Two economic experts were given the opportunity to set the economy on a new path, shedding light on the choices and challenges facing the next Government.

First to take to the stage was Lydia Prieg, Head of Economics, New Economics Foundation, who began by highlighting what she believes are the four key crisis the UK is facing – stagnant wages and productivity, an ageing population, climate change and housing - and then turned her attention to the potential solutions and whether or not the UK can afford them.

Stagnant wages and productivity

According to Lydia, the Government’s strategy to cut taxes to boost productivity was unlikely to work, she pointed out that this is likely to result in a system becoming less and less efficient. Lydia favoured a strategic investment programme - into skills, housing, energy and infrastructure. 

Housing

Lydia talked about the reasons behind the current housing crisis – affordability issues, chronic lack of social housing plus a rise in homelessness.  She once again focused on the need for proper investment and how it is vital that homes are built in the right places, how some areas of green belt should be classed as grey and a need to build up. 

Lydia pointed out that supply side changes in isolation won’t solve the problem, there is also a need for government to stop developing policies that fuel demand and increase prices and think about the distribution – many homes are under occupied, second homes or owed by overseas investors. Lydia would also abolish Stamp Duty that penalise transactions and prevent people moving into suitable homes.

Climate change

Lydia highlighted four areas she believes require change:

• Investment into affordable, sustainable access to transport.

• Introduce a frequent flyers levy. In any given year 50% of households won’t take a flight. 

• Develop a nationwide grant/loan system for home insulation, installation of heat pumps and other home improvement measure, as is done in Japan and China. 

• Investment into clean energy.

Lydia also highlighted a need to reform fiscal rules, to take a longer term view, to enable the scale of investment that is needed.

Finally, with an ageing population, Lydia outlined the need for taxes to rise.

Next to take to the stage was Professor Trevor Williams, Economist, Visiting Professor and Author, beginning his pitch by outlining what he believes are the UK’s three big problems – poor productivity, the housing crisis and an ageing population.

UK’s poorly performing economy

Trevor believes poor productivity is at the core of the UK’s economic weakness. There has not been enough investment into public services and skills and we are not harnessing what we already have. This has led to a fall in real pay and an associated drop in living standards. 

Trevor acknowledged that part of the cause of this is a global phenomenon but with no further agreements in global trade there will be slow productivity gains. He said we need to open services trade, particularly in technologies, to meet the future growth we need.

Trevor did highlight that there are some excellent areas of productivity in the UK, in fact some sectors are over performing, for example the life sciences and aeronautical industries.  

The housing crisis

Trevor began in agreement with Lydia by stating that not enough homes have been built since the 1980’s relative to demand. He then explored a different angle, highlighting the need to co-ordinate the location of new towns with areas in which it makes economic sense for businesses to open factories and warehouses. He also made the point that the selling of council housing stock has added to the issue and that rebuilding this would create a boom. The private sector has not been able to build the homes that local authorities need. 

Trevor also made the point that only 11% of the land in the UK is actually built on and agreed with Lydia that some of the Green Belt should be built on.

Ageing population 

Trevor told delegates that the working population is shrinking with a resulting shortage of key workers, and said that part of the issue could be solved by increasing the pension age but the UK also needs a better health service to keep the population in good health to keep them working.

Trevor focused on the need to invest to develop skills and that while skills are being developed, migration policy needs to change to fill the gaps.

The need for investment

Throughout their speeches, and during the following Q&A session, both Lydia and Trevor talked about the need for greater investment – into skills, housing, infrastructure, apprenticeships, and the health service – to see a return to growth. A need for the reform of planning systems and fiscal rules. And a change to the government’s approach to climate change and an increase in taxes.