The UK needs a coherent long-term economic strategy that underpins robust growth in domestic output, after years of inconsistency from ministers, according to three reports released on Wednesday.
The Resolution Foundation, a think tank, warned that Britain’s economy was slipping behind others due to a ‘toxic combination of low growth and high inequality’. His report was picked up by the Tory-dominated House of Commons Treasury Committee, which accused ministers of “lack of long-term thinking in economic strategy”. Meanwhile, the National Audit Office (NAO) has concluded that the government’s skills strategy is unsuited to business needs.
All three reports suggest the economy would need more than a handful of tax cuts to meet the challenges of the 2020s.
Tax cuts have so far dominated thinking about economic reform among candidates in the race to become the next Conservative party leader and prime minister.
In its interim report surveying the kind of economy the UK needs by 2030, the Resolution Foundation, together with the Center for Economic Performance at the London School of Economics, highlighted the challenges facing the British economy is facing.
He revealed that the UK, having nearly caught up with the productivity levels of France and Germany in the mid-2000s, had fallen behind both under the Labor government’s handling of the 2008 financial crisis -09 and the Conservative-led recovery thereafter.
With high levels of inequality, the report found that although the richest 10% of UK households were better off than those in most European countries, middle-income households were £8,800 poorer than their counterparts in Australia, France, Germany and the Netherlands, with a widening gap.
The exact spread is uncertain and depends on technical calculations of what money can buy in different countries, but according to Resolution Foundation director Torsten Bell, the trends since the mid-2000s were clear and depicted economic management in a bad light.
He accused ministers of “not being serious about the nature of our economy. . . not serious about investing companies. . . not serious about upgrading. . . not serious about fairness. . .[and]not serious about taxes”.
Claiming that these government failures had led to a “nation of stagnation”, the report called on politicians to recognize that the UK would never be a manufacturing powerhouse and that the future lay in its strengths in professional services, education and intellectual property.
Rather than tax cuts, the future, with an aging population, would likely be tax increases if public services were adequately funded.
Bell said: “We underestimate the scale of our relative decline and are far from serious about the nature of our economy or the scale of change needed to make a difference. This must change.
Many of the findings of the Resolution Foundation report were echoed by MPs on the powerful Treasury committee, who pointed to the decline in the workforce since the start of the pandemic and the continued weakness in productivity growth.
He called for extra resources to tackle the long Covid to help get people back into the workforce and more help from the Treasury to offset the damage caused by Brexit, alongside an increased effort to find opportunities to leave the EU.
Tory MP Mel Stride, who chairs the committee, said that while the focus on taxation was a “good start” to improving productivity growth, “the evidence we have received suggests that there must be greater stability and long-term certainty in the development of government policies”. .
The third report by the independent National Audit Office, which reviews government policies, raised questions about whether ministers had devised an adequate skills strategy to equip Britain’s workforce for decades to come.
He noted that Brexit had reduced the supply of skilled workers from the EU and increased the need to train employees domestically. But company training budgets had shrunk by 11% between 2011 and 2019, and 39% of employers had not provided any training to their staff in the previous 12 months.
NAO boss Gareth Davies said it was “essential” that the government and employers support skills acquisition. “The government has taken sensible steps to address skills shortages in recent years, but the challenges it faces have grown. There is a risk that, despite the greater activity and good intentions of the government, its approach will not be more successful than previous attempts to equip the country with the skills it needs,” he added.
The Treasury did not immediately respond to a request for comment.