Economic and political chaos of the global and home-grown varieties mean the work of plotting a route to a fairer society and better living standards has rarely seemed more daunting.
But that was exactly the challenge seized on by a host of speakers at the Centre for Progressive Policy’s (CPP) Inclusive Growth Conference at London’s Royal Institution last week.
The economic climate in the UK is a cold one. Last week, the Organisation for Economic Co-operation and Development said the UK economy was on course to reduce by 0.4% of GDP next year, with only Russia forecast to have a worse performance among the world’s most wealthy economies.
But chief economist at the Institute of Directors Kitty Ussher grabbed onto something approaching optimism. Her message to delegates was that predictions of a two-year long recession are ‘possibly a little too pessimistic’.
The Government has set the Bank of England a 2% inflation target. Ms Ussher said consumer price index inflation had risen to 11.1% and was ‘peaking round about now’. By this time next year ‘we should see a very clear sense of inflation, whilst it may not be on target, falling back rapidly’.
On economic interventions, Ms Ussher said the ‘enormous gap [in the UK] is in policy towards skills shortages’. She underlined Labour leader Sir Keir Starmer’s message that same day to the Confederation of British Industry conference when he said a Labour government would not hold business back if more migration was needed to increase innovation or tackle labour shortages in key sectors. But in his speech, he emphasised that businesses must focus on ‘investing more in training up workers who are already here’.
Ms Ussher reflected: ‘However you voted in the Brexit referendum, there is a perfectly valid political interpretation of that, which is that we should be growing our own [workforce], and there was nothing in the Autumn Statement on that, apart from an NHS workforce plan.’
What are the characteristics of good growth and how can it be delivered? In her opening remarks, chief executive of the CPP Charlotte Alldritt said inclusive growth means ‘enabling as many people as possible to contribute to and benefit from economic prosperity’. It involves ‘recognising that investment in and reform of public services is as important as the traditional levers of economic policy’.
She continued: ‘Should we have to choose between a strong economy on the one hand and public services on the other, or as we at CPP believe, must these go hand in hand if we are to break the productivity malaise and real wage stagnation of the last decade?’
Ms Aldritt emphasised the importance of ‘fixing our inequalities in education and skills’. What’s needed is ‘to be able to go in and think at a place level, [about] what skills are needed and how they can be effectively deployed and delivered.’ She also highlighted the need to put much more resource into a much better mental health system.
Part of the challenge depends on eradicating poverty, she added. She stated that ‘the majority of people who are in poverty are in working households’. She commended the Autumn Statement’s announcement of an uplift in the National Living Wage, and welcomed the uprating of some benefits.
Like Ms Aldritt, mayor of Bristol and chair of Core Cities UK Marvin Rees raised the case for improving health. He also put forward the argument for strengthening social cohesion. He said: ‘Maybe you begin to take into account the potential of cuts to cost the future economy, reducing the health resilience of the population, and reducing social bonds in a way that would undermine the basis for growth. As a businessman in Bristol John Savage once said, “riots are not good for inward investment”.’
In response, chief executive of the Royal Society for Arts Andy Haldane said ‘we could do just what Marvin says - there is no reason why as a country we could not take stock…. not only of human capital, but also of social capital’.
He added: ‘There is no reason why we couldn’t score societal success in a somewhat different way and make budget decisions through the lens of helping to accrete these capitals.’
New data commissioned by the CPP from global polling firm Ipsos and unveiled at the conference revealed that in the UK right now the public is pretty downbeat about the economy’s prospects, and we stand out in Europe in terms of our degree of worry about economic inequities between regions.
Presenting the polling, global chief executive of Ipsos Ben Page said that what’s clear from the mid-October data is the public is ‘very concerned about what’s going to happen next’. He said the popular word polycrisis does reflect these ‘very difficult 2020s where we came out of the pandemic and nobody anticipated the persistence of inflation to start with’.
He added: ‘We don’t know what Mr Putin will do next. We don’t know what President Xi [of China] will do or anything else. That uncertainty is really the only certainty. The challenge is that the British public is in a fairly pessimistic place.’
While he dryly pointed out that the British are usually fairly gloomy anyway, he said we are expecting 2023 to be fairly miserable – ‘that we are going to have a recession and a peak in inflation in the early part of the year’. Sixty-seven per cent of the public said they expect their local economic conditions will get worse over the next 12 months.
Across the UK, 59% of people expect local economic conditions to worsen over the next five years. Around half (49%) of those surveyed think that access to economic opportunity will become less equal in their local areas in 12 months or over the next five years.
He emphasised that at a local level overall the south east and the south west were ‘happiest’. London is ‘not particularly cheerful’, with ‘people struggling to pay the rent in London, struggling to find somewhere to live’. In the north-east, 63% said that society would become less equal, and 40% of respondents in the region said they expect the economy in their local area to get a lot worse over the next five years – the highest proportion in the UK.
Professor Tony Travers, of the London School of Economics’ Department of Government, said it was time to say ‘something nice’ about [former Prime Minister] Liz Truss, who ‘did articulate very clearly… that the trend growth rate in the UK, which had tottered down to one and a half or one per cent, probably wasn’t good enough to sustain the sort of state that we had become used to of two and a half per cent trend growth’.
He added that getting better and more inclusive growth at the local level was going to ‘require greater local freedom to use the resources and powers available at the sub-national level in order to produce the kind of growth in places that had been left behind to help them catch up’. That means policy is needed not for two or three years but for 30 years, he believes.
Devolution’s potential as an engine for growth returned to the political spotlight in the Autumn Statement. Chancellor Jeremy Hunt emphasised that discussions on ‘trailblazer’ deals with Greater Manchester and the West Midlands are back on track and will mean more powers devolved in areas including skills, transport and housing. Tera Allas, director of research and economics at McKinsey & Company, told the conference that there is a ‘sense of devolution creating real opportunity for us to work with partners locally. It has to be still in partnership with central government but there are things you can get on with’.
Returning to Mr Page, he finished with a plea for creative thinking and consensus as a way to fix the growth problem. ‘Can we finally agree about what good growth looks like which everyone in this country wants and everybody in this country expects?’
