Thursday , May 6 2021
Home / David Smith's EconomicsUK / There is no economic silver bullet, but every little helps

There is no economic silver bullet, but every little helps

Summary:
There is no economic silver bullet, but every little helps Posted by David Smith at 09:00 AMCategory: David Smith's other articles My regular column is available to subscribers on www.thetimes.co.uk This is an excerpt. Not to be reproduced without permission. Every so often people start to think great thoughts about improving the performance of the British economy. Nearly 60 years ago, there was a flurry of such thinking. We would give our eye teeth for the UK’s absolute performance in those days, but relatively speaking it was weak, particularly compared with the big European economies. So, in 1962, the National Economic Development Council (NEDC) was established, bringing together the “three sides of industry” - government, business and the unions. Three years later the Labour

Topics:
David Smith considers the following as important:

This could be interesting, too:

David Smith writes The Covid debt isn’t going away. We will have to live with it

David Smith writes Pluses and minuses of the return to business as usual

David Smith writes The virus cost trillions, but the world is bouncing back

David Smith writes Will Britain’s consumers splash their stash of cash?

There is no economic silver bullet, but every little helps

Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on www.thetimes.co.uk This is an excerpt. Not to be reproduced without permission.

Every so often people start to think great thoughts about improving the performance of the British economy. Nearly 60 years ago, there was a flurry of such thinking. We would give our eye teeth for the UK’s absolute performance in those days, but relatively speaking it was weak, particularly compared with the big European economies.

So, in 1962, the National Economic Development Council (NEDC) was established, bringing together the “three sides of industry” - government, business and the unions. Three years later the Labour government set up the Department of Economic Affairs (DEA) which, taking it leaf from successful French planning, launched a national plan for the UK.

Then, as now, there was a lot of excitement about new technology, Harold Wilson revelling in the “white heat” of the technological revolution. But these efforts were not successful. The DEA was short-lived, always overshadowed by the Treasury, in whose building it operated. The NEDC and the “little Neddies” it spawned, covering individual sectors, were finally put out of their misery in the 1990s.

The problem of relatively weak growth and persistently high inflation in the UK was instead tackled by entry into the European Economic Community (EEC) in 1973, the Thatcher revolution, the “Big Bang” in the City, the single market and Bank of England independence.

Toady we are at another of those crossroads, and plenty of people are thinking big thoughts about how to improve the UK’s performance in a post-pandemic, post-Brexit world. Some of that thinking is going on within government, though it tends to emerge in ambitious and eminently missable targets from the prime minister. You don’t get the impression that a huge amount of strategic thinking is going on.

Others are doing so, however. The CBI is undertaking its own exercise, and the Resolution Foundation think tank is combining with the London School of Economics for its Economy 2030 inquiry, which will be formally launched later this month. “The country lacks a clear sense of its path to prosperity,” the think tank says.

The first of these exercises, the final report of the Covid Recovery Commission, was published a few days ago. Set up in July last year, and chaired by John Allan, chairman of Tesco and Barratt Developments, this business-led commission consisted of 10 leading business figures, including the chief executives of Vodafone and Heathrow, and the chairs of Shell UK, Admiral Insurance and Babcock International and the managing partner of McKinsey in the UK, It was advised by a 23-strong advisory group and a 19-strong policy panel. It was an impressive line-up.

The UK, it concluded, needs a “national prosperity plan” led by business, government and civic society, to address longstanding problems of weak productivity and inequality. It uses the example of the speedy development of the Oxford/AstraZeneca vaccine as an example of the kind of thing this country can do when the chips are down One of its commissioners is UK president of AstraZeneca.

The commission addresses the UK’s key weaknesses, on skills, infrastructure, investment, competitiveness, regional inequality and income inequality. It will be necessary, it says, to build on the UK’s strengths: “our leading universities, world-class innovation and R&D, our businesses and financial system, our democracy, our institutions and governance”.

To this end it has a five-point programme., or five national “imperatives”. The first aim is to create at least one globally competitive industry in every region and nation of the UK by 2030. Regulators should focus on competitiveness as well as immediate consumer protection, it says, and catapult quarters – a bit like supercharged enterprise zones – should be established.

Second, lifelong learning should be made a reality rather than a slogan, with the aim of halving the skills gap by 2030. The apprenticeship levy, hated by many businesses, should be replaced. Third, government should spend at least 1.2 per cent of GDP on infrastructure each year. It thinks there should be a new government consulting service, among whose tasks will be to create “the Great British supply chain”.

Fourth, there should be a “national deal for net zero homes”, what it describes as a 15-year pathway for the decarbonisation of the housing stock. A green homes bond would provide access to the funds for retrofitting buildings, with the return coming from a share of the energy savings. Finally, an imperative is to “close personal and community resilience gaps in mental and physical health, finances and wellbeing in each year over the next decade”.

As is often the case with these exercises, in it there is a lot that is good, some questionable, and quite a lot of motherhood and apple pie, in other words things that we would very much like to happen but it is not clear how. I like the idea of having at least one globally competitive industry in each region. Some regions already have more than one, others none at all.

The government is responding to the infrastructure challenge, and the report’s well-described UK shortcomings in this area, though we have not seen much yet apart from the announcements. Infrastructure takes time. Full-fibre gigabit capable broadband could provide a significant boost, and featured in both the Tory election manifesto of December 2019 and Boris Johnson’s leadership bid. But the government has scaled back its plans, from offering 100 per cent coverage by 2025 to 85 per cent, and the Commons digital, media, sport and culture committee warned recently that even that scaled-down target risked being missed.

The idea of a Great British supply chain, which has had some coverage, looks like a bit of a knee-jerk response to issues that arose around component supplies from China early in the pandemic, delays at the ports around the turn of the year and the more recent Suez Canal blockage.

Businesses will decide where best to source their supplies. For government to seek to influence those decisions, and push businesses to Buy British, smacks of protectionism.

There is great potential for jobs, and growth, from decarbonising the economy and the commission is right to push it. But this is a policy which, too often, again lacks follow-through from announcement to realisation. If there is an army of home insulators and heat pump installers out there, I have yet to spot them.

The commission’s conclusion, that there is no “silver bullet” but that growth and innovation are the key to future success, is hard to disagree with. Its report is a good effort but falls short of being comprehensive. Perhaps, when the other exercises currently being undertaken are complete it will be possible to combine them into a workable plan.

There is no economic silver bullet, but every little helps
David Smith
David Smith is economics editor of The Sunday Times. His website is http://economicsuk.com . His latest book is Something Will Turn Up.

Leave a Reply

Your email address will not be published. Required fields are marked *