million total, or over £13 million per year, to be used for running costs. Which may be bordlerline believable for a slimmed down, high tech enterprise.
This would seem to be a costless social solution to the productivity crisis, the current business issues with lack of labour availability and the historic low returns on savings while, as a bonus, sticks two fingers up to the banks. The same banks who caused a huge financial mess in 2008, pay worse interest rates to savers than the SOTAF would (e.g. Lloyds Standard Saver at a 0.1% AER slap around the face), and offer loans to businesses at double the SOTAF interest rates!
It may surprise readers of this blog but I am currently employed. I could be tempted back to the U.K. to implement this scheme and my other great ideas. I would accept the position of Home Secretary or ideally Chancellor of the Exchequer. No need for another election- I could do this from the Lords. With regards to Dominic Cummings’s call for misfits as weirdos I may disappoint. I have at least seven friends and mother insists that I’m just as normal as the other boys. My preferred working hours are 10am to 3pm on Tuesdays and Thursdays, with occaisional availability on Wednesday lunchtimes. I will look forward to HM Government sliding in to my DMs.