The financial disk will not solve the problem of Britain’s growth

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In the spring statement last Wednesday, Rachel Reeves, the treasury counselor, did exactly what is expected of it. I faced, as expected, with worse expectations than Budget Responsibility Office From those in the past OctoberThe government has amended plans for spending and revenues, with the aim of restoring the Judges of OBR, which it lost in relation to its financial goals after five years. Was this reasonable? no.

As I am Argue Two weeks ago, the world changed significantly, not least given the need to raise defensive spending significantly. In this context, the government should have asked itself whether it needed to reconsider some of the self -imposed restrictions on taxes and spending. Made wider, as Andy Haldan He argued, there is a little meaning in making such amendments to revenues and spending in response to changes in very unconfirmed predictions. It will be wise to have fewer financial events and also set goals and produce predictions in terms of results ranges instead of incorrect points estimates.

However, the OBR process provides a different opportunity. This is to provide a strict external evaluation of the effect of government structural reforms. These reforms are now necessary, given the United Kingdom’s miserable economic performance. In fact, as a colleague Chris Giles It was noticed in his comment on the spring statement, the latter is the largest economic issue to a large extent: disappointment accumulates on disappointment, while continuing slow growth. Between 2019 and 2024, the economy expanded by only 3.4 percent. Worse, from 2015 to 2024, productivity increased at the economy level only 4.4 percent.

As long as growth remains very slow, no wisdom will be resolved by the UK’s difficulties, including financial difficulties. The stagnant economy is also a “zero” economy, as it means more for some groups that are inevitably less for others. The policy of such an economy must be risky. In the end, financial or democracy is likely to collapse.

Therefore, it is necessary to expand the capabilities of the offer in the economy. One of the government’s ideas to do this – undoubtedly good – is to build more homes and infrastructure. OBR provides an interesting analysis for the first. Its ruling is that it will help, but not as much as one hoped or the economy needed.

Consequently, the Central OBR expectations are that “cumulative additions to housing stocks to 2029-30 million are less than 1.3 million, from this, we estimate that 170,000 additions due to government planning repairs and raising this gross domestic product by 0.2 percent on the expected horizon.” As always in such expectations, there are great uncertainty cases. Capacity restrictions – the lack of skilled workers, and the strong opposition to building or obstacles created by the judicial review – may prove more binding than expected. However, it is also possible to imagine that vocals or other efficiency improvements may lead to greater expansion of width.

In the “low scenario” of OBR, the expansion of the show is 100,000 units by 2029-2030 compared to central expectations. In the “high scenario”, however, it is the 100,000 largest in the central expectations. The corresponding increases in GDP are 0.1 and 0.3 per cent. Housing supply increases for what could have happened without new measures, should make home prices modestly than they were. OBR is also assumed that economic benefits will be built over time, as people move to more productive areas. However, the largest house construction program is much more than it will be needed to transfer housing and cut prices sharply.

This indicates that the government should be more extreme if that is to significantly improve growth prospects. Dramatic discounts, for example, are needed at the cost of building infrastructure. There are also acute improvements in public sector productivity. Special attention must be paid to enhance innovation. The need to expand spending may help defense in this regard. Reforming pensions, wisely made, may greatly improve the availability of risk capital. Reform and simplifying the tax system is also necessary. Finally, not another, the government must avoid any dangerous errors. Its decisions can be proven to raise the cost of employment through high taxes, minimal wages, and the most strict organization to huge errors.

The government should not allow itself to be buried in an endless change and change from the financial position. Instead, you should focus on root structural repairs supporting growth. They may not work quickly. But it is the only thing that will work in the long run. Large repairs are vibrant.

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