Last week, I made the case that economic growth matters and that raising growth is an admirable goal for any politician. I also complained that Liz Truss and Kwasi Kwarteng don’t seem to know how to continue it. Tax cuts for the rich, a rudimentary subsidy, opening the door to energy spending, are all responsible for the rise in inflation. . . it’s always been a half-baked plan, couldn’t be more appetizing by generously seasoned with wishful thinking.
It’s easy to criticize, especially if you’re criticizing this couple, but there’s one important insight amid all their overbearing and recklessness: growth issues. The UK economy has been cursed by more than a decade of stagnation, and if policies can be found to spur growth, even back a quarter of a century before the financial crisis. global mainstream, that would solve many of our fundamental economic problems. .
So what can be done? One possibility is to shrink the state, leaving more space for private business. This may sound good to some, but Kwarteng’s “Small Budget” merely achieves this goal. The tax cuts don’t shrink the state; spending cuts. If the government is merely borrowing money to cut taxes, the private sector knows that eventually the bill will come due.
In recent years, some serious efforts have been made to think about what will be needed to boost UK growth. One of them is the Growth Committee at the London School of Economics, which has published a comprehensive review 2012. More recently, LSE economists have partnered with the Resolution Foundation to generate a report under the auspices of The Economy 2030 Inquiry. At the risk of being seduced by the blandness of economic orthodoxy, curious readers may be intrigued to hear some recommendations.
Upgrading the skills of the people of the UK, with a particular focus on improving schools.
This sounds good, but the 12-year record isn’t entirely encouraging. Free schools were introduced in 2011 and, according to the Academy of Education Policy, were underrated at the elementary level, although they performed better at the secondary level. That is a good news. The bad news is that spending on schools has actually fallen back since 2010. UK education spending also depends on private sector spending, inability to advance the skills of those most deprived.
Improve the UK’s infrastructure and create an independent body to advise parliament and compensate those affected by new development.
Again, the record here is mixed. A National Infrastructure Commission was created in 2015, but it was not independent and was cut to warn the government not to do so.vague promises“. Speaking of vague promises, I wrote recently about Transpennine Railways, and how the multi-year vacancy led to delays, wasted money, and ultimately a massive downsizing scheme. Londoners may enjoy the Elizabeth Line, but London is hardly the source of the UK’s growth problems.
The wisdom received has been that the UK’s world-class universities have produced a string of priceless breakthroughs, but due to the lack of funding for ventures, such breakthroughs are often not commercialized. chemical. That was disappointing enough, but now the question is whether those world-class universities can continue to thrive in the face of the Brexit-induced whirlwinds that have made recruiting faculty from the EU a big deal. more difficult and threatens to exclude the UK’s scientific research community from the EU or not -admired Horizon Europe funded the programme. In principle, the UK has access to Horizon; in fact, it has become a casualties of the dispute over the Northern Ireland protocol.
Encourage business investment.
Business investment in the UK is significantly lower than in the US, but also much lower than in Germany or France, countries with much higher tax burdens. Could it be that the UK’s chronic underinvestment isn’t simply a response to high taxes? Kwarteng is right to look at the tax system for an opportunity to encourage business investment, but he might also consider something businesses value more than tax cuts: political and economic stability. . That’s not something the UK has been able to deliver in the last 15 years.
See Net Zero as an opportunity to grow and create high-quality jobs.
UK insulation old warehouse would be excellent preparation for a brutal winter, as well as being a source of skilled jobs in the construction trade. Alas, indoor insulation rates have plummeted since 2012. And the Net Zero project doesn’t seem to have a champ in Liz Truss, who says there are few sadder sights than fields full of panels solar battery.
You might think that no worthy idea really solves the UK’s growth problem, and you might be right. People don’t just enhance the long-run growth rate of an economy. But it might be worth trying some of them. There are certainly worse ideas for promoting growth; look around.
Tim Harford’s new book is ‘How to make the world increase‘
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