Economic growth in the UK has been lacklustre for years. Between 2009 and 2024, the UK economy grew by just 1.5% a year, around half of the average growth between 1993 and 2007 of 3% a year.
Successive governments have tried and failed to turn the economy around and deliver the type of growth many got used to before the 2008 financial crisis. So what can be done about Britain's growth issue?
Independent economist Julian Jessop told the MoneyWeek Talks podcast that part of the answer is boosting productivity in the country.
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But the best way to do this for Jessop is not necessarily pouring more money into public services. In fact, it may be the opposite.
He said: “The austerity period, interestingly, was a period of relatively rapid growth in the productivity of public services. So I think there’s a good argument for saying that sometimes you need to give the public service a little bit less money and encourage them to make more of what they’ve already got.”
“If you look at the overall amount of resources that were pumped into the public sector, they were used relatively well during that period.”
The consensus of austerity did not survive long though, and after the early 2010s, governments started spending more.
The current Labour government is no exception and is spending more on public services like the NHS – but the expected rewards from this are yet to be seen, Jessop said.
“We’ve had a surge in spending on the NHS during and after Covid. An enormous amount of additional resources are being pumped in, including more staff, but the amount of operations, GP appointments, and so on hasn’t actually increased at all. So it’s not just about money, it’s about how efficiently the services are organised.”
The trouble is also that the UK is unable to fund all its spending through taxation and other revenue-raising activities alone. To fill the gap, the government is borrowing extensively at a time when borrowing costs are at 28-year highs.
The brewing fiscal crisis will need to be addressed at some point soon to keep the wolf from the door.
On the positive side, whatever fiscal crisis may be expected, Jessop doesn’t think the UK will need to be bailed out by the IMF like it was in the 1970s.
However, he says that while the UK won’t need an IMF bailout, it may need “political cover” from the IMF to introduce a proper programme of control on public spending, “which is where the problem is.”
A counter-argument would be that the UK has control over its own money supply and so we should just print the money we need. That, though, leads to inflation as more money floating around will eventually chase up prices.
“So if we don’t fix the problems on the supply side of the economy, if we don’t make more of the resources we’ve already got and use them more productively, then that’s where the productivity drama happens.”
Listen to MoneyWeek Talks for our full interview with Julian Jessop, where he discussed the issues with the UK’s planning regime, poor infrastructure investment, energy supply, and much more.
You can watch the podcast on YouTube, or listen to it wherever you get your podcasts.
About the podcast
MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.
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