CAMBRIDGE – As in many other developed countries lately, the two major political parties in the United Kingdom have embraced economic growth as their top policy priority. Following the volatile 49-day experience of Liz Truss’s government and its “dash for growth” in 2022, however, both parties emphasize that there are no financial shortcuts. The focus, instead, is on devising measures to boost productivity, resource allocation, and growth over the long term. In this respect, the opposition Labour Party is ahead of the ruling Conservatives, though both are still working out the details of actual implementation.
Buoyant, durable, sustainable, and inclusive growth is essential for a country where the older generations risk seeing their children end up worse off than they are. That has not happened in many decades. Only growth can deliver the resources needed to enhance living standards, improve public services, support sustainable energy initiatives, limit the scale of generalized tax increases, and combat inequality of wealth, income, and opportunity.
In short, it is all about increasing the safe speed limit for economic growth. The Bank of England estimates the UK economy’s potential growth may be as low as 1%. At that speed, much that ails the country is likely to get worse, rather than better, over time. Moreover, this already weak growth potential could deteriorate even further if the problem is left to fester.
There is no singular, silver-bullet initiative that can change this outlook. Many British politicians are still haunted by the Truss saga, when the newly arrived prime minister tried to use unfunded tax cuts as a stimulus, only to create a damaging episode of financial instability that forced a change in government. It is now widely acknowledged that after so many years of insufficient investment and sagging productivity, achieving high-quality growth requires a comprehensive policy approach that builds on many intermediate objectives.
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