Matthew Lesh is the Director of Public Policy and Communications at the Institute of Economic Affairs
This election campaign is remarkably low-energy. Rishi Sunak is pursuing a core voter strategy by announcing policies like national service and pensioner tax cuts meant to appeal to older Tories – yet seems to have backfired.
Sir Keir Starmer is announcing pretty much nothing, a small target strategy to avoid ruining Labour’s gigantic poll lead. Ed Davey, meanwhile, is getting wet through increasingly embarrassing stunts like falling off a paddleboard.
It’s gotten so boring that Nigel Farrage has made a screeching u-turn and entered the fray.
The elephant in the room is Britain’s funk. We are emerging from a long period of economic stagnation, yet the lack of reform stifles immediate prospects of hope. Taxes are at a seventy-year high, but the funds are hardly well-spent. Britain’s ageing population is a ticking time bomb for the public finances, and the obsession with a riskless society is pushing us towards a European model of hyperregulation stifling innovation.
But just because things aren’t improving does not mean we should give up. The UK has not reached some preordained limit to prosperity. The gap with the United States, now over one-third richer than the United Kingdom, demonstrates that a higher quality of life is possible.
Faced with deep structural challenges, achieving this will require a whole-of-state rethink of responsibilities and deliveries.
It would have to start with an immense focus on removing the biggest barrier to Britain’s prosperity: our broken planning system. The UK’s housing shortage is not only pushing up the cost of rent and making it impossible for many young people to own their homes and put down roots – it’s also dragging down growth across the economy.
Lack of housing in Britain’s most productive places in and around major cities prevents people from accessing better paying jobs. Leaving people stuck in areas without good jobs drives immense inequality between different parts of the country. We could be tens of billions of pounds richer with serious housing reforms allowing densification.
The planning system also makes it difficult to build infrastructure, from new tram and train lines to roads, nuclear energy, and wind and solar.
It’s a truism that getting people and goods around, as well as cheap energy, is essential to a well-functioning economy. However, the cumbersome processes, from tens of thousands of pages of planning applications to consultations and environmental assessments.
This makes building anything extraordinarily slow and costly, costing up to 10 times more to build new transport links in the UK than in other European countries, according to Britain Remade.
Fixing the planning system will involve some complex trade-offs. It will mean giving fewer opportunities for Nimbys to delay and veto proposals, encouraging the likes of the nuclear regulator to take a more rational risk-based approach and winding back on some excessively cumbersome regulations.
There is no reason that the UK could not, for example, allow the construction of South Korea’s nuclear reactors, which cost six times less per megawatt than Hinkley Point C. The other challenge is finding win-win ideas, like households near new energy projects receiving discounted electricity, to incentivise more development.
In other cases, it will be a matter of arguing against cumbersome red tape that holds back individuals and businesses for limited to no benefits.
For example, in response to the Grenfell Tower tragedy, the Government has sought to mandate a second staircase in every property above 18 metres. The problem, however, is that this is extremely expensive and is unlikely to meaningfully improve safety.: the Government’s own impact assessment found that the regulation would cost £2.7 billion for just £91 million in benefits. This hardly sounds like good value.
This is just one of thousands of regulations holding back the economy despite not passing a cost-benefit analysis. Over time, the regulatory state grows at an immense pace, as it’s always easier to pass a rule in response to some demand.
Still, it is much harder to assess the impact and determine whether it is necessary. It’s even harder than that to repeal an existing regulation. Fixing burdensome regulation is hardly sexy, but it is essential to address Britain’s malaise.
Taxes are so high because the cost of government has spiralled in recent years. We are spending record amounts on healthcare, welfare, and pensions. This issue could get even worse, as the associated costs of an ageing population could leave Britain stuck on a high-tax, low-growth trajectory. If, as most people, we desire to pay less to the state and keep more of our own money – and ensure our taxes are low enough to attract investment that drives growth – this issue needs to be addressed urgently.
The answer must be some mix of public sector reform and better targeting. It is simply unacceptable that taxpayers are paying more than ever on the NHS yet millions are languishing on waiting lists, and thousands more are dying compared to other countries. What appeared world-leading last century – a state-funded, owned, and operated healthcare system – has provided far worse care than Europe’s mixture of social insurance healthcare systems.
This would need to be intermingled with a greater expectation on those wealthier retirees with more ability to receive less from the state, so thinking carefully about how to target old age benefits to those who need them the most.
So far in this campaign, the big questions are going unasked, let alone answered. The best we can hope for is that whoever enters Downing Street next month in the face of a daunting in-tray will be willing to pursue a transformative enough agenda to prevent Britain from drifting further into decline.
