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Roula Khalaf, Editor of the FT, selects her favorite stories in this weekly newsletter.
Last weekend, when Rachel Reeves went to China to drum up business for Britain, Conservative MP Tom Tugendhat WRITES that Taiwan will be a better economic partner. With 2,500 words to play with in The Times, he decided the following fact didn’t rate a mention. The annual Taiwan output is $800bn. The one in China is $19tn. Tugendhat, a good man, but also proof of how far a pukka accent and background can take an empty ship in the inert sea of British public life, is not alone. Many Tories want the UK to keep China at bay. There is a security case for doing this. Why is the economy wearing it, though? Why not just admit that growth is less important to them?
The problem in Britain is that almost everyone names growth as their priority, and almost no one means it. There is always another consideration that comes first, be it geopolitical, ecological, cultural or egalitarian. The result is the worst of all worlds: no serious motivation for economic success, but no tacit national agreement that we should sleep for a life of low drama stagnation. Either of these would be a mature option, with its own merits and costs. It is fudge – which holds growth desirable in the abstract but in no definite form – that has Britain in its gelatinous grip.
A thousand newspaper editorials will tell you that Britain lacks a “growth strategy”. If that means policies, then Britain has no such thing, and almost none. What is lacking might be better called “growth preference”: a settled view that, when growth comes into conflict with another goal, growth should prevail.
Let me come to the point from another angle. What has been America’s growth strategy over the past two decades? Under what administration was it published? Can you send me a link? Whenever I put these questions to “strategy” advocates, the best response I get is some vague quip about Darpa’s role. In the end, the most successful of all economies has no plan. What it has, apart from shale and other advantages, is a very strong desire to grow. When growth collides against other imperatives – tax cuts against income equality, corporate expansion against antitrust concerns, fracking against local sensitivities – America’s bias for growth, at least compared to the western European average. A culture without expectations such as statutory paid leave enables dynamic choices that cannot, or will not, be made in Britain.
This week, Sir Keir Starmer plans to use artificial intelligence to improve the UK. The moment it’s clear he’s not serious is when he says he’s going to make AI “work all“. There is hardly any government reform that works for everyone. His line all but agreed that, once AI upsets an interest group, he’s liable to cave.
If AI is half as revolutionary as the hype suggests, it means job losses in the public sector: in the diagnostic phase of healthcare, for example. Unions want economic growth. But not much. AI also has huge energy needs. Even at current levels of electricity use, the government’s target to decarbonize the grid by 2030 is on the outer limits of achievement. To accommodate new demand from data centers, those targets may be lost. Smart environmentalists want to grow. But not much.
If Britain intends to attract the best AI talent, it may need to cut taxes on high income or capital gains. When Starmer was close to that idea, a think-tank of the Resolution Foundation kind prompted him to submit charts about the impact of inequality. Offered the choice of being a social democracy with 1.5 percent annual growth or a more stratified country with 3 percent, few people chose the former. They want growth. But no. . .
There is another way. Britain can stop pretending to be go-for-growth. I hate it, but there is no shame when politicians come to the following intellectual settlement. The strong growth before 2007 was the aberration, not the weak one since then. A reversal of that trend may be possible, but the necessary reforms of unemployment benefits and others may cause social discord, where progress must be countered. Finally, Britain is not America. This is France: a “poor rich nation” whose disproportionately large capital city and talent for Stem subjects paper in many cracks. Good? No, but what model? Economic success does not prevent the US from having the worst politics in the free world.
Or Britain can continue with the current charade. The Tories want growth, but not if it means building things, aligning with Europe, or greater exposure to China. Labor wants to grow, but not if it can’t put the unions, or “leave the people” or some such NGO press release. What growth policy is left, then? A finance minister asking his colleagues to suggest some red tape to be cut. It’s not good to talk about firing Reeves. Yes, he chose to learn the hard way what used to be simple: that the reference to the expenditure as “investment” does not mislead the actual investors; that “austerity” is not the problem in a country that has not achieved a fiscal surplus since the millennium. But Britain had no problem with Reeves. This is a problem in Britain. Deep down, we’re happier with 1.5 percent annual growth than we bargained for.
