Blueprint to End Economic Stagnation Has One Conspicuous Omission | Ed Conway


If you want a sensible document with some interesting and well-reasoned ideas about what we should do about the UK economy (and some brilliant charts), you can hardly do better than reading the Resolution Foundation’s book/report on the subject, Ending Stagnation .

It’s a thick book with lots of analysis about the problems facing this country – low earnings growth, weak productivity, high inequality and so on – and also a bit about our strengths. And it synthesizes much of what you might call the “Whitehall view” of what needs to be done to try to kick-start growth in economy.

So it proposes to raise benefits, lift public investment, remove some of the myriad benefits that allow people to avoid tax, improve statutory sick pay and try to lift cities outside London.

It’s a useful checklist, although much of it will be vaguely familiar to anyone who has followed the economic debate in recent years.

Weak productivity is one of Britain’s biggest problems. If our bang-for-buck (which is ultimately what productivity is a measure of) had been stronger in recent years, then a lot of the problems we’re currently plagued with – from high public debt to weak income growth – could have been resolved.

And while there is a good chance that this document will become a kind of bible that both Labor and the Conservative Party borrow from as they seek to construct their political manifestos ahead of the upcoming general election – it is not for nothing that both the Chancellor Jeremy Hunt and Labor leader Sir Keir Starmer both appeared at the launch.

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Chancellor Jeremy Hunt speaks at the Resolution Foundation conference in London

Both parties want this election to be fought on economic grounds.

Both parties want the British public to know that they want to increase Britain’s economic growth rate. In fact, Starmer has even promised that under Labor the growth per per capita in the UK to exceed the rest of the G7 in the coming years – an ambitious promise, although it is unclear how he or anyone could achieve it.

And that’s because, while there are some obvious ingredients for economic growth, it’s a devilishly difficult thing to generate, or for that matter to understand.

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Starmer: ‘This is an age of uncertainty’

Economists still debate why the United States has a persistent productivity advantage over so many of its rich counterparts in the world. Is it tax policy? Does it come down to investment incentives, to the existence of strong markets, or to something else entirely that cannot be quantified? The short answer is that no one knows for sure.

But if you’re looking for a decent handbook with some of the most plausible policies to boost that growth rate, you can hardly do better than the Resolution Foundation’s tome – with a few caveats.

The first is that since this is a left-leaning think tank, the solutions lean toward higher taxes. Others will have different views.

Second, while the report suggests the government should invest more and mentions the need for more housebuilding in passing, it could put even more emphasis on the desperate deterioration of Britain’s physical infrastructure.

Third and most problematic, one of the most important of all economic factors barely appears in the report: energy. The UK has some of the highest energy costs in the developed world.

This is at least part of the explanation for the weak productivity and investments of recent years. Bringing down wholesale energy costs would make a huge difference in increasing activity in this country – not just for manufacturing companies, but for everyone else.

This comes back to something else. It’s tempting, since Britain’s stagnation began around the time of the financial crisis, to assume it must all be down to what happened in the square mile back in 2008. And that’s almost certainly a big part of the explanation.

However, something else also happened around this time: Britain went from being a net oil and gas exporter, enjoying a large and steady stream of public and private revenue from the North Sea, to being a net importer. It is going too far to blame this watershed shift for everything, but it is equally strange that it is not mentioned once in the Resolution Foundation document.

It all matters, even the boring stuff we mostly ignore. This new document is a fascinating blueprint for some of the things we could do to get this country moving again.

But that’s only the beginning of the conversation – not the end of it.


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