By Stephen Mangan
LONDON, Oct 31 (Reuters) - Britain should strengthen controls on foreign takeovers, devolve more power from London and speed up decisions on airport expansion, according to a government-commissioned report on restoring economic prosperity published on Wednesday.
The report by Lord Heseltine, a former Conservative Party deputy prime minister, said Britain’s current growth strategy of tax cuts and deregulation would not provide a fast track to economic health and needed to be reassessed.
“Continuing as we are is not an acceptable option,” he wrote in the report.
The government, under fire for lacklustre growth, faces pressures to ease a flagship austerity policy aimed at erasing one of the largest budget deficits of industrialised countries.
Heseltine, who was asked to write a sweeping economic review by the government, called for a “war psychology” to overcome economic crisis and pressed for an end to ministerial uncertainty on sectors such as energy and aviation.
In the 228-page report, entitled “No Stone Unturned,” Heseltine makes 89 recommendations, including the need to strengthen controls on foreign takeovers to block deals deemed unfavourable to Britain.
“I reject the notion that regulation in itself hinders growth. Good, well designed regulation can stop the abuse of market power and improve the way markets work to the benefit of business employees and consumers,” Heseltine wrote.
Britain’s Conservative-Liberal coalition government says it is keen not to be protectionist in the way it awards contracts and will look at each tender on its individual merits.
However ministers already intervene in foreign takeovers in cases that may affect national security or when media companies are involved. Mergers are formally assessed if the company being taken over has an annual turnover of 70 million pounds ($112 million) or more, or if the new entity would control 25 percent or more of its market.
If not an issue of national security, the assessment is largely seen through the interests of the consumer as opposed to the wider strategic needs of British industry.
The report called for a less centralised approach, handing more powers and responsibilites from central government to local authorities and local partnerships between government and business.
The regulation system should be overhauled, it said, to oblige regulators to take account of the economic consequences of their actions.
Britain has not recovered the output lost during the 2008-2009 slump and while the country exited recession with growth of 1 percent in the third quarter, the economy remains fragile and policymakers are under pressure to boost growth.
One of the country’s leading economic think tanks, NIESR, published a research paper on Wednesday arguing that tax hikes and spending cuts in the European Union were self-defeating, leading to higher deficits as they depressed growth.
Despite its cutting remarks about every aspect of Britain’s low growth, the Heseltine report was welcomed by the government.
“This is a report bursting with ideas and we will study it very carefully,” said Finance Minister George Osborne.
Prime Minister David Cameron’s Conservative Party, the senior partner in the governing coaltion with the Liberal Democrats, is trailing the opposition Labour Party in the polls.
And a survey showed on Wednesday that the mood among British consumers worsened further in October as fears about the economic outlook remained strong.
The government has pledged to reduce regulation and lower corporation taxes to ease business. It has also launched various schemes to boost credit availability and aims to support infrastructure investment and house-building through guarantees.
Heseltine avoided criticising ministers directly, but said that “it takes too long for decisions to be made” by the government and the message amongst Britons is “that the UK does not have a strategy for growth and wealth creation”.
The report challenges government policy on a vast range of specific issues such as immigration, ways to boost infrastructure spending and the lack of a decision on where to build a four runway airport around London.