By Graham Vanbergen: Government approval rating has fallen to barely 15 per cent. Nearly 40 per cent of the adult population are stressed, and 53 per cent think the Prime Minister is incompetent (another 20 per cent don’t know). With an impending general election due soon, it doesn’t help that 45 per cent of people think the opposition is not ready for government (while 22 per cent don’t know). In saying that, the Tories are doing such a bad job of everything, especially the economy and public health that Labour has maintained a 20-point voting intention majority for some time now, which is hardly surprising.
As of the end of February, polling via YouGov now has the Labour Party 26 points ahead. In February 2020, it was the other way around.
The top three issues facing the country – according to voters, are – the economy, public health and immigration/asylum.
All three are huge issues, and there are no quick fixes. Neither Conservatives nor Labour have convinced the public they have the answers. But one thing is for sure, the Conservative Party have no answers at all. After nearly 14 years in government, the country has significantly declined as a direct result of their stewardship.
As far as the economy is concerned, there is agreement among the experts that there is a path to success and that Britain can prosper and compete. First and foremost – political stability anchors economic policy to the floor – and that has been sadly lacking since Brexit, Boris Johnson’s infantile dealings with the EU, Liz Truss’s epic misunderstanding of the basics and the current incumbent who spends most of his time putting out the fires his own side has lit.
In short, cutting taxes (Tory), solving inequality (Labour) or blaming Brexit (Centrists) isn’t actually the answer. All three will be failures of policy that contribute to the collective malaise of Britain’s performance if only one is concentrated on.
It is sobering to read the now seven-year-old Growth Commission report of 2017. The FT commented on it by saying, “Many of its proposals were not policy proposals but institutional reforms to keep the politicians away from policy proposals.” It only goes to show the damage politicians, in this case, the Conservative Party, have inflicted upon our country because being in power is their first interest, not what is actually in the national interest. That much is quite clear.
The London School of Economics (LSE) report last year – “Stagnation nation: how can Britain pull itself out of its economic decline” makes some sense of it all. It looks at productivity, economic growth and inequality as keys to rejuvenation.
Baroness Shafik – former president and vice-chancellor of the LSE stated quite clearly what needs to be achieved – and here is just one of her recommendations: “The UK’s overarching weakness – poor productivity growth – is widely discussed. But it is also widely misunderstood. Some economists have blamed the UK’s long tail of unproductive firms for dragging down the average, a tail that has got longer as low-interest rates have bred zombie firms (companies that are able to operate but not make enough profit to pay their debts). But our research has shown that this inequality of output has always existed – even when the UK was outperforming the US and Germany productivity-wise in the 1990s and early 2000s. Instead, our productivity woes lie in our business inputs – our firms have a poor record on investment, on training up workers, and on managing their staff.”
The Resolution Foundation report of last December says pretty much the same when it concludes – “Higher growth and higher taxes are needed to raise investment, rescue public services, and repair public finances.” Its report recommendations were clear but Torsten Bell, Chief Executive of the Resolution Foundation, said: “Britain has huge strengths, but is in relative decline. A year or two of low investment and flatlining wages is survivable, but 15 years of stagnation is a disaster. Combined with high inequality, our slow growth has proved toxic for low- and middle-income families, who are now far poorer than their peers in similar economies like Germany and France. Their living standards were under strain well before the cost-of-living crisis struck.
“The task facing the UK is to urgently embark on a new path. A new economic strategy built, not on nostalgia or wishful thinking, but our actual strengths. Along with honesty about the scale of change needed, and the trade-offs involved. It’s time for Britain to start investing in our future, rather than living off our past. There no excuse for fatalism. Having fallen so far behind, we now have a huge advantage: catch-up potential. Closing the gap with peers like Australia, France and Germany would deliver huge living standards gains, with typical households over £8,000 better off. That is a huge prize for a Britain that embraces a new economic strategy and is, in many ways, more normal.”
The IMF Country Focus Report on Britain, more or less, said the same thing. One of its conclusions was – “A stable, long-term strategy to promote business investment—including a permanent set of tax incentives that could potentially apply to investments other than plant and machinery—would strengthen investor confidence. Public infrastructure investment, notably in transport, health, networks, and the green transition, could “crowd-in” private investment. Liberalizing the planning system would reduce barriers to investment in new industries and facilitate the mobility of both firms and workers. The authorities could also consider unlocking pension and insurance savings for investment in higher-return projects while being mindful of any implications for financial stability.”
The Economics Observatory report of June last year found the same failures and echoed the same strategies for heading towards a path of success. Just one of their recommendations was – “By targeting investment, which should be feasible, government need not favour certain industries and instead could give businesses incentives to invest efficiently. This would be more aligned with Smith’s famous observation that: ‘It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.’”
The Productivity Institute (yes, there is one), once again says the same thing. It starts one report by stating that the UK economy “has long suffered from chronic levels of underinvestment. Many factors explain the failure to invest enough. One recurring theme is short-term thinking – by managers who don’t invest in projects with long-term payoffs; and by governments that don’t provide a stable policy environment.”
With 10 chapters written by experts on productivity, the Economics Observatory Productivity Agenda highlights key areas of policy for leaders to focus on so the public, private and civic sectors can be better equipped to translate productivity gains into improved living standards and well-being across the UK. Broadly speaking, it’s about investment, innovation, skills, the green transition, regional performance and inequality. In other words – the same strategic goals as other experts – investment.
There are numerous more reports from experts in their field to confirm that Britain in the doldrums need not be its future. Political stability, a policy framework that leads to economic stability and the drive to succeed is in our grasp. But, a very stark warning about a failure to act comes from Foreign Policy.
It makes the point that Brtain’s plight today is, in fact, from an economic point of view, worse than it was in the 1970s. Even in the U.K., which was forced to borrow money from the International Monetary Fund (IMF) in 1976, growth rates stacked up better in the 1970s than the 1980s, averaging 3.38 per cent per year against 3.0 per cent. Last year, economic growth was lower than 1 per cent with the final six months in technical recession.
As FP says – “Although the U.K. was a relative growth laggard during the 1970s, this was nothing in comparison to today’s current collapse in living standards. Average U.K. real wages are now lower than 18 years ago, which is unprecedented in the country’s peacetime economic history.”
And FP goes on to point out some home truths. On most measures, Britain has the most limited welfare state of any developed country, including the United States, with the result being that working households are shouldering more risk than their peers.
The U.K. is also running a large, structural trade deficit. If its economy were growing rapidly and driven by high rates of capital investment, this would be less of a concern. However, it is not. Britain faces a deepening economic growth crisis, not least because business investment is running at the lowest level in the G-7. The trade deficit matters: The trajectory is unsustainable, implying as it does a rapid increase in liabilities to the rest of the world.
In reality, there is plenty of evidence—not least from the IMF—that high levels of inequality are bad for economic growth, that a bare-bones welfare state makes it hard for people to take risks and hence holds back social mobility and productivity growth, and that the underfunding of public goods—in particular, health care, education, and infrastructure—hurts economic growth potential. There is certainly no correlation between the size of a country’s state and its economic performance.
Once again, there is confirmation that the Tory low tax, small state strategy that has been doubled down on – doesn’t work. It’s about increasing investment and reducing inequality. It’s about strengthening the institutions that aim for these goals. It’s about taking the tough decisions now and creating a stable environment to achieve it. The current political party has had 14 years and five Prime Ministers in office, and ample opportunity to get this country back on track – and failed miserably at every hurdle. Blaming the pandemic or Russia isn’t an excuse – as our peers are showing us all right now.
Right now, as the experts keep saying, we are standing on the precipice, staring down into the abyss. We need to stop listening to the divisive rhetoric coming from Downing Street, its campaign headquarters and the awful doom-mongers of their negative narrative, such as GB News, the Daily Mail, Telegraph, et al and look up for once.