Britain’s Economy Is ‘Broken’
Britain’s economic model is “broken” and failing to generate rising prosperity for most of the UK population, according to a major new report.
The IPPR’s Commission on Economic Justice argues in its interim publication that the UK economy requires a structural overhaul on the scale of the founding of the welfare state by Labour in the 1940s and the Thatcher rollback of the state in the 1980s.
The Commission likens the 2008 financial crisis to the Great Depression of the 1930s and the stagflation of the 1970s as a crisis that necessitates an institutional and policy rupture.
Among its recommendations, the CEJ is mooting new wealth taxes, “fiscal devolution” to the UK’s regions, stronger trade unions and new regulation of digital monopoly companies.
“We don’t have a British economic model. We have an economic muddle,” said Tom Kibasi, the director of the IPPR think tank. “The persistent economic problems we have experienced since the 2008 financial crash won’t be fixed with a bit of tinkering. There is a growing consensus across business, trade unions and civil society that a radical new approach is now needed.”
Members of the IPPR’s commission, which was launched in November 2016, include Sir Charlie Mayfield of the John Lewis Partnership, Jurgen Maier, the boss of Siemens UK, the McKinsey managing partner Dominic Barton, the economist Mariana Mazzucato and the Archbishop of Canterbury, Justin Welby.
“Britain stands at a watershed moment where we need to make fundamental choices about the sort of economy we need,” said Mr Welby. “We are failing those who will grow up into a world where the gap between the richest and poorest parts of the country is significant and destabilising”.
As evidence of Britain’s broken economy the commission cites the fact UK GDP growth has decoupled from inflation-adjusted average weekly earnings, with the former rising by 12 per cent since 2010 while the latter has fallen by 6 per cent. The commission also notes that the share of national income going to wages, as opposed to capital, has declined since the late 1970s.
The report describes Brexit as a “momentous change” that will “require – and may create opportunities for – the British economy to become more resilient and competitive, focussed on higher productivity and export performance”.
The Shadow Chancellor, John McDonnell, said: “The commission’s findings drive home the deep problems of the British economy, which have been gravely worsened by seven years of Tory failure that has seen average wages fall and debt rise.”
But The Treasury defended the Government’s record. “Employment is at a record high, the deficit is down and inequality is at a 30 year low,” said a spokesperson. “We are proud of this record but there is more to be done. That is why we are investing £23bn in infrastructure, [research and development] and housing while also reforming technical education to prepare for the high paid, high skilled jobs of the future.”
The commission’s final report will be published in the autumn of 2018.