The UK’s ever-changing economic-growth strategies and an inability to properly coordinate infrastructure investment are major obstacles to improving the nation’s productivity, MPs have been warned.
Prof Diane Coyle, of Cambridge University’s Bennett Institute for Public Policy, told a Treasury Select Committee session probing the Spring Budget that frequent changes of tack in the nation’s approach to growth were not helpful.
Coyle was asked by Dame Angela Eagle whether “chopping and changing” growth strategies was part of the UK’s problem, and agreed that it was. To illustrate her point, Eagle had listed a range of strategies, from 2017’s Industrial Strategy to chancellor Jeremy Hunt’s “four Es”: enterprise, education, employment and everywhere.
Coyle said that while the “broad trends” being experienced by the G7 group of advanced economies – of which the UK is a member – were “quite similar”, the UK’s productivity had been espcially poor in recent years, and markedly so since 2008.
She said the UK’s issues centred around coordination, scale and a “lack of consistency”.
“There isn’t really a mystery about some of the things that we need to fix: skills; investment; planning; infrastructure,” she said.
“If the broad underlying trends are global, then it’s not that we don’t know what to do; it’s about how we do it. And there have been just frequent changes.”
Coyle said a long-term, strategic approach to managing the economy was required, but whether it was called an industrial strategy was less important.
Coyle said the plans for 12 low-tax investment zones set out by Hunt in last week’s budget were “interesting” but also small scale and therefore not likely to drive major change.
“The different strategies do highlight different strengths that we have in the economy: AI and advanced-materials manufacturing, for instance,” she said.
She said that the funding announced in the budget amounted to "just over £4m" in capital expenditure for each of the investment zones. “Over a five-year period, you might build a lab for that amount of money. So it’s not going to transform anything,” she said
Asked what the UK should bet on to drive growth, Coyle said upgrading rail infrastructure in the north of England could deliver an economic boost – and that the lack of investment in this area was inexplicable.
“The impact that could have on productivity – the travel-to-work area, the career possibilities for two-career couples in those northern cities – is just quite obvious,” she said.
“There’s a bizarre way – and I think it’s a Treasury-inspired way – of looking at these investments project-by-project, when you need to think about the strategic framework in which they sit.”
Coyle said the latest revisions to the Treasury’s Green Book represented “a little bit” of an improvement. But she said a more holistic approach was required that looked beyond the return that a single piece of infrastructure – such as a railway line – could deliver.
“It’s also what else would we put around that [that matters],” she said. “Can we make sure the bus routes join up to the stations? Can we make sure that the housing can get built, or the laboratories? That kind of coordination.”
She said the fact that such coordination was difficult to deliver from the centre of government was a powerful argument for further devolution.