The key to economic recovery is productive spending
I congratulate the Government for pressing ahead with HS2. And while the science budget is declining in real terms, the Government did at least try to protect it. Sadly, that is where its long term vision ends.
Britain’s economic situation is extremely weak.
After five years of recession, our GDP remains 2.6 per cent below where it was before the crash.
Our productive sectors have struggled, with manufacturing GVA down 10 per cent over the last five years.
Construction has fared worst of all, falling into a deep decline in 2012, and is now almost twenty per cent down on 2008.
The European Commission, the IMF and the OECD all say the Euro zone will decline this year.
Our problems are significant, deep and require great attention.
However, if we take the right decisions they can, and will, be resolved. Many times, I’ve spoken about the need to take a long term view of economic growth.
Our challenges are the result of years, even decades, of too little innovation, too little investment, undercapitalisation and too little support for the physical and social infrastructure that delivers lasting growth.
We must all pull together to change this.
Unfortunately, the Government seems mostly focused on the tactical short-termism that got us into this mess.
To be fair, it is doing some good things. We all share the aim that all young people can start training, apprenticeships, or higher education on leaving school.
And I congratulate the Government for pressing ahead with High Speed Rail. And while the science budget is declining in real terms, the Government did at least try to protect it.
Sadly, that is where its long term vision ends.
I want our Government to take a practical, long-term approach to creating growth.
The key is to gradually switch resources from unproductive to productive spending. That means pay restraint, reducing welfare and housing benefits over time, and perhaps removing benefits from those on above average incomes.
It may even mean more co-payments for public services so people understand the cost of the services they use. None of this will be easy.
But if sustained restraint helps encourage the job creating, technology led, growth we need, it will all be worthwhile.
* Lord Kumar Bhattacharyya is founder of Warwick Manufacturing Group
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