Britain endures meagre economic growth, a cost-of-living crisis and alarmingly slow progress towards its climate goals. These challenges are not accidental. They are the result of policy choices. Overcoming them requires a new type of economic policy that can be achieved through five big resets.
First, growth requires investment. Britain bears the consequences of austerity measures implemented in 2010. In addition to challenges ranging from crumbling schools to knife crime, austerity has undermined the UK economy. Contrary to discredited arguments in favour of austerity, notably from economists who link public debt to weak economic growth, debt sustainability depends on what the government is investing in. In other words, how debt is being used is more important than the level of debt. Government spending is necessary to invest in the drivers of productivity and growth, such as education and training, and research and development. By investing, the government can expand the productive capacity of the economy, leading to a fall in the debt-to-GDP ratio.
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