The new chancellor, Kwasi Kwarteng, has declared that he wants to boost economic growth from the present underlying rate of just under 1.5 per cent to 2.5 per cent or higher. All right, then: here are three quick suggestions.
Let’s start by building a lot more housing: hundreds of thousands — no, millions of homes. And let’s make sure we build them not off in the distant commuter belt but in the cities where house prices are especially eye-watering: right in the middle of London and Oxford. And if this new housing policy means tearing down old Edwardian stock and concreting over patches of the green belt, well . . . so be it.
And since economic growth is really just a form of energy conversion, let’s make energy abundant. Let’s build a fleet of nuclear power stations: some enormous ones next to the sea and tens or maybe hundreds of smaller modular reactors to power towns. And, given it would be foolhardy to put all our eggs into one basket, let’s put up loads more wind turbines too.
And if all that fails, we could always fall back on a kind of economic cheat code we’ve deployed more than a few times in recent decades: let more people into the country. Increase the population by 10 per cent and, lo and behold, our national income should rise by more or less the same amount. Sure, technically we’re not getting any richer, but there’s no denying the arithmetical elegance of this solution: struggling to increase the national income? Just enlarge the nation.
And if none of those whets your appetite, there are any number of other options. Given we have a skills deficit, we could throw more money at further education. How about introducing universal childcare so parents can get back to work sooner? Why not abolish corporation tax altogether, or at the very least introduce 100 per cent deductions for business investment?
By now you’ve probably guessed that I’m only being half serious here. No one seriously expects the government to tear up the green belt or abolish one of its most lucrative taxes. But if you’re after some “pro-growth” solutions from the left and the right, here they are.
Not very appetised? This brings us to the great paradox. There’s a lazy assumption that everyone loves economic growth. And there’s a strong logic to this: stronger growth is good news in all sorts of respects. All being well, it should lift all boats, making everyone better off, diminishing the national debt (since we have more income with which to pay it off) and making expensive public services such as the NHS somewhat more affordable. What’s not to like?
For many people the answer is: quite a lot, actually. One person’s growth is another person’s congestion. While a young person might see a new factory or apartment block and think “opportunity”, a pensioner might just see a lot of noise and disruption. They might see it as yet another thing that would push up prices and cause them more economic harm than good, and they would have a point: from their perspective, at least, it probably would.
Which raises a rather important point: since governments are answerable to their citizens, and since those citizens don’t always like certain forms of economic growth, quite a lot of what passes for policy these days is indeed “anti-growth”. Most of what constitutes the planning system is anti-growth, by design. Nearly every variant of Brexit is anti-growth. Rules that constrain migration, food safety regulations and speed limits — all anti-growth. If governments are anti-growth, it is because, well, that’s what the voters want.
Which raises a question: is this government really “unashamedly pro-growth”, as Kwarteng said recently? Is he really prepared to tear down every stifling regulation, even if that alienates his electoral base, or is he up to something else?
Would he prefer instead to fiddle around with the tax system, cutting constraints on business investment, abolishing the cap on bankers’ bonuses and ditching other onerous European schemes such as Solvency II, a complicated set of rules that forces asset managers to set aside more money on their balance sheets rather than invest it?
Does pro-growth really just mean borrowing a little more and spending a little less time going on about levelling-up and redistribution?
It certainly sounds that way. Their problem, however, is that what passed for levelling-up had all sorts of pro-growth potential. Nor is there much evidence that redistribution tempers growth; indeed, many of the world’s most equal countries — Norway, Belgium and Denmark among them — have some of the world’s highest economic productivity rates.
Now it’s quite conceivable that by cutting a few taxes, the government could indeed boost business investment, in which the UK lags behind most other industrialised economies. It’s certainly plausible that Kwarteng makes a better fist of this than Rishi Sunak, whose most famous business-friendly policy, the super-deduction, was really just a cleverly branded scheme to prevent companies from holding off on their investment as his big tax rise approached.
Few aims are more pro-growth than encouraging businesses to invest more in this country. Yet those kinds of corporate and capital decisions depend on all sorts of thing: everything from political stability and demographics to skills levels and, yes, the tax system.
Being pro-growth doesn’t just mean burning a few regulations; it means pondering all the reasons people might be putting their money elsewhere. And it so happens we’re at one of those moments when precisely that is happening. Money is leaving the country: last week the pound dropped to its lowest level against the dollar since 1985.
Teasing out explanations for this are tricky, but it’s notable that the cost of insuring the UK against sovereign default, which earlier this summer was the lowest among the group of seven industrialised economies, has risen to the third-highest. Investors — those very people we rely on to seed our future growth — are heading in the opposite direction.
It is still early days in the Truss era. There is no shortage of “unashamedly pro-growth” policies for Kwarteng to choose from. There are opportunities aplenty for anyone with the stomach to take on vested interests. But is that really what he wants?
I do generally agree with this but not all growth is made equal.
2% growth from a 2% population increase from migration is unlikely to raise living standards (well it probably would in the short term because migrants skew young and don’t cost much).
Where as 2% from increased productivity, shared between the existing population, would raise GDP per capita and go a long way to increasing living standards.
I’m not saying we can’t do both, we should do both, but it’d be an error to do the first without the second.
We really need a clearer vision for the future. There are a lot of different people with different ideas. We got to pick one and go stick at it for multiple decades. My suggestion, just pour all our GDP into nuclear energy – fusion and fission and just hope it all works out.
This is a good comment piece because it acknowledges the complexity of the situation.
What I think could be added is a note that many of the regulations that could be sacrificed for immediate growth are ones that protect us from short-termism, and pay for themselves in the long-run.
Lax enforcement and management of buildings materials saved tens of thousands of pounds in the early 2010s, but has cost hundreds of millions of pounds after Grenfell demanded re-fitting.
High food standards mean a healthier population that consumes with confidence and exports to other countries that are confident in our product standards.
One of my main problems with the Tories is that in their current form they tend towards short-termism; Cameron was stopped from selling off the nation’s forests, but the austerity that saved money in the short term now costs us billions as social problems are cheaper to solve at the early stages rather than later on.
I fear that we’ll be getting more of the same; imagine a future where ‘onerous drinking water regulations’ have been lifted to ‘encourage growth’, but consequently everyone uses bottled water because the tap water isn’t safe, and we’re all spending more money that was saved.
I honestly can’t fathom how the pro infinite immigration crowd don’t comprehend that the economy growing in absolute terms doesn’t help the individual.
You have a hundred people earing a dollar a day bring in 10 new people earning a dollar a day the total increases but the average stays the same.
Stuffing endless amounts of people on to our island won’t solve anything only make the place less pleasant and more expensive.
We’re already overcrowded by European standards the desperate desire on the left to crowd us in even more seems aimlessly self destructive.
Or pay the people that live and work here enough to actually spend after bills and rent, that could also grow the economy, and encourage people to join places with a shortage
Build new housing in the middle of Oxford? Good luck knocking down a few colleges for that.
>Given we have a skills deficit, we could throw more money at further education. How about introducing universal childcare so parents can get back to work sooner?
More of this please, I love how the portrayed leftist options are actually centrist as well and very attractive being redistributive and resolving long term issues we have.
A good opinion piece overall though.
Don’t even have to let in more people.
Just make it more palatable for people to have kids.
There must be plenty out there who are putting it off due to the fact they can’t afford it, the house is too small, and one of them is going to have to put our career in hold whilst the other works every hour available.
All those right wingers harping on about the great replacement, and they never want to make it more attractive to have kids.
A poem from the home office
Mass immigration no Integration natural segregation.
Nation of Migrants are we no kids on the streets will you see
We have melted through the pot onto the floor dear Britain on deaths door.
How about giving new migrants strict five year work visas, and a free flight home at the end?
11 comments
by Ed Conway
The new chancellor, Kwasi Kwarteng, has declared that he wants to boost economic growth from the present underlying rate of just under 1.5 per cent to 2.5 per cent or higher. All right, then: here are three quick suggestions.
Let’s start by building a lot more housing: hundreds of thousands — no, millions of homes. And let’s make sure we build them not off in the distant commuter belt but in the cities where house prices are especially eye-watering: right in the middle of London and Oxford. And if this new housing policy means tearing down old Edwardian stock and concreting over patches of the green belt, well . . . so be it.
And since economic growth is really just a form of energy conversion, let’s make energy abundant. Let’s build a fleet of nuclear power stations: some enormous ones next to the sea and tens or maybe hundreds of smaller modular reactors to power towns. And, given it would be foolhardy to put all our eggs into one basket, let’s put up loads more wind turbines too.
And if all that fails, we could always fall back on a kind of economic cheat code we’ve deployed more than a few times in recent decades: let more people into the country. Increase the population by 10 per cent and, lo and behold, our national income should rise by more or less the same amount. Sure, technically we’re not getting any richer, but there’s no denying the arithmetical elegance of this solution: struggling to increase the national income? Just enlarge the nation.
And if none of those whets your appetite, there are any number of other options. Given we have a skills deficit, we could throw more money at further education. How about introducing universal childcare so parents can get back to work sooner? Why not abolish corporation tax altogether, or at the very least introduce 100 per cent deductions for business investment?
By now you’ve probably guessed that I’m only being half serious here. No one seriously expects the government to tear up the green belt or abolish one of its most lucrative taxes. But if you’re after some “pro-growth” solutions from the left and the right, here they are.
Not very appetised? This brings us to the great paradox. There’s a lazy assumption that everyone loves economic growth. And there’s a strong logic to this: stronger growth is good news in all sorts of respects. All being well, it should lift all boats, making everyone better off, diminishing the national debt (since we have more income with which to pay it off) and making expensive public services such as the NHS somewhat more affordable. What’s not to like?
For many people the answer is: quite a lot, actually. One person’s growth is another person’s congestion. While a young person might see a new factory or apartment block and think “opportunity”, a pensioner might just see a lot of noise and disruption. They might see it as yet another thing that would push up prices and cause them more economic harm than good, and they would have a point: from their perspective, at least, it probably would.
Which raises a rather important point: since governments are answerable to their citizens, and since those citizens don’t always like certain forms of economic growth, quite a lot of what passes for policy these days is indeed “anti-growth”. Most of what constitutes the planning system is anti-growth, by design. Nearly every variant of Brexit is anti-growth. Rules that constrain migration, food safety regulations and speed limits — all anti-growth. If governments are anti-growth, it is because, well, that’s what the voters want.
Which raises a question: is this government really “unashamedly pro-growth”, as Kwarteng said recently? Is he really prepared to tear down every stifling regulation, even if that alienates his electoral base, or is he up to something else?
Would he prefer instead to fiddle around with the tax system, cutting constraints on business investment, abolishing the cap on bankers’ bonuses and ditching other onerous European schemes such as Solvency II, a complicated set of rules that forces asset managers to set aside more money on their balance sheets rather than invest it?
Does pro-growth really just mean borrowing a little more and spending a little less time going on about levelling-up and redistribution?
It certainly sounds that way. Their problem, however, is that what passed for levelling-up had all sorts of pro-growth potential. Nor is there much evidence that redistribution tempers growth; indeed, many of the world’s most equal countries — Norway, Belgium and Denmark among them — have some of the world’s highest economic productivity rates.
Now it’s quite conceivable that by cutting a few taxes, the government could indeed boost business investment, in which the UK lags behind most other industrialised economies. It’s certainly plausible that Kwarteng makes a better fist of this than Rishi Sunak, whose most famous business-friendly policy, the super-deduction, was really just a cleverly branded scheme to prevent companies from holding off on their investment as his big tax rise approached.
Few aims are more pro-growth than encouraging businesses to invest more in this country. Yet those kinds of corporate and capital decisions depend on all sorts of thing: everything from political stability and demographics to skills levels and, yes, the tax system.
Being pro-growth doesn’t just mean burning a few regulations; it means pondering all the reasons people might be putting their money elsewhere. And it so happens we’re at one of those moments when precisely that is happening. Money is leaving the country: last week the pound dropped to its lowest level against the dollar since 1985.
Teasing out explanations for this are tricky, but it’s notable that the cost of insuring the UK against sovereign default, which earlier this summer was the lowest among the group of seven industrialised economies, has risen to the third-highest. Investors — those very people we rely on to seed our future growth — are heading in the opposite direction.
It is still early days in the Truss era. There is no shortage of “unashamedly pro-growth” policies for Kwarteng to choose from. There are opportunities aplenty for anyone with the stomach to take on vested interests. But is that really what he wants?
I do generally agree with this but not all growth is made equal.
2% growth from a 2% population increase from migration is unlikely to raise living standards (well it probably would in the short term because migrants skew young and don’t cost much).
Where as 2% from increased productivity, shared between the existing population, would raise GDP per capita and go a long way to increasing living standards.
I’m not saying we can’t do both, we should do both, but it’d be an error to do the first without the second.
We really need a clearer vision for the future. There are a lot of different people with different ideas. We got to pick one and go stick at it for multiple decades. My suggestion, just pour all our GDP into nuclear energy – fusion and fission and just hope it all works out.
This is a good comment piece because it acknowledges the complexity of the situation.
What I think could be added is a note that many of the regulations that could be sacrificed for immediate growth are ones that protect us from short-termism, and pay for themselves in the long-run.
Lax enforcement and management of buildings materials saved tens of thousands of pounds in the early 2010s, but has cost hundreds of millions of pounds after Grenfell demanded re-fitting.
High food standards mean a healthier population that consumes with confidence and exports to other countries that are confident in our product standards.
One of my main problems with the Tories is that in their current form they tend towards short-termism; Cameron was stopped from selling off the nation’s forests, but the austerity that saved money in the short term now costs us billions as social problems are cheaper to solve at the early stages rather than later on.
I fear that we’ll be getting more of the same; imagine a future where ‘onerous drinking water regulations’ have been lifted to ‘encourage growth’, but consequently everyone uses bottled water because the tap water isn’t safe, and we’re all spending more money that was saved.
I honestly can’t fathom how the pro infinite immigration crowd don’t comprehend that the economy growing in absolute terms doesn’t help the individual.
You have a hundred people earing a dollar a day bring in 10 new people earning a dollar a day the total increases but the average stays the same.
Stuffing endless amounts of people on to our island won’t solve anything only make the place less pleasant and more expensive.
We’re already overcrowded by European standards the desperate desire on the left to crowd us in even more seems aimlessly self destructive.
Or pay the people that live and work here enough to actually spend after bills and rent, that could also grow the economy, and encourage people to join places with a shortage
Build new housing in the middle of Oxford? Good luck knocking down a few colleges for that.
>Given we have a skills deficit, we could throw more money at further education. How about introducing universal childcare so parents can get back to work sooner?
More of this please, I love how the portrayed leftist options are actually centrist as well and very attractive being redistributive and resolving long term issues we have.
A good opinion piece overall though.
Don’t even have to let in more people.
Just make it more palatable for people to have kids.
There must be plenty out there who are putting it off due to the fact they can’t afford it, the house is too small, and one of them is going to have to put our career in hold whilst the other works every hour available.
All those right wingers harping on about the great replacement, and they never want to make it more attractive to have kids.
A poem from the home office
Mass immigration no Integration natural segregation.
Nation of Migrants are we no kids on the streets will you see
We have melted through the pot onto the floor dear Britain on deaths door.
How about giving new migrants strict five year work visas, and a free flight home at the end?