Business
The business - Christopher Huhne sees Britain lagging behind
Published 03 March 2003
Gordon Brown should stop wagging his finger at our European partners. As the New York taxi drivers would say, if you're so smart, why ain't you rich?
This month, the Treasury issued a paper on economic reform in Europe. It tells you how Gordon Brown sees his role in the world. It is to mount his pulpit and lecture lesser mortals on how to do it. But there is a problem. Britain still has a few lessons to learn from its European partners. A little humility would be more appropriate.
As the New York taxi drivers say, if you're so smart, why ain't you rich? Measured by national income per head after allowing for price differences, Britain is poorer than every other member of the EU except Greece, Spain and Portugal. We are 12th out of 15. Moreover, we are not even catching up. Income per head in the euro area has grown more quickly than in Britain since the launch of the single currency in 1999.
Our life expectancy at birth is lower than in France, Belgium, Luxembourg, Austria, Italy, Greece, Sweden and the Netherlands. Our spending on health and education are well below average. We have half the number of doctors per head of the Germans. Our transport infrastructure is dilapidated. Even the Conservative Party - not known for its well-travelled broad-mindedness - looks to the Continent to improve our public services.
We are also the least equal society in the EU (measured by the authoritative Gini index of income distribution). The poorest 10 per cent of the population receive a lower share of income than in any other EU country. The richest 10 per cent receive the second highest share after Portugal.
We so disregard the importance of social exclusion that we are not even able to report standard figures to the World Bank on adult literacy or the proportion of the population below the poverty line. Since we are a low-trust society with high crime rates, we also imprison more people than any other EU country except Portugal. Britain is a good country in which to be a rich and ennobled benefactor of new Labour, and a bad country in which to be poor, sick, unemployed or old.
Our living standards are not far below the European average (and 6 per cent below Germany's). But more of us have to work, and we have to work far longer hours, to sustain those standards because we are much less productive than other Europeans. We make up in time-serving what we lack in efficiency. Productivity per hour in Germany is 27 per cent higher than in Britain while it is 29 per cent higher in France.
This gap is unlikely to close quickly because we are still underinvesting in both people and equipment. Our capital stock has grown more slowly over the past ten years than the EU average. We invest less of our GDP than any other EU country save Finland, and our share of all EU foreign direct investment since the launch of the euro has been 16 per cent, compared with 29 per cent for the 20 years previously.
Manufacturing output in Britain has stagnated, and we have lost more than one in ten factory jobs since 1998. By contrast, factory employment in the euro area has been broadly stable. There would be 12 per cent more manufacturing jobs today if our trend had followed that of the euro area.
All developed countries tend to lose share in world exports as the developing world catches up, but our decline - from 5.1 per cent to 4.5 per cent since the euro's launch - is more marked than that of our EU partners.
It is not even true that we are tackling problems which our partners ignore. Italy and Germany have been reducing their generous pension commitments to sustainable levels: in Italy's case, reforms have brought the public cost down so much that the ageing of the population is likely to add just 2 per cent of GDP to public spending. By contrast, the stock market crash and the Chancellor's raid on pension tax relief has opened up an estimated £60bn shortfall in British pension funds below what is necessary to meet their commitments.
Nor does our record on the labour market look that impressive. Britain's unemployment is 5.2 per cent of the workforce, lower than the euro area average of 8.4 per cent. But four European countries have cut unemployment by more than us, and five euro area countries - Austria, Portugal, Ireland, Luxembourg and the Netherlands - now have lower unemployment rates than us.
And when we do the right thing, we tend to do it after everyone else. The independence of the Bank of England was long overdue. Every other leading industrial country in the Group of Seven had already made its central bank independent in setting interest rates.
But we do have one advantage over our European partners. We have a preachy and self-satisfied Chancellor who knows how to wag a finger or two.
Christopher Huhne is a Liberal Democrat MEP and a former economics commentator on the Independent and the Guardian. Patrick Hosking is away
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