In this election campaign we are seeing the consequences of the Brexit impasse across a raft of policy areas. With infrastructure and investment expenditures continuing to be deferred, we are seeing a rash of spending promises to placate a disillusioned electorate. But what we continue to lack is a credible set of mutually re-enforcing policies that confront the challenge of Brexit. The underlying tensions that have led to a series of inconclusive elections and disputed referendum results this decade will not be solved by the parties’ promises. This has been the decade of the doldrums and all the hot air expended in this election month will not blow us on our way to a more prosperous future.
Let me give a few examples. In education it turns out we are actually spending quite a lot by international standards but within that not enough on early years or on vocational further education. Infrastructure spending is unevenly distributed, as is public and private investment, with implications that while three-quarters of London’s premises have access to ultra-fast broadband that falls to 1 in 3 in Wales. The success of minimum wages in generating more employment at higher wages may be undermined if both parties push for increases in the level and coverage in order to win votes. Migration does not seem to have supressed wages and also has generated net support to the Exchequer. While low productivity firms have remained on life support through low interest rates, firms with high productivity may have held back from further investment in high quality jobs because of the precarious global and domestic outlook, which is not so much about Brexit per se but as much about a persistent lack of international demand.
The thread running through these observations is that spending by itself will not help deal with national frustrations especially. It is the allocation to areas of particular need, in regions or sector. Successful institutions such as the Low Pay Commission and the Bank of England do need the mission creep of also being asked to achieve a wider range of policy objectives. In the former case, minimum wages, although they have helped, cannot solely solve the problems faced by low income households. In the latter case, the distributional consequences of monetary and financial policy are a question for Great George rather than Threadneedle Street. And say it quietly, the evidence points to the need for more rather than less immigration. And what firms seem to need is politically driven confidence in the future rather than the ongoing crisis of the past three and a half years.
These disparate phenomena cannot be dealt with by any simple populist call to arms. The Tory call to get Brexit done will not, at a stroke, lead to a huge increase in administrative spare capacity and resulting tortuous negotiations in Brexit purgatory would better placed in Dicken’s Circumlocution Office. Neither will the Labour call to increase the size of the state with huge nationalisations help particularly, as this will saddle future generations with debt and also ask managerial questions that we have learnt that the state simply cannot answer. The Liberal Democrat call to revoke Article 50 treats a symptom and not a cause. Each of the main parties are guilty of proposing a big answer to the wrong question.
The right question is what is the particular policy challenge facing a country at the top of global income league but facing sharp relative decline in economic, political and soft power? And the answer is actually surprisingly dull as it involves detailed analysis and planning of each area of government, as well as reform of our tax system to meet those demands. Let’s remove the need to announce new policies on the hoof but rather move forward gradually on ground of firm evidence. But that will matter for little unless we resurrect rule by cabinet, representing the needs of their department, rather than a coterie surrounding our political leaders. The regeneration plans will need to be formulated and then systematically carried out over a number of years and Parliaments, with scrutiny by the relevant Committees.
The economic shock of Brexit is a good starting point. Given the consensus in the profession about the negative impact on the economy, with considerable regional variation flowing from intensity of EU relations, it would be far more constructive, rather than closing minds to the shock, for each department to explain how they will mitigate the impact and what extra resources will be required. In that sense government will at least start to work again. These Election Briefs, kindly funded by the Nuffield Foundation, not only help the electorate in this election but also act to guide the approach to policy over the next Parliament.
Jagjit S. Chadha, December 2019