Growth Commission sets out policy priorities to kick-start growth ahead of the Spring Statement

The Growth Commission today unveils the policy priorities the Government should be pursuing to deliver growth ahead of the Chancellor’s Spring Statement.

As Rachel Reeves puts the finishing touches to the Statement she is due to deliver next Tuesday, the 13-strong body of independent economists concludes that ‘the cyclical recovery is likely to prove fragile unless it is supported, not hindered, by policy”.

The key proposals in the briefing paper Policies to sustain the cyclical recovery include:

• Bringing central government spending under control
• Revising employment rights to create a fair balance between employer and employee
• Freeing up planning and housing regulation to get developers building and landlords investing
• Making energy cheaper and more abundant
• Financing higher education in such a way that it does not discourage graduates from getting productive jobs
• Reforming the tax system so that it limits the penalties paid for success and encourages the young and talented to stay in the UK
• Avoiding anti-growth own goals in the regulatory sphere such as aligning with EU regulations

In terms of the overall economic outlook, they identify several reasons for optimism:

• Most indicators since the Budget have suggested that a recovery is beginning, for instance with retail sales recovering sharply with a 1.7% rise in January
• Both consumer and industrial surveys are reporting an improving mood
• Recent borrowing figures suggest that the fiscal deficit for 2025/26 will come in below the November OBR forecast

However, they suggest that the incipient recovery is fragile:

• Employment and unemployment are not yet sharing in the recovery, with the UK seeing higher youth unemployment than the EU for the first time since records began
• A disproportionate amount of growth is emanating from the tech sector which faces particular challenges relating to the cost of energy, labour market regulation and the Government’s EU ‘reset’
• Anti-landlord legislation and a failure thus far to deliver meaningful planning reform has caused a collapse in housing starts, with the numbers in London now the lowest since the 1890s
• A new wave of emigration is seeing higher earners and those with higher skills leave the UK, creating a loss of productive potential to the economy

Douglas McWilliams, Growth Commission member and co-author of Prosperity Through Growth, said:

“The indications are that a cyclical recovery is starting – but it is fragile. Policy fixes are required in a whole range of areas to ensure that this recovery is supported rather than hindered, including in the labour market, in relation to energy supplies, in the housing market (particularly for rental), in higher education and in our tax system.

“An essential element of this is getting central government spending under control. In 1999, when comparable figures were first produced, for every ten local government employees there were only eight employees in central government; but today there are 21. This demonstrates the scale of the problem.

“If we don’t get this right, we will throw away the golden opportunity that comes from the UK’s competitive advantage in the tech sector in an age of technological opportunity.”

Growth Commission Chairman Shanker Singham added:

“The underlying problem facing the Government is that the economy continues to grow only sluggishly. The record peacetime levels of government spending and taxation are a big part of the problem. But not only that, The Growth Commission has also exposed how policies currently being pursued by ministers are so often the very reason for that sluggish growth.

“Whether it be the ill-advised plan to align British regulations with EU rules, the Net Zero policies which have delivered the most expensive energy in the world or the failure to make the labour and housing markets more flexible, the evidence is there that the Government itself is making the job of growing the economy all the harder.

“Our proposals seek to address the various constraints to growth in order to deliver a sustained economic recovery that will lift living standards for all.”