‘Growth’ – the focus of the Chancellor Rachel Reeves’ speech this morning – can be a confusing word. It’s intangible, obscure, hard to visualise. It happens slowly, often imperceptibly, over a political cycle – when it happens at all. The changes needed to achieve it can be tough and involve trade-offs. Often voters feel those changes will not directly benefit them, or may even make their lives worse – whether it’s new housing developments, HS2, a new runway at Heathrow (which Reeves backed) or new nuclear power stations. For anyone who stood on the doorstep during the last election, we know that making and doing more things can be a hard sell. So the Chancellor is right to treat her ‘dash for growth’ – spurred on by the catastrophic £8 billion collapse in headroom caused by her own cack-handed drive for fiscal stability – as a national emergency.
Growth is a necessary, not sufficient, condition for an economy to thrive
What Rachel Reeves’ plan looks like in practice remains to be seen. If she can achieve meaningful reform to Britain’s strangulating planning rules so infrastructure can be approved, homes can be built and companies can establish plants, laboratories, factories and data centres, then she will have achieved what successive Conservative-led governments did not. Going cap in hand to the Chinese Communist party, or urging the Competition and Markets Authority to tweak their rules in favour of foreign acquisitions, are less encouraging. Substantial supply-side change, if delivered, may resuscitate Britain’s stagnant economy. But, as Paul Johnson of the Institute for Fiscal Studies has argued, Reeves’ instincts are all depressingly orthodox. Seeking to balance the books with a cold recipe of tax rises and spending cuts, she is offering a left-wing version of Osbornenomics.
Although temporarily shelved by the Liz Truss experiment, thankfully the debate on growth is back on the table. And after years of telling ourselves that immigration-driven population growth is really good for the economy, politicians have finally started to talk about GDP per capita – still below where it was in 2019, and barely higher than on the eve of the 2008 financial crisis. But a much deeper question needs to be answered: what is growth for?
This may sound like a silly question. Any student of politics knows that market-driven growth allows us all to become richer without taking from each other – a phenomenon relatively new in human history, dating perhaps only to the Industrial Revolution, or the creation of public markets around a century before. A rising tide raises all boats, as the economist Milton Friedman and politician Keith Joseph argued, alleviating the need for redistribution. When growth stalls, the socialist claim that we become better off by taking from the rich suddenly becomes true – a dangerous position for any capitalist democracy.
But growth is a necessary, not sufficient, condition for an economy to thrive. It also matters where it is, and who it benefits. The last Conservative government rightly identified the gap in output and living standards between North and South as an existential challenge for Britain, with the UK one of the most regionally unequal countries in the developed world. In some areas, real wages have actually gone backwards, and there are pockets of the country that seem semi-permanently poorer than 15 years ago, stuck in a depressed equilibrium caused by deindustrialisation. It should be etched into the mind of every MP that only three UK regions – London, the South East and East of England – contribute more in tax than they do in public spending. For anyone on the right complaining about the size of the state, fixing the economic performance of Britain beyond the greater South East is, alongside our doom-spiral demographics, the only show in town.
So it’s vital that growth not only exists, but that it is properly spread. If it’s cripplingly uneven, governments simply have to redistribute after the fact through welfare and subsidies, driving up taxes and spending, undermining solidarity and the coherence of the nation state. Arguments that the state should have no role in shaping markets to ensure they deliver for the whole country become moot, as the bill for failure will arrive later in the form of higher social spending.
Secondly, growth must be targeted at the creation of high-quality, well-paid employment. To some economists this is heresy: labour is a cost, after all, and those highly sought-after gains in productivity should actually kill off jobs, not create more of them. Except that the long history of automation has shown precisely the opposite. From Ludd onwards, technology has created more jobs than it has destroyed.
The myth that automation and upskilling allows one worker to do the job of two (making the second redundant) is only true if output is held at a fixed level. But the goal of real economic growth is precisely to expand output, finding new markets and selling more of what the world wants to buy. And while AI may present a new and faster-moving technological disruption to work, the need for humans seems stubborn. Even Elon Musk said in 2018: ‘Excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.’
Governments should not invent fake jobs. But they should be alive to the job-killing effects of bad policy choices. When 2,500 workers at the Port Talbot steelworks, for example, are laid off, they don’t simply disappear. There is every chance they will require support through the welfare system, or simply move into lower-paid service sector jobs – which is worse, if this becomes permanent. Is this right, simply because it serves the twin goals of global efficiency and environmental targets, providing fresh markets for China’s (highly polluting) steel industry?
Growth is important because it raises overall living standards through people’s ability to work: it’s a means, not an end. Good quality, well-paid employment allows people to do the things that conservatives know make life worthwhile: start families, buy a home, put down roots, participate in community life, pass things on to our children, and yes, enjoy the leisure time that higher productivity should yield. Conservative thinkers in the US such as Oren Cass and Michael Lind have been making the case for some years that conservatives must prioritise work, not just efficiency – especially given their new voter base. If it isn’t delivering these goals, what is growth for?
Functioning markets are the ultimate drivers of the innovation, investment and output that lead to the rise in living standards we call ‘growth’. But where growth happens, and who it benefits, are rightful questions for democratic governments. There is no law of God that laissez-faire will always benefit the UK, or that it will improve life for a majority of British workers. We are now a catch-up economy, and growth is a necessity to be secured, not a certainty to be assumed. But economic policy must aim to benefit the whole country and to create better jobs. We on the right should be pro-worker conservatives.
Join our Coffee House Shots panel, alongside special guests The Rt Hon Robert Jenrick MP and Jonathan Ashworth, at Coffee House Shots Live: A look to the year ahead on Wednesday 26 February. Book your tickets here.
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