The UK needs a robust growth strategy and a stronger No.10 to deliver it

The politics of growth is hard. Rhetorical vehemence is not enough: the issue is not that Whitehall fails to grasp how much the prime minister and chancellor would like higher GDP, but that achieving it demands much more than sheer bureaucratic determination. Both before and after the election, it was normal to hear those close to Labour portray their approach as a matter of getting on with the job – as if grinding through the inbox, taking more meetings with business and pushing things through parliament is all that has been lacking. 

Unfortunately, as Labour is finding out in its first year and half in office, for growth to be a strategic choice, there needs to be a diagnosis of the problem, policy actions to address it and a political strategy for driving them through. Strategy means choosing one path over another, and for this the politics part is key.  

The unmysterious drivers of growth

The problem is not cognitive. Certain commentators like to present the UK’s flagging productivity as some kind of puzzle, as if the country was set to grow robustly before falling ill to some mystery ailment. It is anything but: growth may be a complicated topic, with lots of moving parts and interlinked factors, but ‘complicated’ and ‘mysterious’ are not the same. 

The successive shocks of the 2008 financial crisis, Brexit, the pandemic and energy price shock hit an economy already suffering from weak investment, regional inequality and flagging economic dynamism. On their own these are more than enough to explain the UK’s weak performance. It is no surprise that economies that avoided, or better managed, these perform better.

But solving these problems, like all growth policy, involves confronting political choices. The pro-growth option is never the easy one. Costs arrive in the short term, and higher growth long afterwards. Special interests opposed to disruption and change are much more concentrated in their opposition than the beneficiaries of growth are in their support. There’s always some other agenda jostling for favour. All of these are challenges that need focused leadership to address. 

How does Labour’s ‘stability, investment and reform’ approach score?

Labour has broadly the right outlines of a strategy in the form of ‘Stability, investment and reform’. These do explain where the highest-level choices must be made. Maintaining stability means eschewing the temptation to spend fiscal headroom on making political problems go away. Being pro-investment is never crowd-pleasing – it means making consumption a lower priority. It is hard to boost investment and address living standards at the same time. Restoring dynamism means accepting disruption: whatever may underpin Rachel Reeves’s “securonomics”, dynamic economies allow more failure and challenge, are open to trade, innovation and change. 

‘Stability, investment and reform’ is not that different from the approach of the previous government – and many other centrist ones before it. But in its first 18 months Labour failed to pursue these objectives in a consistent way. Although they have now acted to increase headroom, stability suffered from a gamble on running the public finances with too little leeway against the fiscal rules. Public investment may be higher, but there is no sign of spending by business rebounding (and much of the increased public capital is going towards defence projects). The reform agenda has had a mixed start. Alongside a determined attempt to cut admin burdens, there have been confusing messages about the importance of competition, more regulation for the labour market, and not yet enough focus on the cause of economic dynamism. 

Ruthless prioritisation – from the top – is required in any robust growth strategy

Quite apart from these high-level strategic choices, being pro-growth means having a systemic way to identify and elevate growth considerations over others. The team around the prime minister must resist the temptation to look only for “win-wins”, which is generally a sign of a weak strategy. If growth is the priority, then something else is not. This means taking a lead on thorny matters like tax reform, drug pricing and the pace of net zero, where there are clear winners and losers to navigate. 

None of this is possible with the threadbare operation that normally supports the prime minister on the economy. This is one reason that economic leadership has always fallen to the Treasury. Our argument is that since so much of the substance of a growth strategy is political, and No.10 is the political centre of the country, this cannot remain the case. 

The prime minister needs a larger team to tease out the political challenges to higher economic growth, set direction on them and drive through the policies. This does not mean some kind of centralising, micro-managing unit pushing its own ideas – a sort of ‘growth-central’ that second-guesses the rest of government. This kind of a No.10 is more likely to serve as a disruptive rather than guiding force. Its job is politics, not management, and more often than not its focus should be how best to delegate the actual operation of policy. 

No.10 needs a stronger more capable economics team 

A key part of fixing the country’s growth problem is to have enough of the right staff around the prime minister. Its purpose is that when he says something as sweeping as “growth is the top priority”, his determination is turned into concrete action capable of surviving the political challenges. Those impatient for the UK to get back onto a decent growth path may find this a frustratingly partial answer. The debate around growth is noisy with voices promising simple, low-cost solutions: this or that tax break, planning reform, breakthrough technology or industrial strategy capable of wresting a £3 trillion, 33 million worker economy onto a sharply improved path. 

There are plenty of good ideas around. But there always have been, and yet for a long time UK politics has proven  infertile ground for them to take root and grow. Fixing this will take time, and starts with the leadership of government. It needs the tools for the job.