Boris Johnson must act! “Triple Lock” promise stifles British economy

The northern European countries see themselves as being superior to the southern European countries – economically healthier, less corrupt and generally better managed. Great Britain, of course, definitely joins the first group.

But since the Covid-19 crisis broke out, it’s part of a different pack. The nationwide death rate from the disease is as high as the worst in southern Europe and far worse than in much of northern Europe or America. And now the GDP figures published on August 12 from the first half of the year show a similar picture on the economic front: Britain’s economy contracted by 22 percent, twice as much as in America, worse than in Germany and France and within Europe only less than in Spain.

Johnson administration needs longer term policies

Skilful management is required to get the country back on its feet economically. The British Treasury Secretary Rishi Sunak has already demonstrated this. His leave of absence program was a well thought out short term move and he seems rightly determined to end it in October so that manpower and resources can be relocated where they are most useful. But the government also needs longer-term policies geared towards stimulating economic growth.

Ever since Margaret Thatcher reversed a sluggish unionized economy by removing institutional barriers to growth, the Tories have tended to follow suit and encourage trade, deregulation and flexible labor markets. However, over the past decade, productivity in the UK has grown more slowly than in comparable countries. Part of the problem is the failure to prioritize growth.

Tension has developed within the Conservative Party, which has ruled the country for a decade. While many politicians understand the importance of getting the economy going again, Tory voters are getting older and, for many older people, the cost of growth outweighs the benefits. Many are shielded from the whims of the economy by inflated property prices and generous pensions. They have less economic interest in the future than young people and are averse to the changes that come with growth – spoiled prospects, construction, more immigrants.

The “Triple Lock” promise

The wishes of Tory voters are reflected in policies that stifle growth and spending preferences that do not help growth. Brexit, supported by 60 percent of retirees but only 27 percent of those under 25, will damage the economy. Health spending, which disproportionately benefits the elderly, has risen from six to seven percent of GDP since 2010 – when the Tories came to power – while spending on education, which is not just for today’s youth but also for the growth rates of are important tomorrow, have fallen from six to four percent in this period.

The “Triple Lock” promise, which guarantees that state pensions will increase annually by the amount corresponding to the highest income growth, inflation or 2.5 percent, will be particularly generous this year and next: If the government Keeping this promise, retirees will see a 2.5 percent increase this year, while incomes will decline 1.5 percent, and will see a significant increase next year, when incomes are expected to recover.

Even if the government opts for growth-oriented policies, it will be held back by the attitude of the elderly. The “Big Bang” planning reform that it announced on August 6, for example, was more of a shot in the oven. It contained i.a. a commitment not to relax the restrictions of the Green Belt, which is the main obstacle to development in the south east of England.

Measures to promote growth urgently needed

As the Brexit transition phase expires at the end of the year, measures to promote growth are urgently needed. It is all well and good that the government is seeking to “level” the abandoned regions of the country, especially the north, but it will undermine those efforts if it simultaneously undermines the country’s overall economic potential.

After the transition to Brexit, Boris Johnson’s government should advocate the smoothest possible regulation so that trade can continue to run smoothly, for a more powerful reform of the planning system, for a new focus in education – especially in the area of ​​vocational training – and for a End of the “triple lock” in pensions.

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Before Thatcher put Britain on a new, higher growth path, the country appeared to be in a permanent downturn. Covid, Brexit, and a government failing to prioritize growth could see it resume that bleak course.

This text was published on August 15, 2020 under the heading “Boris Johnson needs to focus on boosting Britain’s economy” in the “Economist” and was translated from English by Cornelia Zink.

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