It’s not just about growth: it’s about quality for all

July 27, 2016

The vote to leave the EU has been like an electric shock to the political system and a major challenge to the establishment. Longstanding issues of economic inequality and social mobility can no longer be pushed to one side.

And it is clear that Theresa May is putting this front and centre of her new government. As she said on becoming Prime Minister: “We will do everything we can to give you more control over your lives. When we take the big calls, we’ll think not of the powerful, but you.”

This is a strong statement of intent but what does this mean in terms of the priorities for delivery? These are perhaps best signalled by the announcement that she will personally chair three new ministerial committees: on exiting the EU, on the economy and on social mobility.

It is clear that the challenge of delivering for the many, not the privileged few, is not merely a slogan but a mantra that will now ring through the corridors of Whitehall and beyond. And on each of these areas, the delivery challenge is immense.

On Brexit, there is an unprecedented scale of challenge to deliver an orderly, and beneficial, exit from the EU. Of course, the UK civil service has proved itself capable over the years of managing some of the most challenging political and economic issues. Brexit will be no exception and, while there is much to do in managing a smooth exit from the EU, there is opportunity to leave in a stronger position than we entered. 

To achieve this, the new Department for Exiting the EU unit has its work cut out, with many considerations to work through. This will inevitably range across a number of areas: the capability and capacity needed across Whitehall (e.g. trade negotiation skills); the options and priorities for the negotiations process (balancing the many trade-offs with red lines); and wider constitutional implications for the devolved regions and local government too.

Economically, the aftershocks of the vote to leave the EU will last longer, since it will take some years before UK’s new trading relationship with the EU becomes clear. The latest PwC UK Economic Outlook, revised down our GDP growth forecast to around 1.6% in 2016 and 0.6% in 2017, largely due to the increased political and economic uncertainty following the ‘Brexit’ vote. This clearly will also have implications for the public finances, as shown by the end of the commitment to a budget surplus by the end of this Parliament.

Businesses are already starting to take stock of the possible impacts of Brexit on their markets and operations and planning accordingly. The UK benefits, however, from a relatively flexible economy and, whatever the precise path of growth in the short term, we would expect it to return to steady growth of around 2% per annum in the longer term once the initial shock of Brexit has faded.

But it’s not just growth, it’s also the quality of that growth. The vote to leave suggested that a large segment of the population feel that they have not benefitted from mega trends like globalisation and rapid technological change. In-work poverty remains a significant issue, poorer people still suffer from higher costs to access many basic services (the so-called ‘poverty premium’) while the next generation may be the first to see their living standards decline compared to their parents.

As we have explored over the last few years, there is therefore a need for good growth: growth that delivers on those things that people most value in the work and money sides of their lives – a decent job and income, the supporting skills and health to work and affordable housing and transport to name just a few. These underpin the success of UK plc, an issue which we are looking into further as part of our support for the RSA’s Commission on Inclusive Growth.

So for a “country that truly works for everyone” much needs to change. I’m confident, however, that if government as well as business leaders work together on an exit deal which helps to deliver good jobs, higher productivity and inclusive growth, they will do much to restore trust with all parts of society and really deliver for the many not the few.

 

Tina Hallett | Government and Public Sector Lead Partner
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