Adrift in the Atlantic: The UK in Free Fall
Author: Dr. Andrew Taylor
Everything seems to be failing in the UK right now and it is not just the product of a global energy crisis. Pretty much any public sector led social system you can think of is in crisis. Consider the following: huge shortages of doctors and nurses, ambulance queues, maternity crises in health; disastrous procurement and planning in defence; a failing, overpriced and under-performing rail network; a passport and immigration system that, with the deportation to Rwanda programme, huge queues for passports and visas is failing foreigners and British citizens alike; an energy policy that veers between renewables, nuclear, fracking and simply keeping the lights on. The list goes on and on, but the real issue here is the absence of any consistent plan, let alone a strategy, purpose or vision.
Meanwhile the private sector is suffering from shortages of staff across most sectors, which, post-Brexit, were entirely predictable. Companies are finding the bureaucracy of exporting to the EU to be the barrier to trade that it was intended to be. Again entirely predictable. Retail is in freefall, driven by online competition and pandemic lockdowns, leaving many town centres empty and down-at-heel. Whilst the property market, fueled by pandemic savings, is perversely booming. This is both sucking money away from other economic investments, creating generational debt that is clearly built upon sand and, due to the need to maintain mortgage payments, limiting individual ability to engage in entrepreneurial activity. The relationship between public and private interest, that is the planning system, is completely broken and not delivering sustainability, economic growth, or quality housing stock. The housing estates that have been allowed to be built since the 1970’s (public or private) in their bland uniformity lack almost any aesthetic appeal, provide increasingly tiny living spaces and are built as cheaply as possible.
Across the political spectrum there seems to be no thought as to the need for doing more than simply bumbling along as usual. As if a country can somehow choose to leave the EU without any kind of alternative plan and expect things to work out well. You can make a case for Brexit, if you have an alternative plan, but there clearly wasn’t. The naivety is simply staggering.
The trouble began with the referendum itself. It was a bit like asking an 18 year old if they would like to leave their parents to live on their own. The answer is, of course, yes. However, when you ask would you like to take responsibility for working out how to pay the bills alone, you might get a different answer. Asking people if they would like to kick authority, especially when many people feel left behind, is not clever. Had the choice been between staying in the EU and an alternative plan, the UK would have had a better debate at the time. People could have made an informed choice and the country would certainly be having a more grown-up debate about its problems today.
The Conservative party leadership struggle to become Prime Minister is anything but grown-up. Arguing about who can offer more tax cuts strikes me as akin to arguing about the price of drinks on the Titanic! There is no debate about either the systemic nature of the problems the country faces or the absence of a consistent socio-economic plan to address them that is rooted in how the country will differentiate itself and compete in world markets.
It is time to ditch blind monetarism and the idea that markets are self-regulating in the interests of all. First, some sectors, such as rail, water and energy, are to varying degrees natural monopolies whilst their performance has significant impacts upon the performance of other sectors. At privatisation most had no debt, but new owners loaded them with debt, extracted the money as dividends and henceforth have simply been rent-seekers, making only minimal long term investments in services and infrastructure. These sectors should allow for competition, but there needs to be a mix. In rail, for example, why not have mutual or community owned services? Yet, state companies would need to provide a backbone of service in many. In the railways for example, when the government took over LNER it was deemed by many to be more efficient and punctual than when run privately. Second, the lesson of countries like Singapore is clearly that whilst nationalisation is not essential, the ability of government to identify future growth areas and create the conditions for them to thrive, including direct financing, underpinned by world class education, does work.
So which sectors should the UK focus upon? Given that UK higher education is still rated as one of the strongest for both research and teaching in the world, this should provide a foundation point and be resourced appropriately. It is not today. Both the green and the digital economies provide significant opportunity for the UK for several reasons. First, they are both growing fast and are likely to continue doing so. Second, they are both research and innovation led. Something the UK is good at. Even if it has been poor at commercialising the value of that research and scaling it up. Something American universities and companies have been far better at and British governments would do well to nurture. Third, the British have very significant advantages in both sectors. In renewables the UK, as an island buffeted by waves and large tidal ranges, could lead the way in wave and tidal energy. It pioneered much of the early stage work in wind, but this was scaled up by the Danes and Chinese. In an era of energy insecurity this would provide significant non-economic benefits, export markets and a renewable alternative to fracking, which is very unpopular. In the digital economy the UK has history as an early pioneer of IT (think Turing, ICL, etc.) and has the combination of university research, infrastructure and financial capital needed. The government simply needs to invest through a coordinated mix of equity, research and procurement as well as support through its tax regimes.
Given that the UK leads the world in exporting its services sector, this fact cannot be ignored. However, in addition to auditing and financing the rest of the world search for value creation, they could and should be incentivised to partner with emerging green and tech firms and take them global. The strategic finance and management capabilities of Britain’s big players need to be brought to bear upon their own economy far more, if the country is to thrive in the world, and that will require a mixture of tax and policy incentives.
Doubtless there are areas and sectors worthy of more coverage than that provided here and whilst you may well disagree with me, how many of you would argue that, instead of being spectators to a personal popularity contest within the Conservative Party, the political class, as a whole, ought to be leading us through such a debate?