We need to believe in growth again
Britain is getting poorer in real terms, and that’s a big deal. Policymakers must change their tune and act
Politicians keep talking about how we need to give growth a boost. Liz Truss made it the central mission of her shortlived government. The Labour leader Keir Starmer, as he prepares for government, has promised, somewhat implausibly, to make the UK the fastest-growing economy in the G7. Business leaders keep telling us we need to prioritise it. We can all disagree about how to achieve it. But the desirability of growth is taken as completely obvious.
It isn’t. A survey by Public First found that, of 2,000 people questioned, 32% felt growth “made no difference” to their lives, and 42% felt it made “little difference”. Only 13% felt they benefited “a lot”, with 3% actually believing they suffer “a little” and 2% saying they suffer “a lot” when the economy expands. Virtually no one believes growth is beneficial anymore.
Major reforms are necessary
That is perhaps no surprise. The British economy has been in a rut for a long time now. If you measure GDP per capita, which is what matters for individual living standards, it has been going nowhere: we were on £33,200 of output per capita last year compared with £32,500 way back in 2007, and once you account for inflation in real terms the figure has actually gone down. Nobody under 50 in the workforce today has experienced what a genuinely growing economy feels like. The political class has forgotten what growth is, and spends most of its time debating how to divide up its proceeds, instead of worrying about whether it actually exists. Meanwhile, the green movement has actively preached that growth is bad for the planet. You can hardly blame people for not having a very high opinion of it.
That needs to change, and soon if the UK is to have any hope of a sustained recovery. To start growing again we will need major reforms. The planning regime will have to be radically reformed, with swathes of the green belts around major cities ripped up, judicial reviews curbed, and many unnecessary regulations binned. We may have to lower taxes, even for those who are already rich, to restore incentives, and we might have to lower the burden on companies as well. We will have to curb our vast levels of welfare spending, making it harder to refuse work, even if that seems harsh, and we will have to stop handing more and more money to pensioners. We will have to take risks with deregulation now we are out of the EU, creating a more liberal regime than the rest of the continent to encourage innovation and entrepreneurship. And we will have to relax the obsession with net zero, reducing carbon emissions in line with the rest of the developed world rather than being a global leader, while making sure that we keep developing our own fossil fuels as we transition to alternative energies, instead of always importing expensive oil and gas.
Keep the faith
All of those are painful, difficult decisions, and there will be plenty of furious opposition to all of them. But if people are convinced that growth is vital, and they are confident that they will benefit from it as much as anyone, then a majority of voters can be convinced that those kinds of reforms are worthwhile. If they don’t believe that growth is worthwhile, then what’s the point? To make progress, we need politicians who make it clear that growth is vital if the UK is to remain a first-world country, and who are willing to explain that it is not just necessary to fund public services, but also to allow real wages to start rising again. We need a culture that recognises economic expansion as a worthwhile ambition.
The UK needs to grow. If we don’t expand the economy, we have no hope of maintaining public services, or repairing infrastructure that is starting to fall apart. We won’t be able to keep our debts under control. Living standards will stagnate and poverty levels will carry on rising. Many people may have lost faith in economic growth, but it remains essential. Until we start believing in it, however, it is not going to happen – and the economy will remain stagnant for a generation or more.