Great Britain? How we get our future back
Torsten Bell, Bodley Head, £20

TORSTEN BELL was from 2015 to 2024 the chief executive of the Resolution Foundation, an economic research charity. He is now the Labour MP for Swansea West. In this hugely informative book, he presents a plausible project of renewing Britain through public investment.

He notes that the most significant economic legacy of the 2007-08 crash, something not once discussed or anticipated in a single government meeting, was a monumental pay squeeze. We have now lived with flatlining wages for the past 15 years. 

Ministers used to claim that if we looked at headline GDP growth — of the total goods and services we produced — we hadn’t done so badly, relative to other countries. This was true, but was simply because our population had increased faster than most, largely due to growing immigration. Net migration has been the main source of population growth since 1999. Growing our economy simply by having more people does nothing for what we need to focus on: raising our living standards.

Bell points out that: “Swiftly rejoining the EU should not be seen as the magic bullet to transform our economic fortunes … The UK had economic challenges before Brexit, and it can make progress in addressing them without being an EU member state.”

He also observes that a green new deal will not transform the labour market. “For some, particularly on the left, the promise of a net zero transition will tackle not only climate change but also our good jobs deficit. Panels at the World Economic Forum in Davos are inundated with claims that green jobs are coming in huge numbers and will transform the labour market … But the overall number of such jobs will be small.”

So, what is the key problem? And what is the solution? The problem is underinvestment. The solution is for us to become what Bell calls “an investment nation.”

For the past four decades Britain has consistently been among the lowest investors among Organisation for Economic Co-operation and Development countries, generally in the bottom tenth. Fixed total investment has been below every other G7 economy, averaging just 19 per cent of GDP a year.

Why? Because Treasury dogma limits borrowing (how far spending can exceed taxes raised) in a given year and requires public debt (the stock of borrowing) to be falling in five years’ time.

The Treasury consistently presses against new public-sector investment, which fell from over 5 per cent of GDP in the mid-1970s to below 1 per cent by the mid-1990s, while the state privatised industries and exited the housebuilding business.

The capitalist class has all too often run off with profits rather than invest them in Britain. Private investment from 1997 to 2022 was 14.8 per cent of GDP, as against a G7 average of 18 per cent.

Instead, as Bell asserts, “We should be nurturing and expanding, not abandoning our areas of manufacturing expertise.” Indeed, we need to invest in industry. This is key to improving our productivity growth, which was just 0.5 per cent a year between 2008 and 2022. Manufacturing industry is by far the main source of innovation, of producing better goods: our manufacturing sector conducts 60-70 per cent of all our R&D. 

But instead of investing to create new assets, too often we have taken on liabilities and sold our existing assets. Foreign ownership of our listed firms increased from just over 10 per cent in 1990 to over 55 per cent in 2020.

We need to invest in producing energy. In 2013 Cameron told his ministers to “get rid of the green crap.” In practice this meant cutting back requirements on energy suppliers to install efficiency measures, such as cavity wall insulation. Installations fell by more than 90 per cent almost overnight – from over two million in 2012 to under 200,000 a year. As a result, energy bills are far higher than necessary. 

As Bell points out, the shift to powering our cars with electricity will also increase demand for electricity, so we will need to build nuclear power stations and onshore and offshore wind farms.

We need to invest in education: nearly a third of our young people are not in any kind of education at the age of 18, compared with one in five in France and Germany. Spending per pupil for under-18s studying in further education colleges has been cut by 12 per cent since 2012.

Since 2011-12, 40 per cent fewer under-19s have started apprenticeships in England. The decline is 34 per cent for 19 to 24-year-olds. Between 2011 and 2017 the average number of days a worker spent in training fell by 18 per cent. The proportion of workers receiving off-the-job training, delivered by external providers, has dropped by 30 per cent so far this century.

We need to invest in housing: “There is no substitute for building if we want rent and mortgages to come down for future generations.”

We have 440 homes per thousand inhabitants, far fewer than the richer European countries, which on average have 512 homes per thousand, led by France (with 590) and Italy (with 587). 

But the new Labour government is keeping to the Treasury dogma — cut spending, raise taxes, to “balance the books” — the rules which bring austerity. And Bell doesn’t ask, never mind answer, the key question — what stops us carrying out the sensible and desirable reforms that he proposes?