Boost the Economy:What the New Government Needs to Do to Boost the Economy 2024?

The biggest problem is the UK’s low productivity, which means workers aren’t producing as much as workers in other countries like the US, France, and Germany. Productivity measures how much work is done in an hour. If productivity goes up (Boost the Economy), workers can produce more in less time. Without higher productivity, the economy can only grow by getting more people to work.

Since 2010, the UK’s economy has grown mainly because more people have started working. This is why the recent increase in people not working is a problem; it undoes one of the few successes of the past decade.

In the long run, productivity also helps wages grow because companies can pay workers more without raising prices too much.

Poor productivity growth explains why wages haven’t gone up much since 2010. Real average wages are only £16 a week higher than at the time of the 2010 election, compared to an increase of £145 between 1996 and 2010.

Why is productivity so low? Most economists say it’s because of low investment. Investment helps workers get the best training and tools. Without enough investment, productivity suffers.

A report from IPPR showed that in 2022, the UK had the lowest private sector investment among G7 nations for the third year. Out of 31 OECD countries, the UK ranked 28th, only ahead of Greece, Luxembourg, and Poland.

There are several reasons for low investment in the UK. First was Brexit and the political instability that followed. Investment stopped growing after the vote because the government kept changing its plans, making businesses uncertain.

The Conservatives have been divided since the Brexit vote, leading to inconsistent policies in important areas like taxes, big projects like HS2, industrial strategy, and the ban on diesel cars.

Second, many economists point to low public investment, which could encourage private investment. This is especially true for the green transition, where companies want the government to reduce the risks of investing in new technologies.

Public investment is also needed to fix the UK’s poor infrastructure, such as roads, pipes, and power lines.

Third, many rules and regulations make it hard for businesses to invest.

There are other reasons for low investment, but any government that wants to improve productivity needs to work on these key areas.

It doesn’t matter which party has the best plan to boost investment because Labour is expected to win. The real question is whether their plans will make a difference.

Labour has promised to use “every available lever” to encourage investment, which is a hopeful sign.

Most importantly, Labour’s manifesto says the planning system “acts as a major brake on economic growth.” Reforming this will likely be a key part of Labour’s push for growth, but it’s uncertain if they can make meaningful changes in this politically difficult area.

Policy stability is also a key part of Labour’s plan, which is good but mainly highlights the last government’s poor record. Business confidence is already at its highest level in years, suggesting stability might already be expected by firms.

Labour’s plan for public investment is modest. Through its ‘Green Prosperity Plan,’ Labour has promised to invest £4.7 billion more per year than the current government, but this isn’t enough to stop public sector investment from falling as a share of national income.

Given the tight budget, this is understandable. However, the costs of doing nothing will continue to grow.

While there are positive signs, it feels like Labour’s current plans might not be enough to change the UK’s economic situation. This could change when they are in power, but there are no guarantees.