In this election campaign, there hasn’t been much discussion about the health of the UK economy. There has been discussion about the symptoms: low wages, the unfinished business of deficit reduction, and the pain of austerity. The latter two in particular featured heavily on today’s Daily Politics Economy Debate. But there has been little political discussion about why it is that the UK economy has seen such a slow crawl to growth and is falling further behind other countries in the amount it is able to produce.
Yes, it’s the productivity conundrum again. Without pushing up productivity, firms will be unable to pay their workers more, and deficit reduction will stall again, because the requisite tax revenues will not materialise, as shown in research by the SMF. Robert Peston, the BBC’s Economics Editor, got in one question about the link between investment and productivity, but that was about it for the hour. Most of the rest of the debate focussed on how growth is shared, and the minutiae of specific spending and tax promises.
So we had consensus across the board about the ‘brilliance’ of taking the low paid out of income tax, but little on why the economy has struggled to generate growing wages. David Gauke had another go at explaining where the Conservatives plan to get the money for their promises to cut income tax and put extra money into the NHS; but there was little recognition that it is economic growth that will allow the Conservatives to both eliminate borrowing and spend more. Predictably, UKIP’s Patrick O’Flynn attempted to claim that UKIP was the party of small business despite not listening to business on the problem of filling skills gaps and the risks of leaving the EU.
The SNP and Labour got tantalisingly close. The SNP’s Stewart Hosie highlighted the need to grow the economy. Labour’s Chris Leslie talked about low wages leading to collapsing tax revenues, but his “are you getting a fair deal?” question suggested the worry was more about sharing the spoils than generating them.
The manifestos are actually reasonably competitive on how to create a growing economy, so it is surprising that very little of this is being spoken about in the election campaign. In a reversal of many recent elections, parties are competing on house-building, with Labour targeting 200,000 homes a year and the Liberal Democrats offering 300,000. The Liberal Democrats aim to double innovation and research spending; the Conservatives plan to increase funding for “Eight Great Technologies”. All parties are keen on infrastructure spending. There is also competition on how much education spending will be protected and how many apprenticeship places will be created. These are all areas that economists would widely agree that need to be addressed if we are to improve the underlying health of the economy. They are – if you like – the real components of a “long-term economic plan”.
Yet, none of these were discussed in today’s rather insular debate. While the parties seem to know what they need to do, they appear unable to communicate to the electorate what is needed to fix the economy and how they are going to do it.