In this long read, Aydin Saribal makes the case for reforms to revitalise the UK's economy
Seneca once said, “success is when preparation meets opportunity”. In national party policy planning and development, never has it been more important to be ready early, to get it right, and to not be lax. Economic security is national security, and it is under threat. Addressing the internal fragilities within our economy can be done through a combination of regional devolution and national economic policies, with lessons being learnt from approaches taken by external countries.
The ongoing political and economic turbulence within the UK has resulted in a substantial poll lead for Labour, seemingly putting them in the position of a government in waiting. Yet there are likely two years till the next election. In this time, political parties must now act proactively, not solely reactively, to reaffirm and highlight their economic policies.
Labour should seize the narrative on economic growth via both regional devolution and national uniform economic policies. This means avoiding being swept into discussions on austerity rhetoric that promotes cutting towards growth. To counter purely short-term policies and develop a long-term vision of the UK’s economic and democratic future, our approach has to differ from the proven to be ineffective policies of the past. Reform is needed as the UK is the only G7 economy predicted to shrink by 2025.However, any current or future government should continue to engage in proper fiscal responsibility to ensure market confidence in tandem with powerful developmental policies as FDR once did in the US.
Development of successful and effective economic policy requires consistent engagement with those on the ground, those in the media, economic experts, and others in influential bodies such as think tanks. Doing so allows for the creation of policies that address real issues effectively by engaging with thoughtful doers who have expertise and on the ground experience; something national politicians often lack due to a need to focus on national/international issues. This ought not to be limited solely within our country too, but by looking at what is being done successfully abroad, as there are some transferable lessons where other states have faced similar challenges. This applies simultaneously to Labour’s regional devolution policy and Labour’s national economic policy. It is not a case of pursuing one at the expense of the other as they are intertwined. However, clarity is necessary to identify what the government does well, what it should focus on, and where it can devolve to levels that allow for more effective policy delivery.
Too often, UK policymakers have held a stance of the UK’s unique exceptionalism that has undermined the review of effective policy approaches in other countries, due to claims of the other system being too dissimilar. Instead, the UK should be looking externally towards others because we can learn, both from their successes and their failures. For example, Japan, which has a Minister of Economic Security, has developed four key pillars for economic security and has highlighted its critical role as part of national security. The four pillars are:
Strategy to build resilient supply chains of critical commodities;
Strategy to ensure safety and reliability of key infrastructure;
Public-private cooperation system for key technology developments;
Non-disclosure system for patents.
Japan’s approach is a contemporary and world leading example of how the state can engage with business in the development of effective economic policy. By effective, I refer to meeting the upstream goals of the private sector while simultaneously strengthening Japan’s national security and facilitating growth across the economy.
Political parties can also engage more closely with our US counterparts. At a State level, the US has seen the formulation of innovative regeneration policies that could be adapted to fit some areas of the UK. For example, the Michigan Economic Centre’s work as part of revitalising struggling heartland communities. Similarly, in Germany, their Chambers of Commerce and organisations like GTAI (Germany Trade and Invest) have been successfully utilising their convening capacity to coordinate and simplify business development.
Revitalising the economy in a way that also promotes equity is crucial to renewing democracy because if people are suffering economically, they lose faith in democracy. For example, in Germany and the US it is evident that economic growth requires a greater adoption of public private partnerships. Notably, this has been in tandem with other regional actors, be they the political M10 (grouping of the ten Metro Mayors) or the British Chambers of Commerce. Central government can incrementally devolve some economic levers to the regions whilst supporting capacity building by transferring some civil servants to these mayoralties too. This would enhance regional skills whilst developing Whitehall staff with on the ground experience across the country.
The central government can play a further role in steering the economy. Even though region-specific issues on health and education are typically best addressed at a regional level, the shortcomings of the labour market (work hours instability, income volatility, low wages, insufficient disability & retirement benefits, inadequate paid leave, cost of education) can be best impacted through national policies. This is because non uniform policies such as on work hours or welfare could see too big of a variety between geographically close areas.
In regional development, the central government can play a facilitatory role in encouraging investment or the creation of an independent public investment bank akin to the KfW, as the Brown Commission recently proposed. A public investment bank could support longer term projects (like ports, train stations, airports) that do not give an immediate or clear financial ROI (return on investment) but have longer term community wide impacts, such as promoting connectivity, accessibility, and aspiration. In addition, the supporting apparatus, such as the development of ARIA, are crucial to providing seed funding and encouraging entrepreneurship and discovery (as has been the case with DARPA in the US).
A comprehensive, work-based, economic security "policy package" should be explored because the UK is in a rut economically and needs a re-evaluation of its approach and vision. The following example is an approach to be considered, not the only potential method of travel. This would help low-income individuals, poorer localities, less affluent regions, and foster local/regional cooperation, through fixing the shortcomings of the labour market by:
- Reducing the problems & costs faced by poorer localities and regions;
- Providing poorer localities and regions with more local tax revenue (and other resources) to solve problems;
- Reducing the barriers/disincentives to local/regional voluntary cooperation—as well as any mandatory cooperation imposed by central government; and
- Making it easier to devise equalising formulas (i.e., levelling up the revenue to poorer localities & regions) that are financed mostly at the central government level.
John Harris is right in the article he penned in the online Guardian titled, "Westminster beware: the north is ready to take 'levelling up' into its own hands". Levelling up poorer regions is necessary as the UK has some of the highest levels of regional inequality of all OECD countries, as the economist Phillip McCann has repeatedly highlighted. Regeneration and levelling up involves the key actors and institutions in poorer regions taking matters in their own hands, e.g. creating new regional structures to improve public health, education, transport, culture.
However, another key step that the UK could take to "level up" poorer regions would be nationwide changes in economic security policy that, while uniform, disproportionately benefit poorer citizens (as David Riemer alludes to in his book). This is in areas of working conditions and welfare where regional adjustments are limited in their efficacy and may be negative in a relatively geographically small country like the UK. Therefore, potential changes (listed below) in nationwide economic security policies would see poorer regions, whereby the shares of poorer citizens per 1000 is higher than the national average, benefit more and therefore will "level up" poorer regions while still helping poorer people in wealthier regions. Such economic security policies include:
(A) guaranteed employment if there are insufficient jobs in the local regular labour market;
(B) a high national minimum wage;
(C) large per-worker supplements to earnings, adjusted for the number of dependent children, that ensure that full-time earnings and the supplements always yield an income well above the poverty line;
(D) guaranteed free childcare for young children (and for older children while their parents are working 2nd and 3rd shift jobs);
(E) higher minimum payments for adults living on disability benefits or retirement benefits.
These nationwide, uniform economic policies will benefit both economically poorer and economically wealthier areas. For example, they will benefit more residents on a per 1,000 residents’ basis in Darlington than residents on a per 1,000 residents’ basis in Cambridge. This is as they will also deliver more employment, earnings, income, and other help on a per-resident basis to those living in Darlington than on a per-resident basis to those living in Cambridge and so will "level up" poorer regions while simultaneously still helping poor people in relatively wealthier areas.
The approach to assuring economic security is not an either-or matter. It requires changes both to regional devolution/levelling up policies and to uniform national economic policies. Regional devolution policies, for example, allow for the North-East to address issues that are particular to the North-East in a tailored approach. National policies meanwhile can be utilised to uniformly readdress issues that pertain to the whole UK, such as issues of inflation outstripping pay.
Aydin Saribal serves as Politics and Democracy Networks Lead at Ditchley. Here he is writing in a personal capacity. He has also worked on Labour campaigns for the Labour PPC of the Vale of Glamorgan and runs the education programme for a Mosaic, a charity that provides access to education for girls in Afghanistan.