This podcast explores the challenges of the UK economy and the importance of economic growth. It discusses stagnant wages, income inequality, and the underperformance of the economy. The impact of Brexit on manufacturing businesses and the need for government spending and investment are also discussed. The podcast emphasizes the trade-offs and challenges in growing the UK economy, including infrastructure and the role of stakeholders.
Stagnant wages and incomes in the UK for over a decade have resulted in lower average incomes and income inequality.
The UK's economy faces challenges in terms of regional disparities, inadequate investment in skills and vocational training, and a complex and inconsistent tax and planning system.
Deep dives
Stagnant Wage Growth and Income Inequality
Wages and incomes in the UK have been stagnant for a decade and a half, resulting in a period without wage growth longer than any other since the Napoleonic Wars. This has led to a 15-20% underperformance in economic output compared to expectations, causing households to experience lower average incomes. Additionally, this lack of growth has contributed to greater income inequality, with the average UK household being approximately £10,000 worse off than if growth had continued after the 2008 financial crisis.
The Importance of Investment and Skills
To achieve economic growth and productivity, there are key ingredients needed, such as a well-educated workforce, private sector investment, and adequate infrastructure. However, the UK's economy is unevenly baked, with London and the southeast performing well, while other regions and cities, like Birmingham and Manchester, have struggled significantly. Investment in skills and vocational training also remains a challenge, with the UK lagging behind in providing technical and foundational skills to meet the demands of businesses. Inconsistent skills policies and reduced employer spending on training further contribute to this issue.
Barriers to Growth: Taxation, Planning, and Policy Inconsistency
The podcast highlights several barriers to achieving economic growth in the UK. The tax system, although relatively internationally competitive, is complex and often unfair, penalizing employment and earnings. The planning system also poses challenges, making it expensive and uncertain to build houses, infrastructure, and transport networks. Policy inconsistency, with frequent changes in tax rates and rules, hampers business confidence and planning. Short-term political priorities and a lack of long-term vision contribute to a volatile policy environment, making it difficult to prioritize public investment and enact effective growth strategies.
The cost of living crisis followed a decade in which people’s wages and incomes barely grew. The idea that each generation does at least as well as the one before, has for the moment ended. We’ll only start getting better off again if we can get the economy growing – as it used to in the decades preceding the financial crisis. So, what levers can governments pull to get growth back into the system? Why don't governments do the things that nearly every expert thinks might work? Should we be looking to governments at all? Paul Johnson of the Institute for Fiscal Studies explores the challenges facing the UK economy and asks: how can any government get the UK economy growing?
Presenter: Paul Johnson
Producer: Farhana Haider
Editor: Claire Fordham
Contributors:
Diane Coyle, Bennett Professor of Public Policy at the University of Cambridge.
Jagjit Chadha, Director of the National Institute of Economic and Social Research
Stephen Evans, Chief Executive of the Learning and Work Institute
Richard Davies, Director of the Economics Observatory
Louise Hellem, Chief economist at the CBI.
Nicholas Macpherson, former Permanent Secretary at the Treasury.
Rowan Crozier, CEO C. Brandauer & Co Ltd
Sam Bowan, Editor of Works in Progress
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