Does anyone remember the show Who Dares Wins? Teams would bid on how many correct answers they could give to a subject list, for example, Premier League winners since 1975. If the show were to be resurrected, I reckon a good category would be issues with the British economy. How many could you name?
Most people would have a chance of naming at least seven or eight and thus, it would make quite an entertaining and engaging round. I will, rather restrictively, discuss just three and how they have contributed to the somnolent growth of the last decade or so.
Rishi Sunak has pledged to halve inflation but is yet to enunciate how his government will do so. Inflation will come down due to measures such as the energy price freeze and saving astronomically priced goods rising to absurd levels, but whether it will have anything to do with other government initiatives such as freeports is sceptical at best.
The ghost of Christmas past, Liz Truss, and Sunak are right to highlight that growth will decrease inflationary pressures, as there will be more money to chase goods, but whether or not the former knew, or the latter knows, how to actually achieve this remains to be seen.
The first problem is that austerity inhibited investment, and therefore, acted against growth and encouraged inflationary pressure. In austere times consumers are told they do not have enough wealth and are discouraged from spending. Thus, consumption reduces in tandem with investment.
Why would one invest in a product if the product cannot be consumed? The lack of both private and public investment leads to a shrinking national income; leaving more people without jobs and seeking help from the state, which increases government expenditure on unemployment benefits and so forth. Austerity, therefore, only ostensibly reduces government spending and fails in its raison d’etre to leave the public finances in a healthier position.
National debt increased during the Cameron and Osborne years and whilst the deficit did decrease, growth levels throughout were meagre. As the great Liberal philosopher Thomas Paine argued, ‘no nation ought to be without debt’, but debt without progress is futile.
A perennial problem for the UK economy over the last decade has been pitiful productivity. This is directly linked to the investment problem. However, more fundamentally, the current chaos, regarding industrial disputes, both exposes and adds another layer to this problem. Striking workers should be shown solidarity, particularly regarding conditions within work.
Exhaustive and perilous conditions have caused concern amongst staff, particularly in the NHS, for decades and has encouraged an exodus from the medical profession. The same is true of teaching. Education in particular is vital for economic growth and a healthy worker, who can fall on adequate care if it is required, is a more productive one.
In capitalistic terms, is a worker not happier if they have more money? Solving the strikes is key, admittedly in a roundabout way, to conquering the productivity problem.
Boosting productivity in the private sector is hardly straightforward, but would be aided by expanding the successful four-day working week pilot scheme for businesses. 95% of the businesses taking part have said that they have witnessed increased levels of productivity, or similar levels, since taking these steps.
Supply is also a quandary. Brexit has allowed politicians such as Suella Braverman to influence Tory immigration policy. Her defiance of Truss’ calls in October for increased immigration, and the fanatical far-right’s ferocious reaction to such proposals, is perhaps part of what brought down Truss’ premiership, as it precipitated Braverman’s resignation and the pandemonium that ensued.
Immigration is necessary, and the lack of supply in this sense, particularly post-COVID, has been detrimental to economic recovery. With the country close to full employment and an ever-ageing population, moving people into the workforce is vital.
Another idea lost on those inside Number Ten, is the importance of housing to economic growth. Sunak is behest to his nimbyist backbenchers, which unfortunately means his impulses to build must be repressed. This has been true for Conservative premiers for over a decade.
Since 2010, roughly 1.4 million homes have been built, a number which sounds gargantuan, but in reality is tiny. With around 1.6 million households in need of social housing and regions in need of regeneration, house building is the key to ‘levelling-up’. It stimulates local economies, simply by bringing people to them, but also by giving employment to local tradesmen and increased incentives to, and support for, local business.
Building was the ballast to Attlee’s ‘Jerusalem’, and thus, an ambitious house-building program across the UK’s regions should be at the forefront of any growth agenda. This could also encourage a shift in how houses are seen in the UK. As writer Will Self has argued, ‘houses should not be cash cows’; the provision of housing should be seen as a basic right to citizens of this country. Hence, the bulk of this housing built should be social; this would encourage the deflation of extortionate housing prices, making the market more accessible for all.
Thus, the woes of our economy have been austerity, productivity and supply. We need to build more houses, whilst remedying the former ills, to encourage growth.