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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Last weekend, when Rachel Reeves went to China to drum up business for Britain, the Conservative MP Tom Tugendhat wrote that Taiwan would make a better economic partner. With just 2,500 words to play with in The Times, he decided the following fact did not rate a mention. Taiwan’s annual output is $800bn. China’s is $19tn. Tugendhat, a good man, but also proof of how far a pukka accent and background can take an empty vessel on the inert sea of British public life, isn’t alone. Lots of Tories want the UK to keep China at a distance. There is a security case for doing so. Why dress it up in economics, though? Why not just admit that growth isn’t all that important to them?
Britain’s problem is that almost everyone names growth as their priority, and almost no one means it. There is always another consideration that takes precedence, whether geopolitical, ecological, cultural or egalitarian. The result is the worst of all worlds: no serious drive for economic success, but also no tacit national agreement that we should bed down for a life of low-drama stagnation. Either of these would be a grown-up choice, with its own merits and costs. It is the fudge — which holds growth to be desirable in the abstract but in no specific form — that has Britain in its gelatinous grip.
A thousand newspaper editorials will tell you that Britain lacks a “growth strategy”. If that means policies, then Britain lacks no such thing, and almost never has. What is missing might be better called a “growth preference”: a settled view that, when growth comes into conflict with another goal, growth must prevail.
Let me come at the point from another angle. What was America’s growth strategy this past couple of decades? Under which administration was it published? Can someone send me a link? Whenever I put these questions to “strategy” mongers, the best answer I get is some vague bluffing about the role of Darpa. In the end, the most successful of all economies didn’t have a plan. What it had, besides shale and other advantages, was an extremely strong growth preference. When growth bumped up against another imperative — tax cuts against income equality, corporate expansion against antitrust concerns, fracking against local sensitivities — the American bias was for growth, at least compared with the western European average. A culture that doesn’t expect so much as statutory paid leave can make dynamic choices that Britain can’t, or won’t.
This week, Sir Keir Starmer set out a plan to exploit artificial intelligence to enrich the UK. The moment it was clear that he wasn’t serious was when he said he would make AI “work for everyone”. Almost no government reform that is worth a damn works for everyone. His line all but concedes that, once AI upsets an interest group, he is liable to cave.
If AI is half as transformative as the hype suggests, it implies public sector job losses: in the diagnostic phase of healthcare, for example. Unions want economic growth. But not that much. AI also has colossal energy needs. Even with existing levels of electricity usage, the government’s target to decarbonise the grid by 2030 is at the outer bounds of achievability. To accommodate the new demand from data centres, those targets might have to slip. Sensible environmentalists want growth. But not that much.
If Britain aims to lure the best AI talent, it might have to cut tax on high incomes or capital gains. As soon as Starmer goes near that idea, a think-tank of the Resolution Foundation sort will nag him into submission with charts about the effect on inequality. Offered a choice of being a social democracy with 1.5 per cent annual growth or a more stratified nation with 3 per cent, some people choose the first. They want growth. But not . . .
There is another way. Britain could stop the go-for-growth pretence. I’d hate it, but there would be no disgrace if politicians were to arrive at the following intellectual settlement. The strong growth rate before 2007 was the aberration, not the weak one ever since. Going back to that trend is doable, but the required reforms to out-of-work benefits and so on would cause social discord, which the putative growth should be netted off against. In the end, Britain isn’t America. It is France: a “poor rich nation” whose disproportionately huge capital city and flair for Stem subjects paper over a multitude of cracks. Ideal? No, but what model is? Economic success hasn’t stopped the US having conceivably the worst politics in the free world.
Or Britain could keep on with the present charade. Tories want growth, but not if it means building things, aligning with Europe, or much exposure to China. Labour wants growth, but not if it incommodes the unions, or “leaves people behind” or some such NGO press release inanity. What growth policy is left over, then? A finance minister asking her colleagues to suggest some red tape to trim. It would be daft to even talk of sacking Reeves. Yes, she has chosen to learn the hard way what was plain all along: that referring to spending as “investment” doesn’t fool actual investors; that “austerity” isn’t the problem in a country that hasn’t achieved a fiscal surplus since the millennium. But Britain doesn’t have a Reeves problem. It has a Britain problem. Deep down, we are happier with 1.5 per cent annual growth than we dare let on.
