The UK government’s approach to fiscal policy is too focused on being “dull” and avoiding risk, according to an op-ed in the Financial Times. The article argues that the Conservative government, led by prime minister Jeremy Hunt and chancellor Rishi Sunak, is failing to address the UK’s underlying economic problems of sluggish growth, low productivity and lacklustre investment. Instead, the government’s policies – including cutting back on capital spending plans – are likely to exacerbate these issues, rather than alleviate them. The focus on fiscal stability over investment and growth could also harm the country’s international competitiveness in the long term.
The op-ed argues that despite some better-than-expected economic indicators, the UK economy is facing recession, with likely implications for the government’s policy commitments. The article points out that the Bank of England still expects a recession, albeit lasting for one year rather than two, and that living standards will be severely affected. Meanwhile, the government’s own fiscal flexibility is constrained by low public confidence and ongoing pay disputes, as well as by political pressures to avoid unpopular tax rises or spending cuts. This has led to a “glide path” of policy and a lack of political leadership on economic issues.
The article argues that the UK needs to change this approach if it is to address its underlying economic problems. The country needs to invest in long-term growth drivers, such as infrastructure, education and training, and innovative technologies. This will require bold policies from the government, even if they generate some uncertainty in the short term. Rather than trying to reduce risk, the government needs to take on some risk if it is to achieve its economic goals. This will also require politicians and policymakers to think beyond the next election cycle and to focus on building a sustainable, resilient economy for the future.