Build Back Better - 3. Economics and Industry

Apologies but I have skipped the second post (I am half way through making the notes and have left them at home – I’ve stolen 10 minutes away from the family while on holiday to continue reading the pamphlet, so I’ll skip to part 3)

This section is written by 9 different authors, most notable of which is Sir Vince Cable.

Where I deviate too far from summarising and instead go off on a tangent with my own thoughts - I have put those bits in italics.

Summary:

Duncan Brack takes the first chapter to set the scene for higher spending in the future: It begins with noting the dire financial situation Britain finds itself in post-Covid and notes that a return to austerity would kill off any recovery – it neatly comments on how the Coalition austerity most likely did the same thing post-credit crunch. A sign of a mature Party, able to criticise its own actions.

It notes that at just under 100 percent the debt to GDP ratio is historically quite good when compared to other emergencies (all of them wars). It makes the argument this is essentially the same emergency as a World War and therefore we can afford to hit similar levels of debt v GDP (240% at the end of WW2, for example). Smartly it notes that debt servicing on UK government bonds is at near zero – so an ideal time to hit the spending button (although, a word of caution – Britain’s debt servicing levels may well take a hit during a no deal Brexit (or any Brexit)).

It notes the need to be honest with the electorate over how this will be paid back – “Scandinavian-style levels of public services can be paid for with US-style levels of taxation. This myth, pedalled by politicians from all parties, has contributed to the appalling impact of coronavirus on the UK”.

Vince steps up for the next section on Industrial Strategy and Liberalism. He begins with a discussion of Alexander Hamilton. (I enjoy the reference and have also been swept up in the genius that is the stage show by Lin-Manuel Miranda and have read Hamilton’s biography off the back of it – but I do wonder if it hadn’t have been for the musical, would anyone really be mentioning him? – he has been referenced a lot in the recent EU mutual debt obligation v loan debate too). Hamilton was a fan of industrial policy – choosing winners by backing certain companies and industries. The more liberal doctrines in Britain have historically shied away from this approach, preferring to trust the markets and only intervene using state muscle in clear cases where the market is failing (like investing in long term projects like nuclear power – or building aircraft carriers).

Vince talks of his own initiatives along the industrial policy route – creating groups of stakeholders in each industry and letting them agree to a plan of government backed action. This was combined with smaller initiatives like ‘Catapult’ centres to bring together and drive forward certain sectors and better designed apprenticeship schemes.

Vince proposes bringing back the Green Investment Bank (the Tories sold off the original…). This bank, and the still existing British Business Bank will need to be allowed to lend a lot more than the very modest original GIB – partly because of the crisis and partly because we are losing access to the European Investment Bank and need to replace it! (presumably from the ‘£350m a week’ we will be getting… although I thought that was exclusively for the NHS…).

He p that industrial strategy could be used to locate new industries in areas that need them, he is especially proud of the wind turbine plant in Hull, for example. While he doesn’t say it, he is talking of ‘levelling up’ (to borrow yet another phrase that will Boris will hopelessly fail to deliver) but refreshingly he acknowledges that this too comes at a price – skilled workers and infrastructure work when best with they are centralised – not scattered across the country – network effects may be lost and duplication may occur if this was the case. A ‘balance’ must be struck.

Josh Babarinde chimes in with a piece entitled ‘Recovery Rewards’. An idea I have always thought sounded great as it harnessed the power of competition. Based on the X-Prize (initially for low earth orbit travel, but since expanded to other things) it would create cash prizes for individuals or companies that create solutions to a given problem. Post Covid (and EU!) Britain is going to be full of problems that need solving. Seems like a smart move to introduce this style of policy setting in earnest. It is a huge multiplier effect - $100m spent on space technologies by the competitors aiming for the $10m prize in the case of the X-Prize.

Helen Cross with ‘Community-based prosperity’.

Cross identifies the issues with Britain’s economy – low productivity and huge inequality between regions and different ethnic groups. She outlines six ways to make improvements:

The shift to a high(er) skill economy will require a cultural change away from a focus on short term share holder returns and towards longer term investments. It will also require a cultural shift towards lifelong learning and less on one off 3 year long dollops of higher education at the beginning of someone’s career.
More investment from government. A move away from the ‘toe-in-the-water’ funding of pilots and more of a deep dive into uncharted territories (I’m paraphrasing).
Make it green. Of note is the idea that SMEs will need particular help in adopting new green innovations. Something I agree with. Not every company is a British Telecom that can pack a leafy campus (in Ipswich) with clever people to dream up big dreams – most company ‘CEOs’ are too busy doing the dishes and putting the kids to bed – they need support to make the changes, especially as collectively they make up the biggest bulk of our economy.
Make it regional. The old Regional Development Bodies suffered from democratic deficits as the proposed regional assemblies they were supposed to accompany were never created (voted down, I believe). Newer versions with ties to local authorities s