Can Bojonomics reboot the UK economy?
One of the biggest policy benefits from leaving the EU is the end of the ‘Brussels excuse’. No longer can British ministers blame the European Commission – often illegitimately – for tying its hands in dealing with Britain’s economic challenges. Now the buck clearly stops with a Boris Johnson-led government, which is also has the benefit of a large parliamentary majority. What do its early actions tell us about the new government’s approach to national economic policy?
The single most important feature of Britain’s economic problems is the prolonged period of slowing, and then stagnating, productivity growth. This accounts for the deceleration in rising living standards, as well as the widespread turn to borrowing to keep households and businesses moving along. The main driver of the productivity predicament is increasingly recognised as a dearth of business investment. This has held back the diffusion of innovations and improved technologies, and spawned the emergence of a high-employment but low-productivity economy.
What can any government do to fix this? Would greater state intervention tend to accelerate or constrain the process of economic renewal? To what extent does Johnson’s talk about adopting a changed economic course represent a break from traditional Tory scepticism about government economic activism?
Some of Johnson’s colleagues describe the philosophy of Bojonomics as ‘cakeism’: wanting to spend more and tax less, without borrowing too much. Is that assessment dismissing the possibility of doing things differently? Why couldn’t the recent consensus around borrowing to boost public infrastructure spending turn into a catalyst for higher levels of private investment too?
Other critics of the government see the concept of a ‘Northern strategy’ and ‘levelling up’ the regions as little more than an attempt to hold on to new Conservative voters. But could this shift of direction become the long-overdue centrepiece for a national unifying mission to regenerate the whole economy? Or is an activist regional policy likely to distract from an ambitious national programme of change? Was the Johnson government’s first big economic decision to rescue the regional airline Flybe an indication of a fresh pro-growth agenda, or a continuation of state support for failing businesses?
This forum takes place in the aftermath of the new government’s first Budget statement on 11 March, where chancellor Sajid Javid is expected to announce a five-year £100 billion infrastructure and housing programme, with a focus on the regions that helped achieve the Tory majority. We’ll be able to discuss to what extent the Budget statement and other policy announcements signal a genuine departure from previous practices.
image: Financial Times via Wikimedia Commons
economist and business manager; author, Creative Destruction: how to start an economic renaissance
Jennifer Castle, David Hendry and Andrew Martinez, The paradox of stagnant real wages yet rising ‘living standards’ in the UK, VOX CEPR Policy Portal, 21 January 2020
Richard Jones, A Resurgence of the Regions: rebuilding innovation capacity across the whole UK, 22 May 2019
Andrew Haldane, Climbing the Jobs Ladder, 23 July 2019 - speech given in Scunthorpe by the Bank of England’s chief economist
Russell Lynch, Bojonomics does not add up — this wannabe PM would drown under a gigantic deficit, Evening Standard, 13 September 2018
Patrick Minford, Mark Carney is right: Brexit must free the City of London from Brussels red tape Telegraph, 8 January 2020
For a longer version of this perspective read:
Graeme Leach and Patrick Minford, Evaluating the Conservative and Labour Party Manifestos. Economists for Free Trade, November 2019
UK Regional Productivity Differences: An Evidence Review, Industrial Strategy Council, February 2020