Without Real-Term Social Outcomes from Investments, Prosperity in the UK Will Remain Illusive

Without Real-Term Social Outcomes from Investments, Prosperity in the UK Will Remain Illusive

Dr George Dibb, Siobhan Morris, Dr Olivia Stevenson

All too often, policy responses are formulated without considering the levels of deep-rooted poverty in the UK, which are all-too-often exacerbated by domestic and global shocks. This approach to policymaking has two major risks. Firstly, an untargeted policy programme risks headline growth figures masking a lack of real improvements in living standards. By 2028 the UK is expected to have seen steady GDP growth but absolutely no increase in real wages – a shocking break between the nation and the household. Secondly, policy responses don’t achieve “true” value-for-money as they address one crisis after another without tackling the underlying problems – the very definition of “sticking plaster politics”.

One stark example is the repeated failure to connect the Covid-19 pandemic with the current cost of living crisis. All crises or shocks create winners and losers, but when such inequality accumulates and repeatedly affects the same people that we see an acute problem. Both the pandemic and the energy price shock have hit lower-paid people in insecure employment, often outside London and the Southeast the hardest. The failure to recognise the connected impacts on specific groups of people reflects the short-term ‘sticking plaster’ approach to policy responses, and a continuation of emphasising policymaking at the level of the ‘general population’ rather than targeted interventions for specific groups with distinct needs.

The lack of cohesive thinking is a major obstacle to addressing wider economic prosperity in the UK in the 21st century. Both Theresa May and Boris Johnson tried to confront these economic challenges via, respectively, the industrial strategy and ‘levelling up’. But with the stewardship of confronting long-term challenge reverting to the Treasury under Rishi Sunak, there has been widespread criticism of Whitehall’s most powerful department for prioritising short-term gains at the expense of long-term investment and coordination towards an economic strategy (see here, here, and here). This has been critiqued as the Treasury “knowing the price of everything and the value of nothing.”

Neglecting the importance of social infrastructure investments as critical to stimulating UK growth is an example of such economic folly. So is the Treasury’s continuation to place the responsibility to invest in long-term economic growth at second or third importance behind other roles as a fiscal ministry and finance ministry. This approach is detrimental to effective policies as it creates a bias against projects with immediate financial costs but long-term societal benefits.

Added to this blinkered approach is the language of economic policy that has accompanied both shocks. There is an inevitable price tag attached to the reframing and redevising of the way public policy solutions are made, implemented and evaluated to tackle the twin shocks of the COVID-19 pandemic and cost-of-living crisis. However, political debate needs to reframe negative thinking about the ‘costs’, to rethink tackling fundamental problems, such as poverty, as a narrative of national investment. Doing so requires breaking down the current government fiscal systems that perpetuate a narrative that the building of roads is an investment in the UK’s prosperity but that the paying of benefits is a “cost” to society. One proposal in this area has been a new type of government accounting investment in ‘preventative spending’

Our report outlines the need to reframe investment priorities, stresses the importance of long-term planning, and sets out the need for a shift in Treasury doctrine. While this requires a change in mindset and political capital, it could bring positive outcomes. Moreover, without a dedicated ministerial portfolio and oversight function responsible for addressing the deep-set poverty levels in UK society that underpin the cost-of-living ‘crisis’ and contribute to the effects of economic ‘shocks’ such as Covid-19, policies will continue to lack the necessary focus and coordination to alleviate economic deprivation.

The absence of a comprehensive strategy, cross department working, and evaluation frameworks result in fragmented efforts that fail to address the unique challenges faced by different population groups in different household types and regions. This holds back economic prosperity. 

Creating intersectional policy, with all sections of society in mind, is challenging. But without acknowledging the interconnected, intersectional nature of the ‘shocks’ of COVID-19 and cost-of-living, and without a system to understand the actual social outcomes from financial investments, achieving economic prosperity in the UK remains elusive. 

Relying on the current policy playbook won’t jumpstart growth. Only by recognising the need to build intersectional policy, that addresses immediate and long terms needs and that takes account of sections of society that have been most affected by the interconnected impacts of COVID-19 and poverty pandemics, can a path be charted toward inclusive prosperity in the UK economy.

Dr George Dibb is Associate Director for Economic Policy, IPPR (Institute for Public Policy Research) and an IPPO advisory board member, Siobhan Morris is Assistant Director, UCL Grand Challenges and an IPPO advisory board member, and Dr Olivia Stevenson is Deputy Director, UCL Public Policy