TThe IMF could hardly have put it any clearer this week. Britain’s chronic disease, the underlying disease that separates Britain from the population of the developed world, is our low economic growth.
The IMF’s revised forecasts for 2023 certainly make for intense reading for Rishi Sunak. Last week, Sunak told his colleagues at a cabinet meeting in Checkers that the next election will be judged on five issues, one of which is their success in expanding the economy. However, just days later, the International Monetary Fund cut its growth forecast for the UK to 0.6% from the paltry 0.3% it forecast three months ago.
With that new prediction, Sunak’s steep road to electoral success just got steeper and more slippery. But this is not Sunak’s only problem. This is a national challenge that affects us all. Significantly, Britain was alone in suffering this humiliating revision. The IMF forecasts growth for every major developed or developing economy this year. The list not only includes all the countries that some conservative writers spend their careers despising, such as France, Germany, and Japan, but even Russia, despite wartime sanctions.
To be fair, none of this means that global economic growth is either booming or problem-free. Neither is true. Global growth has slowed this year, and the decline is particularly pronounced in advanced economies, including the US, not just the UK. Growth, both in developed and developing economies, is one of the main causes of the global climate crisis and therefore cannot be ignored.
But we must say that Britain is at the back of the field and the gap with the leading group has increased. There is a danger that the UK will lose touch with its competitors. It will be an indelible legacy for any government that follows Sunak. True, not all reasons lie behind the government’s doors. Yet many do – two of them in particular.
One is the short-term legacy of the Liz Truss/Kwasi Kwarteng tax cut budget, which led to higher taxes, higher borrowing costs, higher interest rates, a contraction in the housing market and lower market confidence. Another is Brexit, which continues to hurt UK business and create major shortages in the labor market, particularly in health services. The UK’s relatively high dependence on imported gas at a time when energy prices have soared has not helped either.
However, to read some right-wing British newspapers this week, it’s as if the events of last autumn never happened. Newspapers such as the Daily Telegraph and Daily Mail not only deny the economic damage from Brexit, but this week claimed that the response to everything Tax reduction. If the economy is failing, taxes should be cut. If it’s booming, it’s time to cut taxes. This is as vague and nonsensical as Douglas Adams’ claim that the answer to everything is 42.
However, in this article, these articles speak to and for an important strand in the Conservative Party that Sunak will find difficult to manage, including in Westminster. It’s a strand that sees government as a problem and taxes as bad, that thinks both must be cut to kill economic growth, backed the Terrace last summer and, if either tries to topple Boris Johnson – and maybe Even Sula Braverman – supports it. Sunak this year.
All this leaves Sunak and the more cautious majority of the conservative parliamentary party in a bind, unable to get the government or, more importantly, the country out of it. Before the election there is neither time nor resources for the Conservatives. The tasks that Sunak sets for them in Checkers seem insurmountable now.
Many conservatives will spare their pity. However, this still leaves the UK in an economic policy bind, with less policy flexibility than other countries to generate wealth in the incomes and taxes that enable households to cope, businesses to innovate and trade and It enables the government to start repairing public services. . This is a national crisis, not just a party political crisis. It also limits Labour’s options.
There are many growth strategies for Labor to employ that do not necessarily involve tax cuts or increases. Supporting new technology and green energy economies through public-private partnerships is a long-term interest of many labor strategists. Investing in education and childcare to get more people back into the labor market is another.
But there are more political issues, such as increasing immigration or reforming (rather than just liberalizing) planning laws, both of which are unpopular with many people. Britain must also understand the sting of Brexit and improve access to and from European markets.
However, few of these offer quick fixes, and if the UK is further behind the pack in 2024, the gap will widen and inequalities will become even harder to overcome. A new government is definitely a necessary answer to Britain’s problems. But no one should pretend that is enough.