To everything, turn, turn, turn

Afternoon all,

Big week for turning around in Westminster. The highlight (so far as we’re concerned) was a welcome upside surprise on monthly growth – the no-fun caveat for which is that on more reliable longer-term measures we’re actually growing even slower than our dismal recent track record. For those wanting to know more about how to pull those levers, we have a sneak peak of our big growth paper below that we’ll be launching on Monday.

If you’re a big fan of entertaining but informative newsletters (which, of course you are!) might I recommend the Resolution Foundation’s new Substack. Our latest edition explains why your mortgage bill might go up even as interest rates go down.

Meanwhile, read on here in the OG RF newsletter for more on Scottish budgets and why the Europeans could learn some socialism from America, at least when it comes to sport.

Have a great weekend,

Ruth
Chief Executive
Resolution Foundation

Scottish spending. Tuesday was a big day north of the Border, with Holyrood publishing its Budget. Announcements were clearly made with one eye on the looming elections with an eye-catching above-inflation increases in the basic and intermediate income-tax threshold – moving policy in the opposite direction to that for the rest of the UK. But a closer look reveals spending pressures are building. You can get the reaction of the bright folks at the Fraser of Allander Institute (FAI) here (other analyses are available). Mirroring policy in Westminster, Scotland will introduce two new council tax bands for properties over £1 million, using current valuations rather than 1991 values. But this change only affects only 1 per cent of properties, so the wider system’s inconsistencies remain unresolved. Our old friend ‘fiscal fiction’ has also raised its head again…The government assumes chunky efficiency savings – which raises credibility concerns given a backdrop of tight spending settlements.

Vibes-based housing policy. What makes someone a NIMBY or a YIMBY? The classic theory is that homeowners fear that new housebuilding will reduce the value of their properties, and so band together to block local development. However, this paper (using surveys of US residents) finds that most people simply don’t believe that an increase in housing supply would actually deliver more affordability. While a large majority of owners and renters want lower prices, only 35 per cent agreed that more homes would lead to lower prices, while 42 per cent believed that prices would rise in response. Alternative policies like rent control and mortgage subsidies were both more popular and viewed as more effective.  In contrast, most people agreed that greater supply led to lower prices when it came to used cars (86 per cent) and grain (59 per cent). Luckily for the YIMBYs (and Steve Reed’s TikTok account) the authors found that people’s views on this were not strongly felt, and could be nudged by economic data or short-form advocacy videos.

How healthy is your high street? This paper examines how different parts of the country have seen different trends in the kinds of “health-related amenities” on their high streets, analysing nearly seven thousand areas using Ordnance Survey data between 2014 and 2024. More deprived areas have been more likely to gain harmful amenities (fast food outlets, bookies and vape shops), and to lose health-conducive amenities (supermarkets, public toilets, pharmacies). Plus, these harmful amenities clustered together, particularly in deindustrialised northern cities like Manchester, Leeds, and Birmingham, creating “addictive environments” that compound health risks. The authors argue these patterns reflect structural inequalities rather than individual demand, and will require policy interventions like planning restrictions and high street rejuvenation programs to mitigate the compounding harms. Just don’t say ‘levelling up’…

Late-stage soccer. For the football fans among you, the conclusions of this paper on the failings of the European football market may not come as a surprise – superstar clubs and players now capture an outsized share of the market, limiting resources available to others, lowering competition, leading to more predictable outcomes and less engaging games for fans. Although of course upsets do happen – like when the current FA cup holders got knocked out by a valiant band of part-time professionals that included a former Love Island winner. Tech advances and growth in global broadcasting have allowed the world’s best talents to reach larger audiences at lower costs, driving up the value of these superstar players to clubs. This, in turn, has led to extraordinary increases in player transfer fees and salaries, pricing smaller clubs out of accessing top talent. That the premier league’s top player has an annual salary of £27 million tells you clubs aren’t all operating on the same playing field. Unusually, it seems European football would benefit from following the example set by some major US leagues (the NFL, NBA, NHL), which have a range of rules to maintain competitive balance… including salary caps, central funding pots and redistribution of funds to lower-revenue teams.

Something for the weekend | Diplomacy hits the slopes

Next week sees Davos kicking off – supposedly with a “record number” of world-leaders in attendance. This year’s theme of “a spirit of dialogue” feels somewhat unfashionable in today’s geopolitical traumas. Rachel Reeves will be in more familiar territory at least – bigging up British business to “get deals done”. Let’s hope summit stability fares better than policy stability – see COTW below for how that’s going in the UK.

Indeed, attendees have apparently rated conflict as the greatest challenge to growth in the next couple of years. Luckily, Trump will be in attendance. Nothing says ‘spirit of dialogue’ quite like sipping Champagne with leaders who’ve spent the year raising trade barriers, cutting diplomatic ties, and flirting with walking away from historic alliances.

Assuming the Prez sticks to his guns on erm… not sharing his guns, huge questions remain over how much (more) European countries will need to spend on their own defence going forward. No wonder fewer than 40% of Europe’s fiscal councils judge their countries expenditure paths as plausible. At least the snow forecast is good.

Chart of the week

On Monday we’re publishing a beast of a report taking stock of the UK economy and assessing the Government’s economic strategy. Watch the launch event here. Here’s a preview to whet your appetite. One key strand of the Government’s economic strategy has been to restore stability – a laudable aim. We’ve seen action too, with a return to multi-year spending reviews and a clear determination to move towards fewer fiscal events. But it hasn’t all gone to plan, as COTW shows. Policy uncertainty – measured by newspaper coverage of policy-related economic uncertainty – is higher in this Parliament than it has been in the past seven stretching back to 1997. Yes, some of that is elevated global uncertainty which can hardly be laid at the UK government’s door. But even after we strip out global uncertainty (the difference between the blue and the red line in the chart) the UK is still relatively more uncertain in this Parliament than in any other apart from one – the Brexit one. Elevated uncertainty is not the main reason why the UK’s growth record continues to disappoint – read the report on Monday to find out what is. But policy stability is within the Government’s control, and it’s something they’ve let slip over the past 18 months.