Politics of Growth: Bring it on

The best answer to Liz Truss’s assertion that the Liberal Democrats (among others) are in some way ‘anti-growth’ is the truth; our growth policies are better than hers. Fairer, more popular, and more likely to work.

Consider these five points:

  1. The most fundamental consideration for investment and growth is a stable macro-economic backdrop. Truss and Kwarteng could not have crafted a better way of sabotaging the UK’s reputation as a place for investment to thrive. The likelihood of the Tories being out of government may now in itself lead to more positive business sentiment and a more positive outlook for growth.
  2. We back working with our main trading partners in Europe rather than antagonizing them. Joining the single market is near the top of most economists’ lists of actions which would increase the UK’s rate of growth.

  1. We back free child care – a key policy in our 2019 manifesto. Ensuring women can participate fully in the labour force is a key differentiator for a successful modern economy.
  2. We have a credible and longstanding commitment to the development of skills – likewise essential to growth.
  3. The UK must build an economy which is fit for the future, rather than protect the entrenched investments of the fossil fuel companies of the past. While the Conservatives also talk about ‘Green’ growth, it is no longer clear that their heart is in it. Ours is. We do not instinctively support regulatory and tax changes to encourage gas and oil, and we do not instinctively oppose wind turbines.

The Conservatives, in contrast, have an ideology which is both empirically dubious and out of tune with popular opinion – that growth depends on reducing taxes for the rich, incentivizing those on lower incomes through cutting welfare payments, and diluting objectives for net zero.

Both parties have other growth oriented policies: improving the structure of corporate taxation; supporting investment in transport and digital infrastructure; more support for R&D; and balancing growth across the nations and regions. These are important policies but distinguishing between what the various parties are saying requires a level of detailed knowledge that most of us neither have nor want. We shouldn’t expect much here to move the dial electorally.

Assuming (big assumption) that Truss and her message survive, delivering growth is likely to be a major battleground in the run up to any election whether we like it or not. Hence, we need to develop and propagate this strong story. That means reframing some key policies in the context of generating growth and thinking what more we can do to validate the contention that these are better than the ‘growth’ policies of Truss and Kwarteng.

One side of validating that our policies are better for growth than theirs has been made easier. They have already shown that they don’t know what they are doing. It is in some ways harder to prove the more positive side of the contention (that we do indeed know what we are doing) given our more limited share of voice in the national media. Approaches might include comparison of our respective policies by a generally respected think tank or amplification of the achievements of some of our councils.

But if supporting growth is the field on which the Conservatives want to play then bring it on.

* Kevin has been a party member since June 2017, from Kingston

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19 Comments

  • Katharine Pindar 6th Oct '22 - 9:37pm

    Indeed, bring it on, as you rightly suggest, Kevin! I thought the lumping together by Liz Truss of us, the Labour party, and other groups not identifying with her as ‘anti-growth’
    was fairly desperate: this lady is prepared to declare enemies rather than seeking support, and given that only 50 of the Tory MPs supported her leadership bid in the first place is likely to be embattled immediately. It can’t be good for her that a certain sympathy for her likely isolation (with only a tiny crew of similar fanatics in support) arises in a Liberal Democrat heart! But she can still do too much harm to keep any sympathy for long.

  • Steve Trevethan 6th Oct '22 - 9:52pm

    How is growth defined?

  • nigel hunter 6th Oct '22 - 10:16pm

    We need migrants to fill the jobs that are available .Putting UK retired or not looking for work categories etc will not be suffice.The country needs the training and equipment to increase productivity.With this an increase in social housing would be positive steps to show outside investors that we mean business.Yes time is now to show we are the party of business.
    The ‘anti growth’ comments of Truss is the beginning of the Conservatives election campaign. Who,s growth model is best will be the battleground.

  • Kevin Langford 6th Oct '22 - 10:21pm

    That’s a brief question which can’t be satisfactorily answered briefly! I think there was another thread on this a few days ago.

    In the context of this article I would say:
    1 The debate is mainly cast in the terms of GDP growth.
    2 I think most of the electorate understand growth in terms of making the economy bigger and the population of the UK in general better off
    3 There are many different problems with GDP as a measure – indeed the more you look at it, the more holes you find. I found Diana Coyle’s book on the subject from a few years ago a good summary.
    4 Strong cases could be made for several alternatives – eg something which incorporates sustainability and the degradation of ‘natural capital’
    5 But – all that said – having a bigger pie to share is better – even if we aren’t quite measuring the size of the pie correctly. And at the political level I think we should put our main focus on policies which will grow the pie rather than how we measure it

  • Christopher Haigh 6th Oct '22 - 10:53pm

    @ Steve Trevethan -I’vee been wondering that myself. Economists on here say it’s the total amount of money spent by final users of goods and services adjusted for inflation – which is supposed to equal the value of goods produced or GDP (gross domestic product).

  • @Christopher Haigh + @ Steve Trevethan
    It is clear that economists have overlooked a key variable, namely population.

    If you adjust the headline GDP “growth” figure for the increase in UK population, you’ll see “growth” in recent years is basically is down to the increase in population, hence giving credence to the daft notion that you can grow the economy by simply importing more people.

    @nigel hunter – We need migrants to fill the jobs that are available .
    No we don’t. what we actually need is a mindset change – business has to invest in people and pay living wages – a dividend that many who voted leave wanted (hence can be weaponised as a “dividend of Brexit” and be used against the Tories). A massive side effect of this will be to reduce the demand for welfare and thus reduce government expenditure in this area.

  • Joining the single market […] would increase the UK’s rate of growth.

    When the UK was a member, the big ’growth’ was in the EU trade deficit…

    ‘Why has the UK trade in goods deficit widened in real terms?’:
    https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/articles/whyhastheuktradeingoodsdeficitwidenedinrealterms/2018-09-24

    From 1998 to 2000 the UK had an average £3.5 billion trade in goods surplus with the EU. In 2001 the surplus turned into a deficit and by 2017 the trade balance with the EU was £93.7 billion in deficit with most EU countries contributing to the deficit.

    The UK already has 100% tariff free access and EU exports are at record highs…

    ‘UK trade: April 2022’:
    https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/bulletins/uktrade/april2022

    EU exports have increased for the third consecutive month in April 2022 and are at the highest levels since records began.

    There would be little more to gain by rejoining, but the downsides — democratic, financial and economic — would be huge: Three-quarters of EU law imposed; big payments, and no independent trade policy.

    For export led growth the UK needs to be free to make comprehensive Free Trade Agreements with fast growing economies around the world (based on mutual recognition rather than the EU model of regulatory imperialism). We now have FTAs covering 98 countries (27 EU, 71 non-EU) – more than any other country or customs area. The UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will make it the world’s largest free trade bloc.

  • Joining the single market […] would increase the UK’s rate of growth.

    This was the reality of our membership of the EU ‘single market’…

    ‘The EU is a Major Drag on the UK economy’ [March 2019]:
    https://www.briefingsforbritain.co.uk/the-eu-is-a-major-drag-on-the-uk-economy/

    In the twenty years from 1998-2018, the volume of goods exports to the EU rose by just 23% or 1% per year, and from 2007 they have grown less than 3% – or a pitiful 0.3% per year (chart 2). By contrast, UK exports to non-EU destinations have grown strongly, by around 3.5% per year since 1998 (almost four times faster than exports to the EU) and 3.3% per year since 2007 (thirteen times faster). […]

    It is also the case that a 1% rise in demand in non-EU countries has around double the positive impact on UK exports that a 1% rise in EU demand has. UK exports appear to be structurally better suited to non-EU markets than to EU markets. […]

    …94% of world growth in the next two decades will be outside the EU, along with the great majority of economic opportunities for the UK. […]

    Overall, the above analysis shows clearly that the EU has, over the last two decades, failed to provide the kinds of benefits that proponents of EU membership promised from the 1960s onwards. The EU’s anaemic GDP and productivity growth has hobbled UK trade and manufacturing, while UK consumers have suffered by being forced though the EU customs union to buy overpriced EU products.

  • According to government figures they intend to reduce government revenue by £43bn a year by 2026-27. According to our plans we want to invest £150bn in green policies and £50bn to increase economic growth outside London and the south-east. These figures are over the course of a parliament, so that is £40bn a year if averaged over five years.

    The money should not be invested equally over five years instead the amount each year has to be greater than the previous one. £12bn in the first year, £25bn in the second, £39bn in the third, £54bn in the fourth and £70bn in the fifth. This would increase investment by £12bn in the first year (about 0.5% of the economy), £13bn in the second, £14bn in the third, £15bn in the fourth and £16bn in the fifth.

    With unemployment still above 3% and about one million not working because of their health, there are people in the UK who could be working but are not. The issue is how to get these people back into work. Increasing the time people have to spend at the Jobcentre and applying sanctions if they don’t is not the way to do this. Providing free training for them to get back into work will help significantly plus providing work experience for people so they can gain the experience employers want. Providing incentives for businesses to employ people who have been unemployed for a long time or have health issues would also help.

  • Mick Taylor 7th Oct '22 - 6:20am

    I think we need to use another word for the sort of green measures we propose. The word growth has entirely different connotations when used by Truss. It implies greater resource use, which is unsustainable and anticipates greater use of polluting fuels contrary to what is needed. If we have influence after the next election then we won’t be looking for growth fuel by consumers, oil companies and bankers, but sustainable development led by green technology, home insulation and electric cars, buses and trains.

  • Perhaps an additional point is that of our support for unpaid carers; many of whom struggle to juggle caring and work. Without support, many carers end up giving up work to care. This is a loss to our economy.

  • David Garlick 7th Oct '22 - 9:24am

    I think that we will all be amazed if anything that this new Government does is beneficial to the economy so yes, Bring it on.
    For me the big driver is, as Labour have successfully laid out, the drive for reneable energy and in addition for me the drive to insulate the UK’s homes. The basic starting point is to make illegal the building of any new homes that are not of the highest standars of insulation. Jobs will follow these measures, the economy will stabilise whilst our dependence for energy in fluctuating world markets ends.

  • Kevin Langford 7th Oct '22 - 9:37am

    There is clearly room for discussion around exactly how we set out the case that the UK would achieve better growth under Liberal Democrat plans and governance than the Conservatives. And we know that in reality there are trade-offs to be made in relation to most of the big decisions. But my main point here is that we should be thinking now how we can be on the front foot in relation to growth.

    @John Bangs, I hadnt really thought about how the policy on carers may impact the economy. I think the impact of free childcare is likely to be quite significant – I wonder whether the impact of support for unpaid carers has been quantified in any credible way? Of course it depends what kind of support is being provided as to whether or not it leads to a bigger contribution to the economy.

  • @Michael BG
    …The issue is how to get these people back into work. Increasing the time people have to spend at the Jobcentre and applying sanctions if they don’t is not the way to do this.

    Agree, we need to address the real problems rather than automatically reach for the stick. Over a decade back I remember the advice from those with experience was if you had a young family was not to register as unemployed but to go for working families tax credits. You received a similar amount of money but avoided the hassle of the hurdles associated with claiming unemployed/job seekers benefits. Having avoided the hassle of attending the Jobcentre and applying for x jobs every week, you actually had time to do: training, proper job searches, or start a business and have family time… Mind you in both cases you hit head on the problems with claiming benefits and working, with the benefits system seemingly actively to discourage and even penalise working.

    Given our experience of working during lockdown and how home working/education was a real leveller between those who for various reasons were unable to regularly attend an office but could work from home, there really is no reason why, albeit with some sensitivity and consideration, people who have been long-term unemployed or had health problems (including stress related burnout) couldn’t become economically active again.

  • Kevin Langford 7th Oct '22 - 11:07am

    @micktaylor – on different words for growth – I agree that how we intend to grow the economy is different. I am not so sure though about using a different word. For some people the idea of growth is a turn-off. But for most people who might consider voting for us, I think it is more persuasive to just say that we will deliver growth better than Truss will

  • Katharine Pindar 7th Oct '22 - 1:18pm

    In decrying the economic approaches of the Tory governments of the last decade, Liz Truss is on shaky ground, not least in that she has been a minister herself throughout. Besides which, in the matter of growth, I was struck by a comment by the Observer columnist William Keegan in the last edition of the paper. He pointed out that according to the National Institute of Economic and Social Research Brexit has reduced annual GDP by between 4 and 5.5%. That is one mountain these keen Brexiteers are having to climb, though they will not admit it. As Kevin mentions, most economists would like us to rejoin the single market, and we back working with our main trading partners in Europe as a means of restoring growth.

  • Katharine Pindar 7th Oct ’22 – 1:18pm…………In decrying the economic approaches of the Tory governments of the last decade, Liz Truss is on shaky ground, not least in that she has been a minister herself throughout……..

    Not just Truss. On ‘Question Time’ last night Nadhim Zahawi, between shouting at other panel members, condemned ‘decades of low GDP growth’ whilst prophesising a 2% growth under Truss’s radical policies..
    How quickly he has forgotten ‘Rah-Rahing’ every time Johnson claimed UK growth was ‘world beating’ (BTW between 2012 and 2019 (Covid) GDP grew by an average of slightly OVER 2%)

  • The question is what sort of growth. Green growth will grow the economy, help the COL crisis and tackle climate change. The government’s job is to target growth into areas where it is sustainable, ethical and long-term.

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