Dozens of economists warned that Labor and the Conservatives had failed to deliver a “serious plan” for investment in the economy, which they said was a “recipe for further recession”.
In an open letter read it I65 economists called on Sir Keir Starmer and Rishi Sunak to explain whether and how they would work to reverse austerity-era cuts to state capital investment and provide “fuel for growth”.
Both major parties have signed on to spending plans that will put more pressure on public investment from next year onwards.
Sir Keir and Rachel Reeves, who are expected to become prime minister and chancellor within days if opinion polls are correct, have said they want the private sector to invest more in Britain but have refused to commit to more government spending beyond green infrastructure.
“The UK has consistently seen some of the lowest levels of public investment in the G7, and has been well below the level expected,” the group of economists, made up of more than two dozen universities, and coordinated through a new “Invest in Britain” campaign, warned. OECD average of public investment.
“This lack of investment deprives our economy of the fuel needed to grow and prosper, whether that is in infrastructure and innovation or a healthy, skilled population. Given our low levels of investment, it is not surprising that the economy has performed very poorly in recent years, with a slow recovery from… “Every major shock.”
They warned that “we are heading into these elections without a serious plan to increase public investment,” which would be “a recipe for further stagnation.”
Investment Promises:
Labor has abandoned an earlier pledge to spend £28 billion a year on capital investment in green infrastructure, cutting that figure to around £5 billion a year. The party claims that spending from the treasury will attract large amounts of private capital as well. Other forms of investment will be frozen in nominal terms, eroding their value as a result of inflation and heading downward as a proportion of GDP.
The Conservatives have promised to freeze investment spending to reduce debt over the next five years, but the party has not made clear what this might mean for any individual projects. Conservatives do not exclude capital spending from their fiscal rules, making borrowing for investment more difficult.
The Liberal Democrats have proposed an additional £19.7bn of capital investment each year, which would keep investment as a percentage of GDP stable over the coming years. Investment is currently high by historical standards, and the Liberal Democrat pledge would ensure that this remains the case.
The UK Reform Party doesn’t say much about government investment in its election manifesto. The Institute for Fiscal Studies has warned that the combination of deep tax cuts and increased spending on the NHS would create a fiscal gap in the Reform Party’s proposals, suggesting that the money available for capital projects will not be sufficient.
The Green Party has the most ambitious plan for capital spending, demanding an annual increase of £90 billion. However, the Institute for Fiscal Studies noted that this is based on overly optimistic estimates of how much could be raised by raising taxes.
The IMF, traditionally cautious about public spending, has called for increased government investment in sectors such as transport, health, telecommunications and energy, arguing that more money from the treasury could eventually encourage private companies to invest as well.
Tom Railton of Investment UK said: I“The UK economy is stuck in a doomsday cycle of low investment, low growth and low living standards. The reason is clear: for decades we have not invested enough in our collective future.
“There is a growing consensus among economists that serious action on public investment is essential if we are to restart our economy, restore our public services, raise living standards and address the unacceptable pressure on household incomes. With only days to go until a crucial election, it is time to get serious about public investment, because further cuts are simply not credible.”
Economists who signed the letter include Lord Skidelsky, Emeritus Professor of Political Economy at the University of Warwick, Professor Paul Ekins OBE, of University College London, Professor Diego Sánchez Ancochea, of Oxford University, and Professor Elisa van Wynnbergh of the School of Oriental and African Studies, University of London.
At the last election, Boris Johnson promised to increase public investment, but after a short-lived uptick, Jeremy Hunt announced a five-year freeze on cash investment – meaning it will steadily decline as a share of GDP.
Labour has significantly scaled back its infrastructure plans, having concluded that the previous policy of investing £28bn a year in green technology was unaffordable, meaning investment is still set to fall as a share of the economy if the opposition wins.
2024 elections
Rishi Sunak, Sir Keir Starmer and other party leaders are on their way to the election campaign IThe Elections Live Blog is the go-to place for everything related to the general election.
The reform came under fire after Andrew Parker, an activist, was caught using a racist slur against Prime Minister Rishi Sunak. Nigel Farage expressed his “dismay” at this matter.
while, I We’ve compiled the major parties’ pledges on key issues – read our details on the NHS, education and defence. You can also read each party’s key pledges in our election manifestos for the Conservative Party, Green Party, Labour, Liberal Democrats and UK Reform Party.