The outlook for the UK economy doesn’t have to be so bleak. We just need to get back to basics, writes Sam Bidwell
It was Lee Kuan Yew, Singapore’s visionary founding father, who once famously said that those who do not know history think short-term, while those who think history will always take a medium or long-term view.
If Lee is right, then I am forced to conclude that there are no historians in Britain’s political class. For decades, politicians in this country have avoided tackling the structural flaws in Britain’s economy in favour of short-term, stopgap solutions. As Labour’s party conference kicks off, the open secret that nobody in government wants to admit is that our economy is low-growth, low-tech and low-innovation, thanks largely to political decisions.
And as the public is now discovering, following Labour’s landslide election victory back in July, these structural challenges are not the preserve of a single political party. Both major parties have been complicit in preserving a broken planning system, which disincentivises growth and investment. Both major parties have tended towards reflexive regulation as the solution to every negative externality. Both major parties have pushed away the world’s best and brightest through punitive taxation and the scrapping of the non-dom regime, while nevertheless advocating for a policy of mass migration.
All of this sounds rather bleak, but there is a silver lining. Despite all of the UK’s weaknesses, from our absurd energy policies to our dwindling state capacity, people still want to invest, build and grow here. Every time you hear a story of a new data centre or a new lab that gets refused planning permission, comfort yourself with the fact that these stories imply that businesses do, in fact, still want to build data centres and laboratories in this country. People want to invest in Britain, but we are making it impossible for them to do so.
Seizing these emergent opportunities is now simply a question of getting the basics right. We need only let the natural brilliance of the country flourish, and we would be well on the way to fixing our endemic lack of economic growth and our flagging productivity.
And slowly but surely, this simple idea of ‘getting the basics right’ is emerging as the consensus position on how to fix our broken economy. Published just last week, the excellent ‘Foundations’ essay – authored by Sam Bowman, Ben Southwood and Samuel Hughes – rightly noted that there is no path towards economic growth without planning reform and cheap energy.
In the same vein, we must redesign our immigration system to prioritise high-quality human capital, as noted in the Adam Smith Institute’s recent Selecting The Best paper. Far too often, life is made difficult for talented migrants from countries like the United States while, at the same time, we encourage industries like hospitality and agriculture to rely on low-skilled migrant workers.
Instead, our economic system should promote innovation, automation and education, while also poaching the best and brightest. That means enabling businesses to invest capital in new machinery and new technology, embracing robotics and AI as a means to improve productivity and reduce our economy’s structural demand for labour. In turn, these investments must be supported by a planning system that enables us to build the necessary infrastructure, such as data centres.
None of this is particularly flashy – indeed, this is the economic equivalent of plumbing. Yet allowing the natural strengths of our economy to flourish is the first step in the transformation towards the high-tech, high-investment, high-quality economy that we all deserve. In the immortal words of Adam Smith, little else is required to carry a state from the lowest barbarism to the highest opulence but peace, easy taxes and a tolerable administration of justice.
Sam Bidwell is the director of the Next Generation Centre at the Adam Smith Institute