Politicians should track progress in repairing Britain’s recession-scarred economy by measuring how the typical household is faring rather than specializing in GDP alone, in accordance with a report by a panel of heavyweight economists.
The London School of Economics Growth Commission, in findings published on Thursday, demands statistics on median household income to be published regularly alongside quarterly GDP figures, and for use as a measure of whether government policies are working.
The high-level panel – including Nobel prizewinner Chris Pissarides, ex-BP boss John Browne, the 3 former Bank of britain rate-setters Richard Lambert, Rachel Lomax and Tim Besley, in addition to the LSE’s John Van Reenen, director of its centre for economic performance – offers a sequence of prescriptions for tackling the long-term failings of the united kingdom economy.
They argue that tracking median household income within the runup to the financial crisis would have revealed that the advantages of growth were being swallowed up by a small segment of society. “Increasing inequality seriously is not an inevitable byproduct of growth, especially if policies are pursued that make growth more inclusive,” the report says.
In what they bill as a “manifesto for growth”, the authors argue that during three areas – human capital, infrastructure, and long-term investment – the united kingdom risks falling behind its international rivals.
They demand a lift to education, in the course of the creation of a “flexible ecology” of college types, and longer probation periods and higher rewards for the fitting-performing teachers, to enhance the odds of youngsters from low-income families.
The authors would also want to see a “new institutional architecture” for major planning projects, to prevent politicians delaying decisions for decades and ensure the economy’s long-term needs are met on the basis of the best expert advice.
“Nowhere is the problem of UK infrastructure better illustrated than by airport capacity in the south-east, where generations of politicians have prevaricated to a point where there is serious risk to London’s position as a major hub.”
Under the regime advocated by the economists, there would be a national-level infrastructure strategy board, to give independent expert advice; an infrastructure planning commission to draw up and approve plans for specific projects; and a brand new infrastructure bank to supply a mixture of private and non-private finance.
Channelling long-term investment to promising small businesses is another major shortcoming of the united kingdom economy, in keeping with the report, which requires the federal government to enhance competition in banking, and inspire alternative sources of finance, including by removing the tax advantages of debt-fuelled takeovers.
The latest official figures, published by the Bank of britain on Thursday, show that net lending to businesses continued to say no last month.
The panel can be highly critical of the prime minister’s decision to vow a referendum on Britain’s EU membership, saying: “Calls to go away the ecu through a referendum aren’t only misguided: they bring about the very uncertainty so we can damage investment and productivity at once. It’s analogous to the needless self-inflicted wounds that the usa is causing in its debates over the debt ceiling and financial cliff.”
Presenting the report, Tim Besley said that while the coalition was concerned with short-term deficit reduction, commitment to a sequence of longer-term reforms could help to “crowd in” private sector investment and deliver a growth dividend. “We lack a heart of presidency to drive this through,” he said. “There’s little or no on the centre.”
However, business secretary Vince Cable insisted: “The govt. is implementing an industrial strategy in partnership with business to tackle the very issues the LSE’s Growth Commission report identifies.”
