Growing pains
Liz Truss was right. That is a statement of fact consistent with Tony Danker’s recent article on economic growth (“The seeds of growth”, December). Growth is the only solution to the fundamental imbalance between the country’s needs—for spending on everything from social care to infrastructure—and the revenue available. Truss’s misjudgement of the market response to her borrowing was fatal, but the objective was the right one.
If anything, the same objective is even more important for Labour, given its natural desire to use public power for the public good. There is much talk of the priority of “stability” but insufficient recognition of the fact that true stability can only be achieved through growth. The last thing the country needs is four or five more years of Calvinistic austerity. The challenge is to find a strategy that carries more credibility than Truss and Kwarteng managed to find.
Danker sees this clearly and offers a menu of options, most of which make good sense. The problem is that his ideas would take too long to produce the desired results. By the time they were in place we would have lost another three or four years in what is now a fierce international competition involving the US, China and the EU using semi-protectionist moves to support their economies.
To kickstart growth and to buy time for Danker’s ideas to work through, we need a powerful shift in incentives to encourage investment, especially by the companies currently sitting on vast amounts of unused cash. One recent study reported that the companies in the S&P 500 were holding some $2.6 trillion of uninvested capital. There is no reason why some of those funds could not come to the UK. Jeremy Hunt’s autumn statement has opened the door, with a modest adjustment to capital allowances.
Labour should go further and recognise that unemployed capital is as bad for the economy as unemployed workers. The lesson of Truss’s failure is to change the means—to focus on boosting private investment—not to abandon the goal. Nick Butler, King’s College London