Ending this era of political and economic stagnation

The UK is making everything look difficult. Economic growth is tepid or non-existent, productivity is poor, politics is increasingly populist rather than constructive and, as a result, the challenges are mounting up. The answer, as in previous such periods, is to set a bold new course that unlocks value and that communities can get behind.

We face a raft of major challenges and opportunities as a country:

• There are times of continuity, when the system is working and the private sector can confidently invest; and times of change, when the current system has created all the value it can and a new direction is needed. According to the Tony Blair Institute, the major changes we now face are Brexit, the technology revolution and climate ambition. While we are in need of new policies to benefit from rather than be harmed by these changes we are, in fact, seeing policy stagnation. The thin Queen’s Speech is the latest such example. As a result, we are experiencing low growth, poor productivity and democratic disenchantment.

• The politics of who to tax and how to curb borrowing is evidence of political failure as it imagines we are managing a finite pot. It is more akin to a whip round for an expense than an opportunity to invest. Instead, we need to decide what we need and want as a country and where the big economic opportunities lie, and then to decide how to collectively pay for it. Without that direction, wealth will continue to collect in unproductive assets, such as real estate. Nearly £9bn a year is invested in UK buy-to-let house purchases alone, with other popular investments being land, gold and artwork. This all represents a missed opportunity to invest in a more productive future.

• Democracy is not popularly supported for its own sake but as part of a package of individual and collective social and economic rights. Key parts of this mix have weakened in recent decades: people’s economic opportunities, spending power, access to housing and general sense of resilience; the quality of our public services, despite tax rises; and the traditional social structures connecting communities to each other and to political institutions. As a result, while we must manage major changes, including on Brexit, technology and climate, our democratic institutions are not trusted to do this fairly or competently. Edelman’s latest Trust Barometer found that only 15 per cent of people think the UK political system works for them. This creates a vicious cycle in which communities oppose development and politicians are rewarded at the ballot box for a lack of ambition.

With the right policies, we can address these challenges, strengthen our communities and grow the economy, fairly. Some ideas:

• Energy, data and green transport revolution: the government should set out a roadmap for national, green and high capacity energy, data and transport networks, with sufficient detail for the next decade to attract investors. These networks are core superstructures upon which other economic investments sit, and they are heavily influenced by state actors, with governments dragged in even if they do not want to be. The government should get on the front foot, using minimum prices, contracts for difference or similar tools to attract corporate confidence and investment. To back this, our political leaders must make the case for how such investment is about achieving modernisation to create jobs, growth and successful communities, not an unfortunate cost. They should also be clear that we cannot make the perfect the enemy of the good. We have seen many government infrastructure plans which, to avoid picking winners or predicting where technology will go, have had little impact. Instead, we should get comfortable with delivery and, if necessary, altering plans later.

• Asset owning nation: rather than investing surplus wealth in unproductive assets, individuals should be encouraged to invest directly in the productive local assets the country needs, such as windfarms, energy storage, metros and massive data centres – with minimum prices or returns guaranteeing such investments. Following the example set in Bristol, which will see the country’s largest onshore wind turbine return revenue to reinvest in local regeneration, local and regional politicians should be responsible for liaising with industry and community grouse to create and promote prospectuses of local investment opportunities. This would funnel money from unproductive to productive assets, create a sense of empowerment in local communities and, as a result, engender support for rather than opposition to local development.

• Community leadership: to foster new connections within communities, and between them and larger political institutions, a wider group of people must be attracted to take part in local policy-making. Local and regional authorities should be incentivised to make greater use of citizens’ assemblies, local businesses should be similarly incentivised to release employees on company-time to participate, and local authorities should provide trained staff to support assemblies and other community groups in the day and evenings. At the same time, to strengthen the quality of local news and debate, the government should subsidise politically balanced journalism and ‘print’ content, in the same way as license fee-payers fund the BBC regionally and nationally, and social media companies should be encouraged to increase the local content users see on their feeds.

Just as the growth of the railways, backed by the state, unlocked new investment and efficiency across the country, the above measures would foster an enterprise culture, providing investors with the confidence to establish new, productive energy- and data-intensive industries, such as hi-tech vertical farms and green steel manufacturing. Strengthened energy, data and green transport networks would also provide house builders and mobility tech companies with the confidence to invest, replacing current restrictions with a plug and play approach. Easing the path to investment and delivery would also help to stabilise the cost of energy, food and other goods, while creating new jobs, skills and manufacturing and civil engineering techniques.

Greater local investment in assets and involvement in decisions would strengthen our democracy, reduce barriers to new developments, enhance the economic basis and autonomy of city regions and encourage communities to support investments rather than oppose change. A greater role for local and regional political leaders in shaping investment opportunities would foster growth across the country and recreate a strong connection between democracy, development and resilience in the face of global challenges.

All of this would strengthen our tax base, enabling the proper funding of public services and public goods. While successive Conservative governments have rightly said economic growth is required to fund our public services, they have never successfully stimulated such growth, and have rarely set out plans for doing so. There was certainly nothing in the Queen’s speech capable of shifting the UK from stagnation to productive value generation. New thinking is needed.