The UK needs a coherent long-term economic strategy that underpins robust growth in national output, following years of inconsistency from ministers, according to three reports published on Wednesday.
The Resolution Foundation, a think-tank, warned that the UK economy was slipping behind others because of a “toxic combination of low growth and high inequality”. Its report was echoed by the Conservative-dominated House of Commons Treasury committee, that accused ministers of a “lack of long-term thinking in economic strategy”. Meanwhile, the National Audit Office (NAO) concluded that the government’s skills strategy was inadequate to the needs of business.
All three reports suggested that the economy would need more than a smattering of tax cuts to address the challenges of the 2020s.
Tax cuts have so far dominated the thinking for economic reform among the candidates in the race to become the next Conservative party leader and prime minister.
In its interim report of an inquiry into the kind of economy the UK needs by 2030, the Resolution Foundation, working in collaboration with the Centre for Economic Performance at the London School of Economics, highlighted the challenges facing the UK economy.
It found that the UK, having almost caught up with the productivity levels of France and Germany in the mid-2000s, had slipped behind both under the Labour government’s management of the 2008-09 financial crisis and the Conservative-led recovery thereafter.
With high levels of inequality, the report found that although the richest 10 per cent of UK households were better off than those in most European countries, middle-income households were £8,800 poorer than their counterparts in Australia, France, Germany and the Netherlands, with the gap growing.
The exact gap is uncertain and depends on technical calculations of what money can buy in different countries, but according to Resolution Foundation director Torsten Bell, the trends since the mid-2000s were clear and painted economic management in a bad light.
He accused ministers of being “not serious about the nature of our economy . . . not serious about firms investing . . . not serious about levelling up . . . not serious about fairness . . . [and] not serious about taxes”.
Saying that these failures of government had led to a “stagnation nation”, the report called on politicians to recognise that the UK would never be a manufacturing powerhouse and that the future lay in its strengths of professional services, education and intellectual property.
Rather than tax cuts, the future with an ageing population was likely to be higher taxes if public services were going to be adequately funded.
Bell said: “We underestimate the scale of our relative decline and are far from serious about the nature of our economy or the scale of change required to make a difference. This has to change.”
Many of the findings of the Resolution Foundation’s report were echoed by MPs on the powerful Treasury committee, which highlighted the fall in the workforce since the start of the pandemic and the persistent weakness of productivity growth.
It called for additional resources to tackle long Covid to help get people back into the labour market and more help from the Treasury to offset the damage done by Brexit, alongside a greater effort to find opportunities from leaving the EU.
Tory MP Mel Stride, who chairs the committee, said that while a focus on tax was a “good start” in improving productivity growth, “the evidence that we received suggests there needs to be greater stability and long-term certainty in government policymaking”.
The third report from the independent National Audit Office, which examines government policies, raised questions over whether ministers had designed an adequate skills strategy to equip the UK’s workforce for the decades ahead.
It noted that Brexit had reduced the supply of skilled workers from the EU and increased the need to train employees domestically. But corporate training budgets had declined 11 per cent between 2011 and 2019, and 39 per cent of employers had provided no training for their workforce in the previous 12 months.
NAO boss Gareth Davies said it was “essential” that government and employers supported the acquisition of skills. “The government has taken sensible steps to address skills shortages in recent years, but the challenges it faces have increased. There is a risk that, despite government’s greater activity and good intent, its approach may be no more successful than previous attempts to provide the country with the skills it needs,” he added.
The Treasury did not immediately respond to a request for comment.
Source: Economy - ft.com
