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Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
The writer is a former finance minister
Chancellor Rachel Reeves made a clear attempt this week to change the narrative about the British economy and the government’s ability to increase it. That was necessary. The negative background mood rose after the hopes of the election rose and immediately after the budget of October fell to a recurring disappointment, low expectation and dismay about the obvious lack of a story.
The United Kingdom has again entered a time with almost zero economic growth. The Hit of Business confidence caused by the budget was tightened by concerns about the rising global bond income and the restrictions that deal with the government and thus to the loans.
In her speech, Reeves recognized the cost of business activities from the increase in national insurance – and tried again to explain that she thought it was necessary to control finances. But when she gave herself talking about the supply side, the picture became much more hopeful.
Instead of becoming excessively stressed through demand management, I believe that this offer focus is correct. First, as the Bank of England is determined a large part of the demand: If the interest rates are reduced in the way, this should be an important driver. So Reeves does not want to take measures to compensate for this possibility too much – not least because it would probably help bring the British bond yields.
Second, since the ministers endeavored to say to someone who will listen, the government is restricted by its own financial rules, the first of which limits the current expenses. If it wants to avoid further tax increases, it has to stick to you – or something near it.
Thirdly – and this is particularly important – the problem of Great Britain was back to the 2008 financial crisis and has always been the offer side. Our sad productivity and our weak private and public investments. Since the crisis, the average average growth of 1.5 percent has almost been completely due to a very strong growth of workers. Productivity growth has remained extremely weak. If we want to have stronger growth and at the same time are less prone to inflation, we need more investments and more productivity-es is really that easy.
Therefore, Reeves must ensure that the government of the government 10-year-old infrastructure strategy The focus from now on is the focus.
The Chancellor spoke correctly about excessive regulation, planning permit blocks and a lack of commitment to growth investment projects. She promised support for a great spread of projects to support the continuing delays and obstacles to the infrastructure, including the OX cam project, support for a third runway in Heathrow and a number of systems in the north of England.
What was missing was the frame. There was no place in her story for the institutions that are decisive for the provision of transparent, highly spoiled investments-and they are not yet in operation. However, this emphasis will be necessary if the government is intended to give trust in investors.
Chancellor always like great attention investments, even if, like that Heathrow expansionThey are controversial. Very often these are not accompanied by fresh government capital and are announced in terms of real, permanent advantages for “trust”.
Reeves is no exception in it. She quoted Frontier Economics Research, which indicates that a third runway outside the London region would have positive multipliers – this should become part of the framework for every major initiative. But it has to be systematically, especially since the government has to observe its second budget rule and take on loans to invest. Without such a framework, “Trust us” may not receive such a positive reaction from the gilded or equity market.
The new national authority for infrastructure and service amendment will only be set up in April. But together with the national audit office and others, this unit will be absolutely important to promote business inside and outside the United Kingdom in order to increase the growth potential of the economy with investments. I am surprised that the Chancellor has decided not to talk about it: in fact this will add and support the growth -oriented division of the Ministry of Finance, who have promised both Reeves and Sir Keir Starmer.
In this sense, I hope that Reeves Nista will be authorized to be completely transparent about the investment projects that have positive multipliers. Since this is also the way to indirectly increase the demand side of the economy, and to suspend longer -lasting animal spirits in business and consumers.
