Britain Must Regain the Confidence to Grow Again
This Government loves talking about growth as its number one priority while choosing policies that make growth harder.
Only last week, the Chancellor set out, once again, the Government’s ambition to get the economy moving. The language is familiar: growth, investment, opportunity and, of course, AI. This Government likes talking about growth, while choosing policies that make it harder to achieve.
The route to economic growth is not a mystery
And it is not because this country is short of plans. The Government is constantly rolling out new strategies for growth: industrial strategies, sector deals, missions, frameworks. What we lack is a willingness to pursue the kind of economy that actually delivers sustained growth – one that is flexible, competitive and unashamedly pro-enterprise.
Instead, Britain is drifting towards a different model: higher regulation, higher costs and lower dynamism. Something closer to the European norm, at precisely the moment when the gap between Europe and faster-growing economies like the United States is becoming impossible to ignore.
Britain keeps putting obstacles in the way
Take the labour market, which long used to be one of Britain’s strengths. Flexibility helped drive employment to record highs in the years before the pandemic. But that advantage is now being eroded. Policies that make it harder to hire and fire, as we’ve seen with the Employment Rights Act, have increased the risks of taking on staff in the first place.
We have seen where this leads – higher costs and tighter rules reduce hiring, leaving more people – especially the young – shut out of work altogether.
There is a similar tension around the minimum wage. A minimum wage can support incomes, but it is not cost-free. In sectors like hospitality and retail, there are already signs that higher wages are feeding through into reduced hiring and, in some cases, job losses. These trade-offs are real, even if they are politically inconvenient.
Then there is the question of incentives. Britain has built a tax system that increasingly penalises progression and success. Frozen thresholds, the tapering of allowances and sharp cliff edges around benefits mean that for many, earning more does not translate into keeping more and getting on in life.
A huge element of growth depends on people choosing to work harder, invest more and take risks. A system that discourages those choices will, over time, deliver weaker outcomes.
And while the labour market and tax system shape incentives, the planning system shapes what is physically possible. And here, Britain’s record is particularly stark.
We struggle to build everything from homes to infrastructure and energy. Projects that should be routine become drawn-out battles. The result is a chronic shortage of housing, infrastructure constraints that hold back productivity and energy costs that rank among the highest in the developed world.
High energy costs, in particular, are a direct drag on growth. We have witnessed (and likely will now witness further) the squeeze on households and, crucially, on businesses, deterring investment and making it harder for British firms to compete internationally.
Growth demands choices politicians fear
Of course, none of this is inevitable. Britain retains enormous strengths – deep capital markets, a global outlook and a track record of innovation. But strengths alone are not enough if the policy environment works against them.
The uncomfortable reality is that growth-friendly policies are often politically difficult. They involve trade-offs, disruption and a tolerance for risk. It is easier to promise growth while pursuing caution than it is to embrace the changes that growth requires.
That is the choice Britain now faces.
This is an abridged version of Eve’s full article that appeared in CapX.
Eve Lugg is a Voice for Freedom with Fighting for a Free Future. Eve Lugg served as Special Adviser (SpAd) in the Cabinet Office and brings with her experience in policy and comms, as well as knowledge of how Whitehall really operates.
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The Uk is failing on 3 critical areas:
Cheap, abundant energy;
Efficient modern transport; and
Barriers to build or make stuff
Fixing these will make a massive difference to our economy and making our people feel positive about themselves and our country.
Eve, you are correct. The policies that were put in place are there to reinforce the Labour way to a higher income. It has the effect when in good times that low pay increases. But in bad times it’s another reason not to hire. Or mins about the real truth that is, money already out there is not being spent to return and resupply the need for money upon which we all rely. Money is being saved, hoarded or just sidelined preventing us if the use of it and the flow of money.
Eve, every bloody politician and it seems economists forget about resupply. Any economy needs a ready and constant even perpetual resupply of money flowing through our hands.
Snd the problems we have are because of that puny glow of money.
Money has the ability to create fair exchange. My effort for yours. But unless there is a fair exchange then the system fails. It underfunds the very system that you require to pay your way and mine. It prevents our government from earning its needs from tax take. And tax take us based on spending if money moving. So unless money moves and unless it is SPENT back in a fair exchange then of course it’s no wonder the system fails!
I’m sorry Eve. I get it you accused government but in honest truth you are trying to work out why money is short and therefore taxation is short whilst the system allows money to be sidelined and held onto!
There is no instinctive to SPEND. Only necessity. Unless you want to make more money. Then of course any chance to earn more by NOT SPENDING in a Free and fair exchange of effort and money, they rather lend it back for full repayment plus interest. Snd in the case of investment, they want future profits tied up as well!
Well Eve, I’m fed up with it. You talk as if the only option open to us if government to meet their commitments is to borrow any deficit. Or suffer cuts! Cuts to even more jobs snd cash flow! That’s the most stupid idea going. And cuts are an accountants view of what to do. If we listen to that nothing will get done nothing will change and stagnation is here to stay..
Real leaders know we have to make more out of what we’ve got. Not by cutting. But, by using it all better.
The growth you talk about is different to others. You are talking about more profits from big business to earn more and pay more. To grow profits.
Reeves wants growth to be more tax take. That’s what she wants and thinks more burden of taxation is the answer.
And neither is correct. What we need is more if our existing money, already out there to be SPENT faster and in more weight if amount. This will give growth.
If you want more you have to increase flow. If everything. And in a faster time. That’s growth.
The problem is Eve it’s counterintuitive. So it feels wrong. But in actual fact if we all SPENT more then growth would occur immediately. That’s freely SPENT incomes. Not from indebted money in particular but whoever holds the money at any one time must SPEND it like a hot potato. Then you can have a higher throw out of money and fuel the pace if our economy.
You see Banks and Pension funds or any form of hoarding or holding of money prevents flow. Slows flow. And makes normal commerce of fair exchange devoid of its use.
The very people who hold our money are few. But the amounts are huge. The majority, you and me, us, are devoid of its return. It’s delayed forcing us to borrow it back. Making us poor and them rich. Not from effort but just from holding or withholding the return if our money from general SPENDING.
Spending is the key to growth. Unless people are rewarded for their effort in a fair way change, every month then, the system fails.
You all want the cart before the horse. Growth from policies that stop flow. When the need is for higher volume of flow and velocity.
Banks stop flow. They drip feed back money, indebted money. Now we are underfunded and underperforming. Just like governments. It’s not about taxing. It’s about forcing flow.
There is no tax on unspent money, none! No incentive to SPEND. There is no enforced SPENDING either. So no incentive means it doesn’t happen.
No good putting taxes up unless the people earn more to pay it.
Money being SPENT is what’s needed first. That will drive growth. Supply of house will match the demand. A higher and faster demand than now.
Eve we have a cash flow problem! Get that right snd every policy we want can be afforded.
Look. There is apparently £19 trillion pounds out there in the aether.
In coin notes and digital. Someone somewhere had it. It’s our sovereign money. It needs to be SPENT in rotation and in a free exchange of effort. To ensure a glue if magnitude occurs.
We are not short of money! Far from it. We are short if it because a few people are allowed to keep hold of it!
If they were to SPEND all that £19 trillion pounds I. One rotation just once in one year, it would bring in to the exchequer £3.8 trillion pounds.
That’s four times the tax take now from all taxation. That tells me money isn’t moving in sufficient weight or velocity.