If the Government's task in November's autumn statement was to steady the ship and calm the markets, then it largely succeeded. While the economic outlook remains gloomy, chancellor Jeremy Hunt's conspicuously sober approach signaled a quest for stability sorely missing from that of his predecessor.
But despite some flashes of good policy in the form of an increase in the national living wage and some mild education and health spending increases, there was no long-term plan for growth. The role of place also seems to be pushed to the margins of government's priority list. Last week the Prime Minister asked the public to judge him by five pledges, one of which was spreading economic opportunity across the country. The detail was lacking. So whilst the North East devolution deal is to be celebrated, for example, its announcement over the quiet Christmas period doesn't suggest levelling up will be a critical plank of Rishi Sunak's economic strategy.
Sunak rightly believes that education is as close as we've got to a silver bullet when it comes to growth. But in briefing his new flagship proposal – for all young people to continue learning maths until 18 – he failed to articulate how it might contribute to a model for growth in which everybody would benefit.
Against the backdrop of the NHS buckling and ongoing rail, post and nurses strikes, it was always going to be difficult to get a hearing on the medium term. The Prime Minister needed to come out fighting, making the case for investment in and reform of education, skills, early years, childcare and population health as productivity-enhancing public services. Each of these enhances the quality and quantity of human capital, driving long term growth and shared prosperity. Add transport and housing, and all delivered through devolved entities with finance, accountability and overarching priorities aligned nationally, and there are the makings of a coherent economic strategy.
The Prime Minister might not feel he has the luxury of time, resources or party management to deliver an expansive policy agenda. He will also be mindful not to undermine his chancellor ahead of the Budget in March, especially while the economy is so fragile. But what might have been a symbol of intent to fire the UK economy back up to at least pre-pandemic levels, turned into a symbol of caution and retreat – in the face of initial criticism, the idea downgraded from policy to passing thought even before the speech was delivered.
As chancellor, Sunak also shied away from implementing the recommendations of education catch-up tsar, Sir Kevan Collins, in full. Here was an opportunity to close the education attainment gap between the richest and poorest pupils that was exacerbated by the pandemic, a measure that could have made a tangible and longstanding impact on inclusive growth – within and between places across the country. The price tag was high, but we'll be paying the price of lost opportunities, investment, and earnings for the next decade at least. Centre for Progressive Policy (CPP) estimates that if the stubborn 15% education attainment gap between the least and most deprived places in England were bridged, annual earnings would be boosted by £14.4bn per year.
Earnings would also be boosted by expanding access to adequate childcare services. CPP research indicates the uplift could be worth between £7.6bn and £10.9bn per year. Rishi Sunak has stepped back from commitments made on childcare investment reform by Liz Truss during her short premiership. It would certainly be another plot twist should Truss be successful in preserving these investment commitments from the backbenches, going some way to exorcise her economic legacy.
The current fiscal context is not an excuse to stall on the innovation or investment needed to drive growth; indeed, it makes it more important than ever. The Treasury took a small, overlooked step before Christmas by extending the local government finance settlement from one to two years. Whilst three years would have been preferable, this measure should have a powerful impact on the ability of places to manage risk, costs and short-to-medium term investment.
The Treasury could go further in rethinking the way it classifies human capital investment. Commentators across the sector and beyond have argued this for years, but the pull of the ‘slippery slope' argument holds back Whitehall. There is more we can do here, and CPP will be looking at this over the course of the next year, along with the question of how we fund the level of investment we need to deliver inclusive growth. Drawing on international and historical examples, we will explore what a progressive, pro-growth fiscal programme would look like. Delivering higher levels of business investment will be critical to the success of any government that wants to drive growth, and this will be CPP's other main focus in 2023. We will be particularly focused on areas that stand most to gain from increased business investment and schemes like the government's university-led industrial clusters, which my colleague Ross has recently written about. Unless we think radically the UK risks another decade of flatlining growth paired with rising inequality.
Charlotte Alldritt is director of the Centre for Progressive Policy
If you are interested in discussing further, please get in touch: info@progressive-policy.net
@CentreProPolicy
