Читать книгу The Chancellors - Howard Davies - Страница 11

The deep Covid-induced downturn was followed by a strong short-term recovery. GDP fell by a record 9.9 per cent in 2020. The recovery was expected to bring aggregate GDP back to the level at the end of 2019 by the summer of 2022. Will growth thereafter be stronger than before, allowing the two lost years of growth to be recovered? In the summer of 2021 the Bank of England, while optimistic in the short term, saw no reason to believe the trend growth rate would revert to a figure higher than had been achieved since 2009, in other words 1.7–1.8% a year. That would be a disappointing outcome.

In May 2021 the Resolution Foundation, an independent think-tank, and others launched an inquiry into the UK economy in 2030.²⁰ The premise was: ‘The UK’s recent past has been marked by stagnant living standards, weak productivity, low investment and high inequality. This makes a new economic approach desirable.’ They present a balanced picture of the strengths and weaknesses of the UK as it emerges from recession.

On the asset side of the balance sheet, they identify a fast-growing services sector, especially insurance and other financial and business services, internationally competitive higher education, and a relatively advanced position in the necessary transition to a net zero economy. The existence of a strong political consensus on the latter point is also potentially a trump card. On the liability side, in addition to the poor investment and productivity record already discussed, they list a high degree of inequality, and an unfavourable demographic position, with the population ageing rapidly in the next decade, and Brexit likely to reduce high-skilled immigration from neighbouring countries.

Some of these factors are not susceptible to Treasury intervention. But the report identifies policy weaknesses which are potentially under Treasury control. In particular, they see ‘long-run issues with parts of our tax system, such as the relative taxation of capital and labour’, and the absence of a coherent approach to carbon taxation. (I discuss the tax system in Chapter 4.) And they conclude: ‘The UK also lacks any long-term institutional structure to govern industrial strategy. The ability of sub-national government to manage change has also been weakened, with local authority spending power in England falling by 18 per cent since 2010.’ That is important given the evidence across Europe that attempts to ‘level up’ economic development ‘are driven by regions with high human capital and high-quality local government’.²¹ The Treasury’s centralizing instincts, and suspicion of local government, could be serious disadvantages in pursuing a levelling-up agenda. Critics see ‘no sign the government is embracing the co-ordination needed for the moves to have a significant impact – nor any hint of further devolution of policy powers away from the centre’.²²

The stakes are high. Torsten Bell et al. conclude: ‘If the pace of UK underperformance … were to continue at the same pace in the 2020s as in the 12 years to 2019, then the country will end this decisive decade with GDP per capita much closer to that of Italy than Germany: 17 per cent lower than Germany and just 6 per cent higher than Italy.’²³ My first job on leaving university in 1973 was as desk officer for Italy in the Foreign and Commonwealth Office, as it then was. At the time, the Italians liked to talk of il sorpasso (the overtaking), the moment when their economy would overtake the UK’s. That did in fact happen in 1987, but by 2020 we were almost 30% richer per capita, after dismal performance in Italy since joining the euro. For us to fall back to the Italian level would be dramatic. Fortunately, in the summer of 2021 external forecasters expected the UK economy to grow less rapidly than France and Germany in the recovery phase, but still ahead of Italy.²⁴ That is not, however, a high bar.