It once looked like Keir Starmer was going to be a pro-growth prime minister. Alas. It seems increasingly obvious that the government isn’t committed enough to the reforms that are needed.
The problems run deep. Growth and productivity have been slow, nearly flat, since 2008. The housing shortage in London and the south-east is getting worse. Cambridge is an economic powerhouse thanks to scientific research. But planning rules means there is no spare laboratory space. We cannot build any.
We produce far less energy than France, and it costs a lot more. Cities like Manchester ought to be flourishing, but productivity is far lower in British cities than in other countries. Outside London, we are sluggish. A hundred years ago, Birmingham was a rival power to the capitol; today it is bankrupt and wretched.
The reason is simple. We have too many rules that make everything too complicated and too slow.
The tallest building outside of London was going to be built in Manchester but the process has been stalled because of an administrative error. An application to build a mansard roof on a house in Lambeth was rejected by the council because the house would “dominate” the local area which is of “low-scale character.” Imagine the horror of a discrete third floor in a two-floor neighbourhood! To get planning permission for a twenty-home development, developers must provide things like an aviation impact assessment and a public art strategy, among many others. Remember, this is before planning permission.
In 2013 there was a proposal to build three nuclear reactors in Wales. Four of these exact reactors are already working in Japan, where they have proved safe during significant earthquakes. Works in Progress reported that the Office for Nuclear Regulation demanded design changes for four and a half years. The aim was to reduce the amount of radiation being discharged. And they succeeded. The radiation was reduced by the amount that “a human ingests when they consume a banana”. The planning permission alone for the Lower Thames Crossing was twice as expensive as an actual tunnel in Norway. If the government is going to fix this, it needs to get radical.
In the US, the need for similar reforms have become much more prominent recently thanks to Abundance, written by the journalists Ezra Klein and Derek Thompson. They argue that the American left is too concerned with blocking development. Worried that even something simple like building a toilet in a public park has become expensive and complicated, they argue for deregulation. This is a major shift on the American left from writers at the New York Times and the Atlantic.
As Klein points out, what matters is the default. France is doing better than the UK on this because the default is that it is easier to build. Klein and Thompson have started the important work of reframing what seem like neoliberal economic concerns into political reality.
If Britain wants to be a country with a generous welfare system, it needs to be a country that actually builds enough decent homes for people. If we want to be a country that has excellent hospitals, we need cheap energy to run them. If we want Britain to thrive outside of London, we need the trains, roads, and laboratories to enable that thriving. If we want to have good jobs for working people, we need to have enough homes for them to live where they need to work. If we want our provincial cities to flourish, they need to be able to build transport infrastructure without spending an expensive decade in regulatory review. If we want energy bills to be cheaper for working families, we need to spend less than four years reducing the amount of radiation from a nuclear reactor by a literal banana’s worth.
We need this attitude shift in Britain. And fast. Apparently a lot of people in Labour are reading Abundance. And yet the government is planning to control where pensions are invested “for the benefit of the economy.” America has the abundance movement. We have central planning for pension schemes. It will lead to lower returns, disincentivising savings. It’s also deeply illiberal. Instead of building roads the government thinks it can plan my pension from Whitehall. Get real!
And yet, as the economist Sam Bowman says, Britain is fixable. We don’t need to invent anything. We simply need to build trams, homes, and energy plants like they do in other countries. The Democrats are waking up to the importance of this across the Atlantic. It is time for Labour to make the same shift.
As well as Bowman, people like Ben Southwood, Samuel Hughes, Tim Leunig, Sam Dumitriu and Britain Remade, Stian Westlake, and many others are all working to raise these issues to the attention of policy makers and the public.
But progress is slow. The government probably isn’t going to do what is necessary. Ambitious talk of planning reform has become the petty chorus of telling developers to “get on with it.” Rachel Reeves has promised more than a hundred billion of capital spending. This is as much as the government spends on debt repayment every year, which now costs more than Universal Credit. And spending all of that money is not much use if it all goes down the perpetual sink-hole of regulation and approvals.
Despite the extent of the problems, the government is more interested in adjusting the ISA rules. This is destructive in itself, but while there is so much that needs doing, it is truly fiddling while Rome burns.
There’s another reason for the left to become more like Ezra Klein. Soon there won’t be another option. If Starmer doesn’t start ripping up the rule book, someone else will do it. Sooner or later, reform will come. Taxes and spending can only rise for so long while growth remains stagnant.
And another decade of low productivity, low GDP-per-capita growth, not enough houses, energy infrastructure, roads, or reservoirs, and an over burdensome tax-and-spend regime to cap it all, will leave us requiring more and more radical reform. The longer the government runs a deficit (while already spending so much on debt repayments) without improving the economy, the more unavoidable the solution will become. Left long enough, that will mean another Margaret Thatcher.
Sooner or later, there really will be no alternative. If Starmer wants to avoid empowering a new Thatcher as his eventual successor, he should take a lead from Klein and Thompson and act now.
[See also: Why George Osborne still runs Britain]
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