Across the political spectrum, boosting growth is a top priority - but policy uncertainty is a major obstacle to that objective. In this blog, Melville Rodrigues and Aveek Bhattacharya set out how to (re)build stability at the heart of our politics.
“Growth, growth and growth” are the top three priorities for which major party leader? Answer: both Keir Starmer and Liz Truss. The Labour leader made the claim in a speech on the economy in July. The soon-to-be-ex Prime Minister used the exact same formulation in her Conservative conference speech earlier this month, and expressed the same sentiment in the Conservative Party leadership debates over the summer. This renewed focus on growth is welcome, and long overdue, given the travails the UK economy has experienced in recent decades. Yet as the current Government is discovering, sound economic management depends as much on the way policies are delivered as it does on the content of those policies.
In particular, instability, churn, and uncertainty are deeply poisonous to effective governance. They also undermine business confidence. While wider economic forces and substantive policy decisions have also contributed to it, the stagnation in business investment since 2016 is in large part a product of regulatory uncertainty in the post-Brexit era. Offering incentives for investment or cutting business taxes may seem attractive, but businesses will not take them seriously if they expect them to be unwound after the next election.
Recent work from our think tank, the Social Market Foundation, illustrates the point. In interviews with farmers, we found that many are unwilling to invest in innovative technologies that could help bridge the gap to more productive agricultural systems because six years after the Brexit referendum, they still do not know what the post-EU farm subsidy system will look like. Reports that Liz Truss’ government is considering throwing out much of the progress that has been made and going back to square one with a full review of the subsidy system only makes things worse.
What we need, then, are holistic solutions, and sustainable reforms that achieve consensus amongst a wide range of stakeholders. The good news is that our policymakers, at their best, have shown themselves eminently capable of such collaborative and long-term thinking.
On a number of important issues – independent monetary policy, the national minimum wage, pension reform and auto-enrolment – policies have been developed that rise above short-term party politics and offer businesses a framework for the long-term.
In the years ahead, there are significant areas where all the major parties have similar goals and a shared interest in working together to embed changes. For example, people across the political spectrum share the objective of encouraging pension funds to invest more of their money in long-term assets, like infrastructure, that can boost the economy. Politicians should therefore support the work of the Productive Finance Working Group, which combines the expertise of the Bank of England, the Financial Conduct Authority, the Treasury and industry.
Where appropriate, we believe that policy recommendations should be delegated to more stable, independent and expert decision-making bodies. Events of recent weeks have shown the value of organisations like the Office for Budget Responsibility. We welcome the Chancellor establishing this month the Economic Advisory Council as a consultative forum with leading and respected economists, to advise current and – we hope– future governments. Another example would be for government to take more heed of the recommendations of the National Infrastructure Commission, given the UK’s slow progress on infrastructure investment. At the same time, we are democrats and we recognise the importance of elected representatives retaining the most important decisions.
Moreover, politicians themselves are not necessarily the problem: often the issue is the partisan incentive to engage in artificial adversarialism. In the US, some commentators have put forward the ‘Secret Congress hypothesis’ that effective government action is most likely to occur on issues that do not receive public attention. According to the theory, as soon politicians talk openly on a subject, they feel compelled to draw partisan dividing lines. If it stays in the shadows, they are more willing to seek a middle ground. To some extent, this dynamic operates in the UK as well. Fortunately, however, we have forums and institutions – most notably select committees and all-party parliamentary groups – that facilitate politicians to work together on a cross-party basis.
Yet there are limits to what can be achieved furtively. Impressions count as well as actions, and if ordinary people – including businesses – assume that politics is all Punch and Judy they can hardly be expected to feel secure. There will always be dividing lines, but it would be nice more often to see politicians asked to name which of their opponents’ policies they think have been successful or intend to keep, if only to highlight the latent agreement that already exists.
So we would also like to see more progress in our political culture, towards one that does more to valorise and promote consensus where it exists. We should utilise more expertise within our policy infrastructure to build collaboration and continuity.
Melville Rodrigues is a trustee of the Social Market Foundation and Aveek Bhattacharya is research director