Leading economists urge Chancellor to invest more to reverse “stagnation and decline”

Leading economists this week wrote to the Chancellor demanding a change of direction.

Concerned that the government won’t invest enough in public services and infrastructure, the group of economists  –  including top civil servants and academics  –  wrote an open letter to Rachael Reeves in the Financial Times.

They argue the government is prioritising reducing government borrowing  –  ushering a new round of public spending cuts  –  over investing for the future.

Such a move would condemn the UK to remain in the same “vicious circle of stagnation and decline” it’s been in for the past decade and a half, the economists write.

A period of national renewal

They put forward an alternative: the government should prioritise public investment. There needs to be a “step change in levels of public investment”.

They mean the government should invest in things like roads, hospitals, power networks, schools, water treatment plants, railways and a host of other things that keep the country running.

By doing this “the government will have a real chance of genuinely fixing the foundations of the UK economy and ushering in the period of national renewal that is so sorely needed.”

This letter is an important intervention from some of the UK’s biggest and most respected names in economics, including: former Cabinet Secretary Gus O’Donnell, former Commercial Secretary to the Treasury Jim O’Neill, Mohamed El-Erian and Mariana Mazzucato.

A brighter future

The economists were prompted by Invest in Britain, who campaign for higher levels of public investment. We couldn’t agree more with their argument.

The UK has one of the lowest levels of government investment in public services and infrastructure in the developed world. And it’s projected to fall even further.

This means the government will invest less money in the things that keep our economy and society working.

Only through investment in public services and infrastructure now can we reap the benefits later.

Let’s take one example of where more government investment now could boost the future economy: the NHS.

Cut waiting lists to boost the economy

Waiting lists in the NHS are at record levels: 8 million people are officially waiting for procedures. A further 7m are estimated to need procedures, but haven’t come forward for them.

This huge, unmet healthcare need is causing harm not only to patients but also to the economy more broadly.

It’s not hard to see why. Unaddressed medical problems can decrease overall economic activity given they reduce the ability of people to work, care, and contribute in their community.

If the government invested more in the NHS it could reduce waiting lists. The economic effect of this could be huge.

A leading think tank, and allies of ours, the IPPR, estimates that if the government invested to boost elective NHS procedures by 30 per cent, economic activity would be increased by £73 billion over five years.

There would be an additional £14 billion saved over the five years in health and social care services.

Which path do we take

This is just one example of how government investment now can have huge benefits on the economy in the future.

In contrast: by slashing public investment now, the government condemns future generations to a stagnant economy and struggling public services.

At Tax Justice UK we know which is the better path.

We also know that a fairer tax system can fund a lot of the money the government must invest.

Our ten wealth tax policies set out how the government could raise an extra £60 billion a year.