Economic growth is going into shareholder profits rather than into the pockets of UK workers, harming Britain’s long-term economic prospects – according to a group of leading figures from business and civil society.
The group has called into question the overall direction of government economic policy, with Archbishop of Canterbury, the Rt Rev Justin Welby declaring:
“Our economic model is broken. Britain stands at a watershed moment where we need to make fundamental choices about the sort of economy we need. We are failing those who will grow up into a world where the gap between the richest and poorest parts of the country is significant and destabilising.”
Key findings of the report:
Overall, the report’s analysis finds that the economy is no longer raising living standards for a majority of the population, breaking the ‘economic promise’ that has underpinned public life since the second world war. Here are some of its findings:
- The UK is experiencing the longest period of earnings stagnation for 150 years, and young people today are set to be poorer than their parents
- The UK is the most geographically unbalanced economy in Europe, with 40% of output produced in London and the South East and average incomes in the North West, South West, West Midlands and Wales now more than 30% lower than in London
- The labour market is increasingly geared toward employers and big business, with more workers on low pay than 10 years ago, 3% of the workforce on zero hours contracts and more employees overqualified for their jobs than anywhere else in the EU
- The UK is the most unequal of western European countries, with nearly a third of children living in poverty. More of the poor now live in working households (54%) than in non-working households (46%)
- UK productivity is 13% below the average for the richest G7 countries, around 20% below France and Germany, and has stalled since 2008
- UK public and private investment is around 5 per cent of GDP below the OECD average. At 8%, corporate investment is below the rate of depreciation, meaning that the stock of business capital is actually falling.
- The UK has the largest current account deficit (as a percentage of GDP) of all the G7 countries
- The UK has a growing ‘fiscal gap’ between tax revenues and expenditure, which is set to worsen as the population ages and the proportion of workers declines
- Growing automation is unlikely to cause mass unemployment, but could make inequality worse unless the gains are recirculated in the economy
The group is calling for a set of new, radicalpolicies to address these problems. Interestingly there are not dissimilar to the ideas of Labour leader Jeremy Corbyn:
- A fairer and simpler tax system, that incentivises economic ‘positives’ like investment and employment and penalises ‘negatives’ like pollution and property prices. It suggests that some taxes could be earmarked for specific budgets such as health and social care.
- A better distribution of wealth, potentially through new taxes and a sovereign wealth fund to better distribute national wealth
- Much greater economic power for the UK’s nations and regions, including greater ‘fiscal devolution’ and regional banks to support local economies
- Stronger trade unions to help raise wages and protect workers in the ‘gig economy’
- Better regulation and taxation of monopoly digital companies to ensure that data created by consumers is used for public benefit and supports widespread innovation
Tom Kibasi, IPPR Director and Chair of the Commission on Economic Justice, said:
“There is a growing consensus across business, trade unions and civil society that a radical new approach is now needed. Change should be guided by a new vision for the economy, where long-term prosperity is joined with justice for all.”
As well as the Archbishop of Canterbury, the IPPR commission’s members include Sir Charlie Mayfield, the chairman of John Lewis, Juergen Maier, the chief executive of German electronics giant Siemens, and Frances O’Grady, the general secretary of the TUC.