.jpg)
The May government’s overriding objective will be to ensure Brexit does not unduly harm the British economy. But setting aside the unknowable developments of future trade talks, how will it approach economic management? It is already clear that May has more interventionist instincts than her predecessors. She has in recent days expressed consternation at the approach taken to potential takeovers in key sectors (pharmaceuticals) and less key sectors (chocolate).
May has also indicated a willingness to pursue an agenda of reforming capitalism, to make the economy “work for everyone” and to share prosperity. Most radically, this has included a proposal to have employee representation on company boards. The bulk of May’s focus in this area, however, is on productivity, with supply-side reforms mooted in relation to energy, infrastructure and house building.
On infrastructure (more of which below), May has promised a rebalancing away from financial services in favour of manufacturing. This has been reflected in the creation of a new Department for Business, Energy and Industrial Strategy.
Many will be cynical – Osborne’s 2011 promises of a ‘march of the makers’ barely materialised. But there are reasons to believe this is not merely casual rhetoric now. May’s key adviser on these issues, Nick Timothy, is a firm believer in robust, interventionist government. Expect the development of an industrial strategy, the acceleration of devolution to promote city and regional growth, greater efforts from government to promote key infrastructure and the investment in manufacturing required to support it.
What of deficit reduction? It has been displaced by Brexit as the government’s raison d’etre, but by no means abandoned. May’s appointment of Philip Hammond as Chancellor gives an indication of the direction of travel: expect a soberer, sensible fiscal path to be forged, without the gimmicks Osborne relished such as the welfare cap or legislating for a surplus.
May has already said that the government will not be working to meet Osborne’s 2020 surplus target. It was highly unlikely to ever be met, but with this early move May has given her government more room for manoeuvre. This will be vital to reposition the UK’s economy to be competitive in the post-Brexit world.