Britain needs to spend an extra 50 billion pounds ($64 billion) a year on public investment to boost productivity and long-run growth, largely funded by public borrowing, the National Institute of Economic and Social Research said on Wednesday.
NIESR forecasts Britain’s economy will only grow by 1.1 per cent this year and does not expect annual growth to exceed 1.3 per cent in between now and 2029 – well short of a 2.5 per cent goal suggested by Prime Minister Keir Starmer in the election campaign which took Labour to power at last month’s election.
Asked if Labour had a chance of meeting this goal, NIESR Deputy Director Stephen Millard said no.
Labour finance minister Rachel Reeves has set a more formal target of achieving the fastest growth in economic output per head among the Group of Seven advanced economies for two consecutive years.
Millard said this looked slightly more achievable.
“We have some catching up to do with other G7 countries, so there is some room for us to grow faster. Do we have the capacity to do it? That’s the $64 million question,” he said.
In a quarterly report on Britain’s economy, NIESR, one of Britain’s leading economic think tanks, said public investment needed to be doubled to 5 per cent of national income to fund transport, housing, education and skills and boost productivity.
Growth in output per head in Britain has lagged behind other advanced economies since the 2008-09 financial crisis.
To support this increased investment – which would be well above that in most other rich countries – the government should no longer include borrowing to fund investment in its self-imposed fiscal rule, NIESR said.
That sits at odds with Reeves’ public focus on fiscal prudence.
In a statement last week to parliament, Reeves said the former Conservative government had left the economy in a far worse state than she expected and she scrapped some smaller investment projects – a move Millard called “quite concerning”.
However, NIESR Director Jagjit Chadha did query whether the British state had the capacity to spend extra investment wisely.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First Published: Aug 07 2024 | 8:51 AM IST
The weather warning has been put in place for 24 hoursWet weather on the Liverpool waterfront(Image: Liverpool ECHO)A weather warning has been issued for the UK
US-UK airstrikes in Yemen designed to end the Houthi disruption of commercial shipping have not seriously degraded the group’s military capability, the vice-c
First UKThe Bournemouth School for Girls pupils are first first all-girl team from the UK to participateAn all-girl team is heading to Athens to represent the U
* UK's Starmer appeals to Britons to stick with his plans Starmer to say tough decisions now will pay off later * Has faced criticism for