387. Spring Statement Verdict with Economist Paul Johnson (Extract)

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0:20Hi there, Alistair Campbell here. Just wanted to let you know that right now, if you're a member of The Restisted Politics Plus or indeed you become a member of The Restisted Politics Plus, you can enjoy the special episode that Roy and I recorded on Rachel Reeves Spring Statement immediately after the event. We sat down for half an hour with a very special guest, the friend and some time hero of the show, the Director of Institute for Physical Studies, Paul Johnson, a man without to no budget or spring statement coverage is ever complete. Question time, as a result, we'll be with you on Friday this week.

0:57By the way, to join Trip Plus, just go to TheRestistPolitics .com. And here's a little taste of our episode with Paul Johnson.

1:08Paul, I'd love to come back to this fiscal rule saying a little bit later and in particular the anxiety, which is presumably that she's again set this very small headroom. So there's all the chance in the world that she breaks her fiscal rule yet again and has to fiddle around yet again in the autumn. But before we get on to that, I want to step back and bring listeners into the bigger picture of the British economy. So there's a general sensation of depression. Consumer confidence is pretty low. We see ourselves as a bit of a sick person of Europe and of course the current American administration is doing its best to reinforce that by suggesting that we and all other European countries are completely hopeless.

1:47Can you give a submission of what it would mean to create growth in Britain? And what it is in your view is holding back Britain from finding this magical thing that the government's obsessed with. There's a big question. I mean, we're not really at the moment the sick person of Europe. Our economy is not growing particularly badly relative to Germany and France and so on at the moment. But Europe as a whole has slowed down, over appeared. I just need to give you a sense of what the lack of growth since 2008 has meant. I mean, there really was a kind of momentous thing. The financial crisis of 2008 to 2010 and we are still suffering the consequences in a big way.

2:29Had we grown since then at the kind of rate that we were used to for the previous 50 years average earnings would be about 10 ,000 pounds a year higher than they are now. I mean, that is an extraordinary statistic in a sense. But that gives you a sense of the consequences of what's getting on now for 20 years of very poor levels of growth. So you can see looking forward what the consequences of high growth, relative to low growth would be over the next 10 or 20 years. Now, what's holding back growth? Well, clearly something changed post financial crisis. Actually, lots of things changed access to credit for companies.

3:13Actually, we stopped having the sort of turnover of companies, put low productivity companies when our business and new ones came into business, people stopped moving jobs so much. There was less credit in the economy. So those are things that changed around that time. But more broadly, we do have particular issues in the UK economy. I do think the government is right to identify planning and issues around being able to build things and build houses and our lack of housing and all those sorts of things. That's definitely holding back growth. But equally, the government has done some things which are clearly going to make things worse.

3:49So a big hike in employer, nationally insurance contributions, big increases in regulation, including employment regulation and so on, are not going to help in the short run Brexit, clearly, haven't helped, but it mildly. So there are a bunch of things where we have done things that have been bad for growth. The political instability we had for a long period after 2016 hasn't helped growth. And again, I think the government's right to focus on stability as a good thing. But what worries me a little bit is that for a lot of what they're saying, it all sounds very good in terms of growth. But you look at some of the things they've done in the short run, particularly on things like increased regulation, not reduced regulation, increased taxes, not reduced taxes.

4:35They're probably damaging it at this moment rather than helping it despite their long -term rhetoric in the right direction. Yeah. And so her big sort of thing was, you know, we've got to deliver stability. And I have times, well, just like class between this idea that we have to have stability. But basically, we're all accepting that the foundations are pretty weak that growth isn't there. Second point, Labour elected on a mandate of change. And yet her message about the economic institutions has been, you know, let's just stick with what we've got. And meanwhile, we're now going through this period of pretty weak growth.

5:15But also, the other thing that came through the OBR report, which didn't really come through in her speech or the debate, was this relentless focus on our very, very poor productivity. What is it about Britain that we, or is this another sort of worldwide European -wide problem? But we do seem to struggle more than other economies with improving productivity. What more can governments do about that? And why aren't we doing it? Well, without, I mean, let me preface this, that with some worries, as ever, actually, about the statistics here, the productivity numbers are extremely uncertain. And, you know, the Office of National Statistics, their numbers suggest that extraordinarily poor productivity before months last year, which I'm not actually sure, I believe.

6:03Okay. This makes life really difficult for governments when our statistical infrastructure is badly, badly fraying in all sorts of directions. But our side is nevertheless the case that, I mean, you're right, clearly, over the last 15 years or so, our productivity growth has slowed to a, you know, barely a crawl over that period. And again, I think there's no single answer to the question, what's driving that poor productivity performance? It is a combination of unstable government policy, the very constraining regulations on things like planning and house building and so on, lack of building houses in the appropriate places, and a whole series of things like that.

6:50But do we know exactly the answer to that question? No, there's no single thing, again, there's no single answer. It's very similar to the answer on growth of growth and productivity are really two sides of the same coin. So, if you'd like to hear the full episode here, everything that Paul and Rory and I had to say about Rachel Reeves and her spring statement, join, become a member of the Restistus Politics Plus. Go to therestispolitics .com.