Growth would make all the Government’s challenges easier to solve – but it is not straining every sinew to achieve it

Between all the talk of ‘broken Britain’ and the critiques of such ‘miserabilist’ analyses, it’s sometimes quite hard to figure out where the country now stands.  This is why we’ve partnered to produce an evidence-led assessment of the key issues our politicians confront as they return from their hols.

The Government tells us growth is its overriding priority. The picture is not rosy. In the 15 years prior to 2008 GDP per capita increased by 40 per cent. But in all the time since it is a meagre 5 per cent higher.  There is no quick and easy fix to such economic stagnation. The most consequential choice facing the government after a tough first year is whether to be more radical in their pursuit of growth. We’ve accumulated a series of wicked problems that can only be effectively addressed over a number of years. Yet at the same time, politics demands quick results, not least given the state of the polls.

Looking across the issues most on the public’s mind, higher economic growth would unlock progress on many. Concerns about the cost of living would be helped by action on energy prices, over which the government has some influence. But widespread improvements in living standards ultimately hinge on the ability to secure the kind of growth that will make incomes outpace than inflation. Recent signs of a weakening labour market pose immediate concerns for those looking for work as we seem to be  experiencing a hiring freeze if not a firing spree.

Growth looks unlikely to come to the rescue in time to ease the Chancellor’s headache in the Autumn budget. With taxes at historic highs, she will need to look for the opportunities to boost growth with tax reform and not simply to raise revenue. That doesn’t make the politics of tax reform easy. Even should the government decide to undertake a long overdue reform of Council Tax, the danger is that this is seen not as a principled attempt to raise revenue while addressing the issue of wealth inequality and simply as a desperate attempt to make the sums add up.

But in the long-run, a better growth outlook could ease pressure on the Government’s books and allow for higher spending on public services. The fiscal bind looms large in the 10-year health plan. A sensible document in itself, there are legitimate reasons to wonder whether it will be effectively implemented. After all, prevention, community-based care and digital transformation have been themes of health policy for at least 20 years. And the last time ambitious reforms on this scale were mooted, funding was increased by 6.8 per cent a year in real terms. The equivalent figure today is 2.8 per cent.

So, is the Government straining every sinew to max out on growth? Our experts think not. In the one area where we might have hoped for rapid growth-inducing progress, the Government has steered clear of the most ambitious planning reforms. It has failed to provide a watertight definition of the greybelt and ensured continued dependence on local authorities in order to achieve its housebuilding ambitions. The fact that planning applications in the first quarter of this year were the lowest of any first quarter since 2015 speaks volumes.

Then there are the trade-offs inherent to governing. The Government has already belied the supposed priority accorded to growth by refusing to countenance the kind of rapprochement with the European Union that would have a marked impact on the economy. Equally, reducing migration still further will require difficult decisions about issues like staffing social care or the economic consequences of reducing foreign student numbers.

Here again, the government finds itself in a bind. Public concern has increased – with 40 per cent of respondents to the IPSOS issues index poll in July citing immigration as their top concern. Yet, government risks sacrificing progress on its own priority in order to address that of the public.

More broadly, the Government has to operate in a time of low trust in politics and cratering support for the two erstwhile major parties. Labour and the Conservatives won just 59 per cent of votes cast in 2024 – their lowest combined share for over a century. 2024 witnessed the second lowest turnout under universal franchise, meaning Labour won a massive majority on the back of support from only one in five voters. And the fact that the party is losing votes to both left and right means its MPs face different political challenges. Tax increases and spending cuts will irritate different parts of its coalition.

Politics and policy make for a combustible mix. It remains to be seen if this government has what it takes to try to ride out this storm. When it comes to growth, though, we must hope fortune favours the brave, or many of the challenges facing the country today will be more acute tomorrow.