Labour donor warns dire economic growth is harming voters’ trust in democracy

16 July 2023 , 23:01

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Labour-backing businessman John Mills has outlined his plan for boosting manufacturing and exports (Image: PA)

Dire economic growth is hammering voters’ trust in democracy, a leading Labour-backing businessman warns today.

Shopping channel tycoon John Mills fears public faith in the system is dwindling as ministers chase a 2% inflation target over expanding the economy while in the grip of a cost-of-living crisis.

Keir Starmer refused to rule out changing the Bank of England's 2% inflation target under a Labour government.

Mr Mills told the Mirror: "If we blindly follow the current economic status quo we risk losing support for social democracy.

“People will simply stop believing in a system that continually fails to deliver a good quality of life. We have faced many of the same economic problems for decades now, with little progress. Unless we have the courage to change course and embrace alternative solutions, we are doomed to repeat the same mistakes over and over again."

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Shopping channel tycoon John Mills

The John Mills Institute for Prosperity fears that failing to weaken the exchange rate would see living standards take another 10% clobbering, saying that “real UK GDP will continue to stagnate” unless the targets are switched.

“At the same time, heavy and rising costs on energy, climate change, interest rates, health and social care, pensions, training and probably increased military spending too, will depress average living standards by perhaps a further 10% from where they are now,” says the report.

The Government and Bank of England are struggling to rein in runaway inflation, currently running at 8.7%. Meanwhile, latest Office for National Statistics estimates show the economy shrank by 0.1% in May.

Publishing a 26-page pamphlet, Rescuing our Economy, The John Mills Institute for Prosperity blames a high exchange rate for decades of economic gloom. “Our exports, particularly of manufactured goods, have therefore been overpriced and unprofitable; we have lost share of world trade; investment has languished; productivity growth has been anaemic; living standards, having for a long time grown relatively slowly, are now falling; and our power and influence in the world has drastically declined,” it warns.

“A major reason for this dismal record is that, as our main policy goal, we have been aiming at the wrong target. We have given much too much priority to trying to keep inflation down and too little to keeping the growth rate up. Having 2% per annum inflation as our main economic policy objective has produced pitifully low growth.

“Now, in addition, we have painfully high inflation, reflecting the inability of our economy to match supply to expectations. The 2% target was supposed to produce stable conditions, leading to steady investment and growth. It has, however, clearly failed to do so.”

Keir Starmer refused to commit to the 2% inflation target for the Bank of England (Getty Images)

Mr Mills, who gave Labour £1.65million worth of shares in his company JML under Ed Miliband's leadership in 2013, warned it was “time for the Chancellor to change the Bank of England's mandate and get them to focus on GDP growth instead”. "The goal of keeping inflation at 2% still remains the West’s core economic strategy, despite years of evidence that it is not working,” he said.

"Fast and stable growth is the foundation of a tolerant and free society. We need to focus on growth, and the way to do this is by ensuring that the UK is as competitive as possible for locating manufacturing operations.”

John Mills writes exclusively for the Mirror

It's no secret that the UK economy is in a mess. You'd think that the Tories would have worked out that their plan is not working by now.

But they spend so much of their time trying - yet failing - to chase down inflation that they're missing the wood for the trees. If they got out into the real world, they would quickly see that people are struggling - living conditions are in a death spiral. And with the costs of climate change, social care, and higher interest on Government debt coming down the track, it'll only get worse.

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What's the solution? We need to go for growth. This will give us the money we need to cover these additional costs, resource up our national services, and get living conditions rising again.

Growth in the UK for the last 10 years has been pitiful. Most years, we barely manage to achieve 0.5%. And the key to growth is to get our manufacturing heartlands going gangbusters again. We've got to start churning out more products that people around the world want to buy, we've got to get exporting more.

In 1950, about 25% of all manufactured goods traded internationally were made in Britain - now it's down to 1.8%. We've become so focused on London and financial services that we've forgotten that growth requires an economy that sells actual stuff to the rest of the world.

But the problem right now is that the British Pound is so high that it makes setting up a manufacturing business in the UK almost completely impossible. It's unprofitable. So, forget about inflation. We've got to tackle our overvalued currency, get manufacturing again, and go for growth.

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Ben Glaze