Inclusive Growth – a new agenda
Eight years after the Great Crash it is becoming clear that the long term impacts of the crisis profoundly challenges the model of economy – and politics – we have become used to. Asset inflation and technological revolutions are entrenching untold wealth for a small global elite. This sits alongside falling relative disposable incomes for the many and inter-generational disposable income differentials, whilst a cohort of ‘just-about-managing’ citizens are working harder than ever simply to get by, with falling rates of savings. All of this – along with a persistent structural deficit in pensions, welfare and health budgets – combines to create an urgent need for new economic thinking about a model of growth and twenty-first century economic citizenship that works better for all people and places in our country.
Whilst the main political parties set out to tackle these challenges and develop policy programmes for them, Theresa May has set out a bold new Conservative agenda of reforms to help those of our fellow citizens who are working hard but struggling to get by: to build an economy that works for everyone, and for the people and places left behind.
But this challenge is also generational and will need thinkers from all parties – and none – to talk and think together about fresh approaches, which is why this cross-party initiative on inclusive growth is a welcome contribution to the policy debate.
As Theresa May has set out in her sequence of seminal speeches since being called to office in in the aftermath of the Brexit referendum and resignation of David Cameron, she leads a government committed not just to deliver Brexit, but also to the fresh thinking and fresh solutions to the scale of the domestic challenges we face which clearly contributed to the scale of the Leave vote last June. As she has said, it’s clear that as well as rejecting the EU, voters were rejecting a model of growth that wasn’t working for them.
The UK’s vote to leave the European Union was one of the most dramatic and significant political events in decades – for this country and potentially for Europe. It changes everything: our economic model, our long term economic prospects, the assumptions and mechanisms through which we run most of our government and the diplomatic and economic status of the UK internationally.
Delivering a successful Brexit – one which strengthens our global security, our united kingdom, our economy and popular trust in parliamentary democracy, and a model of political economy that works to these ends, will dominate this political generation.
This is a challenge, but is every bit as much an unprecedented opportunity to reform our model of political economy to tackle the causes of deepening domestic political disillusionment and put our country on the path to long term recovery.
Brexit provides us with a unique chance to address two of the most important public policy challenges facing our country. First, the need to enable and enhance the conditions for creating and developing greater enterprise and innovation across our economy in order to increase competitiveness and productivity. Second, the need to tackle the growing sense of marginalisation and alienation of so many people and places from the opportunities of globalisation, which has in turn entrenched attitudes towards welfarism and social inequality. I believe these two challenges are fundamentally linked.
Without social mobility and the removal of the economic barriers holding back national and regional participation in the opportunities of enterprise and innovation transforming our world, we will never be able to tackle the structural challenges of productivity, public service modernisation, competitiveness and innovation.
It’s becoming clearer to more and more people that a twenty-first century ‘innovation economy’ both requires and drives an ‘opportunity society’. You can’t have an enterprising economy with low rates of social mobility and opportunity on a hierarchical society. And the entrepreneurial spirit of economic aspiration is the essential fuel that powers the engine of social mobility.
For too long we have run an economic model based on generating growing tax revenues from an ever smaller global elite to pay for the welfare costs of a workforce increasingly dependent on handouts. Whitehall has tended to treat social policy quite separately from economic policy. The inevitably siloed thinking entrenched into the Whitehall machine – the Treasury and the Department for Business, Energy and Industrial Strategy for ‘growth’ and the Department for Work and Pensions, Department of Health and Department for Education for ‘public services’ – compounds a lack of integrated policymaking to tackle the socio-economic causes of low productivity. The challenges holding back the people and places we need to help do not fall neatly into Whitehall silos.
Since 1997 successive governments have pursued a model of growth based on a booming service sector, high levels of low-cost migrant labour and housing and asset inflation whilst putting in place a policy framework to support long term industrial renaissance and rebalancing. The EU referendum demonstrated that this model of growth was not working for too many people.
Our industrial strategy must be as much about lifting communities out of low-skill and low-wage stagnation as it is about driving pockets of new activity. We need Cambridge to continue to grow but we also need to ensure that communities from Cromer to Carlisle and Caithness, which do not enjoy the benefits of being a global technology cluster, can participate too. That means new measures to drive infrastructure and skills investment to spread opportunities more widely.
The Great Crash and its aftermath – including Brexit – represents a chance for a new generation to think these problems through and tackle them. We all have a part to play. This is the reason I set up the 2020 Conservatives Group in Parliament six years ago as a forum for a new generation of progressive Conservative MPs, regardless of increasingly old fashioned labels of ‘left’ or ‘right’, and from both sides of the Europe debate, to discuss new ways to tackle the current problems facing our country, beyond the conventional silos of Whitehall. Drawing on previous career experiences outside of Parliament, the group also looks ahead strategically at the potential longer-term social and economic challenges that may confront us in the future.
I believe that technology, and a new zeitgeist of public sector (as well as private sector) enterprise hold the key to resolving the barriers that are currently holding back the development of new opportunities in our society. With innovative new approaches to better infrastructure and skills to connect opportunities to the people and places left behind, better incentives and freedoms for our great innovators to lead the way in public sector innovation, and new models of mutualised public/ private partnerships and ventures, we can build an economy that genuinely works for everyone.
The Government has already set about making this happen. Through the industrial strategy, the £23billion package of investment in new infrastructure and innovation announced by the Chancellor, Philip Hammond, we can now be much bolder in developing a twenty-first century knowledge economy infrastructure that will be the foundation for economic success.
The success of inclusive growth rests on a number of core foundations: that our economy grows, that social inequality is redressed; that people are given the skills they need to pursue a career in the new economy and that we better spread the opportunities of the global economy hitherto enjoyed by a segment of our workforce to the many.
This can only be achieved if we recognise the way in which enterprise and opportunity are interdependent. Together, politicians from all parties have a chance to set out a new path for a Global Britain: making our country the world capital of innovation and opportunity. Not trickle-down economics, but ‘innovation economics’ where the private and public sector commit to a programme of supporting each other for mutual benefit.
An economy that works for everyone is an economy in which the country unites around the twin pillars of opportunity and security which are open to all. A country united by a lived truth of the shared values of opportunity and security. A county in which ‘shared values’ are as important as ‘shareholder value’. And in which both are better shared by all. A country once again with that precious alignment of economic and social purpose which is the hallmark of all great civilisations. It’s a great prize.
George Freeman MP, Conservative Member of Parliament for Mid Norfolk and Chair of the Prime Minister’s Policy Board.