We have failed to move beyond a re-run of failed strategies to boost future growthby David Henig / June 16, 2020 / Leave a comment
A recession wasn’t completely unexpected. The UK has been suffering from low growth for some time, and hopes political certainty delivered by the Conservatives’ election win would release pent-up investment were soon disappointed. Of course nobody expected this recession, and this depth. Some growth will be easily recovered as lockdown eases. But there are real concerns that beyond this a recovery will be slow and unsteady.
We need to unlock new sources of growth in the economy. But anyone looking critically at the emerging UK debate on how to achieve this should be disappointed at the reheated mash of simplistic notions and previously discarded ideas. If only reviving the economy were as simple as relaxing the two-metre rule to one metre. Sadly, that is only a very small part of what’s needed.
Freeports similarly fit into the simplistic camp: the excited talk from the government that areas free of tariffs can be transformational is running into the evidence that equivalents in the US employ on average only 2,000 people, and that businesses probably just relocated from surrounding areas—and that’s with advantages the UK won’t replicate. Supporters also tend to overlook that modern trade is about rather more than tariffs. Local communities cannot be blamed for their interest; freeports might be a chance to obtain government money and do better than neighbours. They are hardly, though, transformational for a country.
Prime among previously discarded ideas—overlapping with freeports—is that cutting red tape, particularly in the planning system, will energise the economy. Those recalling numerous similar initiatives in the past know that while in theory, badly designed regulations can be a drag on economic growth, in practice it has proved very difficult to find these, particularly given there is actually a public demand for regulations that protect the environment or high streets. We’ve been reading proposals for easing restrictions on green belt development for so many years that by now it should have become obvious that there’s some major problem, such that this isn’t the answer.
Typically of more use in responding to recessions is government spending on infrastructure with a view to raising productive capacity. Right now there is a widespread political consensus in the UK that this should happen, but it remains far from a panacea. Many projects take…