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Promoting growth and shared prosperity in the UK Priority

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'Growing together' Aussie-style

05 Mar 2014

Former Australian treasurer and deputy prime minister, Wayne Swan MP, visited London earlier this week for a series of meetings – including at IPPR – to discuss Australian politics and prosperity.

During his trip he gave a presentation, 'Growing together', on the Australian social democratic model.

Download the text of Wayne Swan's speech, and the accompanying presentation.

Will relaxing austerity help the UK economy?

27 Dec 2011

Tony Dolphin discusses the economic outlook for 2012 and what if anything will help the UK economy to pick up in the year ahead.

The 'outlook for 2012 is grim: we've got austerity at home, partly imposed by the government, we've got crises abroad, particularly in the eurozone, which is affecting demands for our exports' but he expresses a hope that 'the economy will pick up in later part of 2012, but it all depends on commodity prices, especially oil'.

Tony Dolphin discusses the outlook for the UK economy in 2012

Ed Miliband delivers keynote speech

24 Nov 2011

In a major speech, the leader of the opposition argued that there is an alternative to the current government's approach of managed austerity, instead focusing on economic growth to stave off future deficit challenges.

Read a transcript of Ed Miliband's speech

Ed Miliband said that the government's economic strategy is locking Britain into a ‘vicious cycle on the deficit’.

He described next Tuesday’s autumn statement from the chancellor as marking ‘a crucial moment in the economic course of our country’, one in which the public learn ‘the biggest economic gamble in a generation has failed’.

‘When a further rise in borrowing is confirmed by the Office for Budget Responsibility next week, it will be a catastrophic blow to the government's credibility,’ he said.

Appealing to voters who backed the Conservatives at the general election, he urged them to ‘look afresh at the evidence’. He said that the reason the government ‘no longer deserves the benefit of the doubt, is that even on this measure – the central test they set themselves – the plan isn't working'.

‘It isn't working because their failure to get businesses growing, to see more jobs created, has locked them and the country into a vicious cycle on the deficit.’

‘We need to ask why, when the recovery was underway just 17 months ago, we have ended up in such a serious situation.’ He said the government was wrong to blame the eurozone crisis for slow growth – it was the ‘scale of shrinking domestic demand’ that was holding growth back. Is there a single other mainstream party anywhere in Europe who thinks the answer to the debt problem is more spending and more borrowing?’

‘Austerity rhetoric’ had had a ‘chilling effect on our economy’, he said – and suggested the government was ‘shrugging its shoulders in the face of economic difficulty’.

He also responded to reports in this morning’s newspapers that action on youth unemployment is to be funded by a freeze on working tax credits. He described it as ‘a welcome reversal of the government’s mistake on youth jobs, but with a catastrophic mistake’.

During the Q&A, he was asked if he was asked by journalists from the Daily Mail and the BBC whether he would condemn or support next week’s planned public sector strikes over pensions. But Miliband refused to be forced into either position, explaining that ‘strikes are always a sign of failure’ and arguing that ‘it is no way to conduct a negotiation to by saying that negotiations have ended’.

He was asked by Ben Page of IpsosMORI why polling of business shows 82 per cent broadly support the chancellor’s approach. Miliband says that people had been convinced that there is no alternative and that changing course is not an option. He urged them to look at the facts and think again.

Anna Turley from ProgLoc asked how growth could be restored in hard-hit regions. Miliband said that he had seen the work of the Yorkshire RDA do important work in his own region but that he wanted to see if local economic partnerships could be supported to succeed before calling for yet more change in regional economic institutions.

Ed Miliband on the economy: 'There is another way'

10 ideas for the chancellor

23 Nov 2011

Ahead of the chancellor's autumn statement, IPPR researchers come up with 10 ways to promote economic growth in the UK.

10 ways to promote growth

Lane Kenworthy on growth and the poor

22 Nov 2011

IPPR spoke to Lane Kenworthy from the University of Arizona who has a new book out called Progress for the Poor.  Professor Kenworthy said the key to increasing the incomes of  the bottom 10 per cent in richer societies was not rising wages, but government transfers.

Professor Lane Kenworthy on how much growth and government help the poor

Matthew Hancock MP speaks during the IPPR economy event at the Conservative Party Conference

Panel reflects on Lehman anniversary

16 Sep 2011

The panel steering IPPR’s ‘Promoting Growth and Shared Prosperity’ programme gathered for its second meeting on Tuesday 13 September.

With both domestic and global economic outlooks deteriorating markedly over recent months and the Eurozone debt crisis now at breaking point, the panel turned its attention to the question of how the UK can avoid a Japanese-style ‘lost decade’.

Tony Dolphin, senior economist at IPPR, outlined the reasons why western policymakers have cause for concern. As US-based academics Ken Rogoff and Carmen Reinhart have shown, recessions caused by the bursting of asset price bubbles tend to be followed by weak recoveries. Under this scenario, the private sector usually attempts to shed liabilities by moving from profit maximisation to debt minimisation, reducing demand in the economy. Here the government can respond, but this time around there is limited room or appetite for further fiscal or monetary policy support. Even if interest rates were cut further (to zero), there is a risk that there will be no borrowers of newly generated savings or debt repayments. The result is what Richard Koo has called a ‘balance sheet recession’ which has the potential to lead to a long period of weak demand growth, and in turn, depressed supply growth.

The panel discussed various ways in which the government might stem the possibility of this situation occurring in the UK. Participants considered steps that might be taken to stimulate demand, including the possibility of a fresh round of quantitative easing, steps to incentivise consumer spending and the role of state-led investment, and where the focus should be on supply – touching on issues ranging from business innovation, productivity, skills and export performance. In this context, panel members discussed what a new industrial policy for the UK should look like, the role of clusters in sectoral growth, and how local and regional levels of government can better support business and entrepreneurs.

Reflecting on the third anniversary of the collapse of Lehman Brothers, the panel were also asked to consider why we haven’t seen a paradigm shift in economic thinking and whether a shift could still occur. Discussion centred on the role of the economics profession, the potential for a change in macroeconomic policy goals, and whether insights from new economic theory – such as complexity and evolutionary economics – could provide policymakers with a new framework and set of tools more suited to tackling today’s economic challenges.

Avoiding a lost economic decade

First meeting of Advisory Panel

17 Jun 2011

Following the launch of the Promoting Growth and Shared Prosperity project in May, the Advisory Panel met for the first time on 9 June at IPPR’s London offices.

Advisory Panel members

  • Chair: Eric Beinhocker – McKinsey Global Institute and LSE
  • Andrew Cave, Head of Policy and Public Affairs, Federation of Small Businesses
  • Alan Buckle, Global Head of Advisory, KPMG
  • David Clayton, UBS
  • Ed Mayo, Secretary General, Cooperatives UK
  • Frances O’Grady, Deputy General Secretary, TUC
  • Sir Geoffrey Owen, Senior Fellow, LSE
  • James Purnell, Chair, IPPR
  • Jesse Norman MP
  • Jonathan Portes, Director, National Institute for Economic and Social Research
  • John Longworth, Competition Commission
  • John Philpott, Chief Economist, CIPD
  • Noreena Hertz, Cambridge University
  • Patricia Hewitt
  • Simon Clark, Managing Partner, Fidelity Growth Partners
  • Stephen Radley, Director of Policy and External Affairs, EEF
  • Steve Masters, Retail Development Director, Asda
  • Vicky Pryce, Senior Managing Director, FDI Consulting
  • Will Hutton, Executive Vice Chair, Work Foundation and Observer columnist
  • Jonathan Wadsworth, Royal Holloway College

Eric Beinhocker set out three possible reasons why previous efforts to identify policies to promote long-term growth and shared prosperity had not led to a coherent government strategy.

  1. It could be that there is no role for government.
  2. Second, perhaps a mix of strategies are necessary across a range of areas, including promoting business investment, investing in education, innovation and the provision of finance and, while these have been correctly identified, political problems have prevented effective delivery.
  3. Third, past efforts have been based on the wrong economic model and new ideas are needed, based on concepts such as clusters and technological innovation.

In their comments, panel members made it clear that they generally favoured some mix of Eric’s second and third options as the reason for the failure to implement effective policies to promote growth in the past. They highlighted a number of areas of particular interest including looking at the UK’s economy in comparison to other countries to see which policies have worked and which have not, and why. Also there was a general interest in exploring new economic models and looking at Britain in the context of an increasingly changing global economy.

IPPR’s Senior Economist Tony Dolphin presented an overview of the UK economy in the aftermath of the recession, concentrating on its strengths and weaknesses and the opportunities and challenges that it faces. One of the issues highlighted was the structure of the economy and need for rebalancing to reverse the shrinking of manufacturing industry and the increasing financialisation of the UK.

Comments from panel members included:

  • The need to incorporate the gender dimension in any analysis especially when exploring the shift in employment between sectors.
  • Looking more closely at the new manufacturing model because of its many implications for the composition of employment within the industry. For example, the production line is now a heavily capital intensive process, with fewer labour requirements. Labour however is increasingly found in the service, repair and maintenance elements of the manufacturing industry. Therefore there needs to be a clearer definition of manufacturing. It also may be useful to look at other countries that have gone through the same shift away from manufacturing eg France.
  • The rebalancing argument needs to go beyond the simple manufacturing ‘good’ and services ‘bad’ hypothesis. It should not be interpreted as the simple need for a shrinking of the finance sector and expansion of manufacturing. It is more complex and this needs to be stressed in the programme.
  • Concern over the real exchange rate. It was argued that the exchange rate has been overvalued which may be have been driven by capital inflows to the City over a number of years.
  • The need to understand the role of the City and how it operates. The UK’s financial sector is a global public good and this should not be easily dismissed.

Discussion then turned to the drivers of UK economic performance. The focus was on the UK’s record on productivity, innovation, investment, skills and trade, and some significant supply side deficiencies were highlighted. Panel members highlighted a number of issues:

  • Britain’s large businesses are doing well, despite overall indicators suggesting UK companies have some ground to catch up compared to their main overseas competitors. Smaller businesses however are lagging in many areas, including skills and training, employee engagement, lack of a desire to expand and develop export markets and an unwillingness to move from small to medium-sized businesses.
  • The need to dig a little deeper to understand many of these indicators in order to really understand the UK’s productivity, innovation and investment performance. For example, some of the headline indicators on investment do not reflect investments in intangible. Similarly, it is necessary to proceed cautiously when analysing R&D expenditure. There are industries where we invest heavily, eg pharmaceutical, but other large industries do not need such heavy expenditure and this may not necessarily be a negative thing.
  • The need for the programme to look at the history of industrial policy in the UK and assess what has worked and what has not. Similarly, it should look closely at what has worked in other similar countries, such as France.
  • On investment, the UK’s openness to inward investment creates a need to assess its pros and cons and to ask more broadly how much, if at all, ownership matters.
  • If we want to get more businesses involved in exporting, it will be necessary to understand the resistance of and barriers to SMEs stepping up their efforts to sell overseas. Some panel members identified a reluctance to grow among many small businesses and a lack of entrepreneurial drive as things holding back the economy.
  • The case for supporting science and R&D in general to provide a platform for growth, rather than subsidising existing businesses was made.
  • The role of British culture was also discussed: how it has shaped our economy and society and how it should to some extent be reflected in some of our analyses.
  • The performance of the public sector was brought up as an issue that needs to be reflected in the analysis of supply side deficiencies.
  • Members were keen that the work seeks to pursue new ideas, including an ecosystems view of the economy and look at path dependence and the role of complex networks.

The panel will meet next on 13 September 2011.

Event review: Growth and prosperity

09 May 2011

Promoting growth and shared prosperity launchTreasury secretary Danny Alexander and prominent economist Eric Beinhocker, chair of the programme’s advisory panel, joined with IPPR Chair of Trustees James Purnell to launch our new flagship project, 'Promoting growth and shared prosperity in the UK'.

James Purnell highlighted the importance of this project for IPPR, and reflected on how the debate around the economy has changed drastically since the financial crisis.

Danny Alexander outlined the government’s measures to promote growth, which include reducing the deficit and supporting business to lead the recovery. He warmly welcomed the new work launched by IPPR and said he ‘very much looked forward to see how the project develops in the months to come’. 

The chief secretary said he hoped the ideas that emerge from the project will help ‘to inform the government’s future decisions … so that we can get the best out of the private sector with growth that is balanced and sustainable, and shared more equally across the many regions of the UK.' He also confirmed that the next phase of the government’s ongoing Growth Review will report alongside the Autumn Statement and will identify new strategic sectors to bolster the recovery.

Eric Beinhocker, chair of the project's advisory panel, called for a step-change in our approach to growth. He said that the crisis presents an ‘historic opportunity’ to step back and ask at a fundamental level what kind of an economy we want for Britain and what Britain’s role is in an increasingly competitive world economy.

He described how the project will explore new engines of growth which will allow us to strengthen the recovery in the near future and deliver better economic opportunities and outcomes for generations to come. He ended by saying that ‘building future growth and shared prosperity will require a level of cooperation and strategic action that has not been seen in Britain since World War II.’

James Purnell on new economic thinking

Danny Alexander on economic recovery

Eric Beinhocker on promoting growth

Event review: Government and growth

28 Feb 2011

Government and growthMartin Wolf of the Financial Times, UCL's Wendy Carlin and Gerald Holtham, managing partner of Cadwyn Capital launched Going for Growth, alongside Will Straw, the book's editor and IPPR associate director.

Martin Wolf, Wendy Carlin and Gerald Holtham on government and growth

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Q&A on government and growth

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