Economic policy

Labour has no answers to Britain’s economic slump

philmullan Cultural renaissance, Economic growth, Economic policy, Politics, Zombie economy

The government’s long-awaited industrial strategy is a weak rehash of familiar, failed ideas.

After Labour’s first year of chaos and U-turns, the prime minister Keir Starmer managed to keep a straight face when claiming this 10-year industrial strategy provided ‘stability’ and ‘certainty’ for business. Though if any business leaders thought the document offered ‘certainty’ even about taxation levels just four months’ hence in the autumn Budget, they would have been disappointed.

This stereotypical industrial policy announcement prompts three questions. Why did it take them so long to draw up something so standard? Second, why is there such a gap between the widely-perceived scale of our economic problems and this hackneyed set of policies? And, third, more perplexing, why is there still so much support across the political spectrum for the idea of an ‘industrial strategy’, when all these blueprints for change have been so ineffective in shaking Britain out of its economic stupor? 

For answers to these questions, read the full article here.

Rachel the Deluded

philmullan Debt, Economic policy, Investment, Politics, State intervention

Playing on the title of an Australian TV series, some critics of chancellor Rachel Reeves have taken to calling her ‘Rachel from Accounts’. That’s unfair to people who work in accounts departments. Most of them can interpret a balance sheet – a skill that seems to be beyond the capabilities of Britain’s chancellor.

Presenting today’s spending review, Reeves once again told the public that she can make everything add up, in defiance of common sense. ‘Rachel the Deluded’ is a more apt nickname

She insisted that the government can stick to its public-spending commitments, while not raising taxes on ‘working people’. And it can do all this while fulfilling her self-imposed fiscal rules.

In her fantastical spending-review statement, she claimed that Brits are starting to ‘see the results’ from her having ‘fixed the foundations’ and delivered ‘economic stability’.

Worse still, the spending review shows that the chancellor is continuing to ignore mounting public debt. Indeed, this clueless government has doubled down on the fantasy that the UK can borrow its way to growth, even though the national debt is already the equivalent of annual economic output.

Read the full article here.

Scrap the fiscal rules, abolish the OBR

philmullan Democracy, Economic growth, Economic policy, Politics, State intervention , ,

The parlous state of the British economy and its public finances shows us what happens when you defer to the ‘experts’. Rachel Reeves is a middle manager posing as chancellor. She exemplifies the managerial politician. She doesn’t make political decisions about what the country and its people need, so much as follow rules and procedures authored by experts – by those who supposedly know best.

Read the full article here.

The myth of America’s economic exceptionalism

philmullan Economic growth, Economic policy, Productivity, State intervention, The longest depression

What sort of economy is the returning president Donald Trump inheriting? In otherwise polarised and uncertain times, a consensus stands out: the belief in US economic exceptionalism. America’s recent growth out-performance and its ever-climbing equity markets seem to make the country the exception to economic stagnation across the west. But America’s underlying productive decay is not that different to the other mature industrialised nations. The staying power of the narrative of ‘US exceptionalism’ points not to the US’s exceptional vigour but rather to some peculiar forces for resilience in the face of its long-running productive decline. These US-specific factors reveal America’s superior capacity to offset its moribund tendencies.

Read the article here.

We cannot regulate our way to growth

philmullan Economic growth, Economic policy, Politics, State intervention

Even before this week’s bond market turmoil, the newish Labour government tacitly acknowledged that not all was going to plan, with the economy continuing to stagnate. Over the Christmas period, in an apparent act of desperation, UK prime minister Keir Starmer, chancellor Rachel Reeves and business secretary Jonathan Reynolds wrote a letter to the UK’s biggest regulators to ask for help with its growth plan. Regulatory bodies such as energy watchdog Ofgem, water regulator Ofwat, the Environment Agency and the Financial Conduct Authority were urged by the government to submit proposals on how best to boost the economy.

Of course, government ministers should always be engaging with their functionaries for advice. But to openly admit they have had to beseech them for help to meet their central policy commitment of ‘growth, growth, growth’ was an extraordinary testament to Labour’s lack of ideas.

We shouldn’t hold our breath waiting for Starmer’s administration to deliver on his pledge to get rid of regulation ‘where it is needlessly holding back the investment we need to take our country forward’. The reality is that his government, like its predecessors, will only add more to the regulatory burden. Indeed, Labour’s manifesto explicitly promised tougher systems of regulation on a huge spread of businesses.

Read the full article here.