Why does the UK struggle with growth? How the centre of government can design better growth policy

The government needs to sharpen up its strategy for raising the rate of growth, led by a stronger more economically capable No.10, says a new Institute for Government report.

Published today, in partnership with Imperial College London, Why does the UK struggle with growth? How the centre can design better growth policy sets out the underlying problems with the way Labour – like many previous governments – approaches growth policy, and how the centre can be reformed to better equip it to take tough choices on growth.

Key issues identified in the report include:

1. Since the 2008 financial crisis, Brexit and Covid the UK has suffered from weak investment, lagging regional economies and a steady loss of economic dynamism.
2. Labour, again like previous governments, recognises this – though in over 18 months in office is yet to articulate a strategy to enable it to confront hard political choices that prioritise growth over other policy areas. 
3. Where it has talked about growth it does so in a high-level a way which is of limited practical use. It has undermined its own “Stability, Investment and Reform” ideals with, for example, its approach to fiscal rules, while its ‘Seven Pillars’ framework is so broad it hinders rather than helps prioritisation.

To provide for a stronger, more economically qualified No.10, capable of working on equal terms with the Treasury, the prime minister should:

• Focus his No.10 on setting direction and resolving political problems, not becoming a focal point for lobbying or policy-origination 
• Set up No.10 to avoid being a centralising, micro-managing team springing ideas and demands upon the rest of government.
• Bring in more expert advice to his top team, so that ‘the economics’ isn’t left to the Treasury, but can sit equally with the prime minister – who must lead from the very top on growth policy.

Giles Wilkes, Senior Fellow at the Institute for Government and former No.10 senior economics adviser, said:

“It is no mystery why the UK economy has struggled over the last twenty years, nor how to turn it around. Labour mostly gets this, but needs a tougher, more systematic way of confronting the political choices needed to raise dynamism and boost investment. This can only happen with a stronger, economically confident team around the PM.”