In 1956, Malta held a referendum on joining the United Kingdom. Since the islands were economically reliant on the Royal Navy, it was unsurprising that three-quarters of those voting believed their future lay in integrating with their colonial masters. But after a lukewarm response from the British government, the referendum result was never implemented and Malta instead hastened towards independence. Seven decades on, it seems the Maltese had a lucky escape.
The Centre for Economics and Business Research (CEBR) has declared that Malta’s living standards will overtake Britain’s by 2035. It cites Malta’s low taxes and pro-enterprise culture, which are especially attractive for the wealthy Britons fleeing a country that lacks both. In contrast, the CEBR predicts Britain’s growth will be the G7’s second weakest until 2030.
The roots of our torpor are not hard to spot. High inflation, burgeoning debt, punishing taxes, rising unemployment and stultifying regulation all contribute to our country’s anaemic growth. The 2020s are on track to be the worst decade for living standards in a century. Britain is not quite the sick man of Europe yet, but it is looking peaky.
It wasn’t supposed to be like this. Before entering office, Keir Starmer declared that growth would be Labour’s ‘number one priority’. That focus has been lost amid the many relaunches, scandals and unforced errors that have become the government’s hallmark. Yet Starmer’s ministers seem keen on making his growth pledge seem more like a cruel joke than a missed target.
Wooing the private sector ahead of Labour’s election victory, Rachel Reeves promised the most ‘pro-business’ government ever. In power, however, the Chancellor has done everything she can to stymie businesses. Even before the Employment Rights Bill fetters the labour market, hikes in national insurance and the minimum wage have made unemployment spike and business confidence plummet to a record low.
Yet Reeves isn’t even Labour’s worst offender. That accolade goes to Ed Miliband, the Energy Secretary. Britain’s industrial electricity costs are the highest in the developed world – four times higher than in the United States. With Miliband’s undeterrable push to decarbonise the grid by 2030, they will only soar further.
Higher energy prices affect every part of Britain’s economy and hamper our ability to corner developing industries. Electricity-hungry AI data centres will not be built in a country that is sabotaging its energy market. Investors and researchers will not be wooed by a government that is unable to think strategically about science and is uninterested in deregulating finance.
We should aspire to more
than just declining a little less quickly than the rest of Europe
Ministers might comfort themselves with the knowledge that the European Union is struggling too. France and Germany are barely swerving recessions; Mario Draghi’s recent report on the EU’s competitiveness predicted ongoing stagnation unless there is a rapid overhaul of the Continent’s capital markets and industrial policies. Meanwhile Wes Streeting wants to shackle us once more to the bloc, proposing we ditch recent trade deals to rejoin the customs union.
Britain should aspire to more than just declining a little less quickly than the rest of Europe. Until the financial crisis, our per capita income grew in lockstep with that of the US. Had that continued, the average wage would be about £4,000 higher. That potential remains. Peter Thiel, the PayPal and Palantir founder, has suggested Britain has ‘the greatest room for improvement of any European country’, if the right policies are enacted.
The one minister who seems to grasp this is Steve Reed. The Housing Secretary recently streamlined housebuilding rules around train and tram stations, pushing towards a target of 1.5 million new homes by 2029. Delivering London’s housing target, according to the consultancy Public First, could add £40 billion to Britain’s economy by 2034. But Reed cannot carry the cabinet alone.
The Prime Minister’s new ‘number one priority’ appears to be appeasing the backbenchers on the left of his party rather than pursuing growth. The best ideas for challenging Britain’s decline are instead coming from pressure groups such as Looking for Growth. Established by the academic Lawrence Newport, the group has shot to prominence and attracted support from many MPs with its bold proposals to get Britain moving, from removing graffiti from Tube carriages to building new cities in the Fens.
In refusing to accept the inevitability of decline, these campaigners demonstrate an ambition that is lacking in government. Reform UK, preoccupied as they are with small boats and steel nationalisation, are also failing to provide the economic vision the country needs.
Even if it upsets one or two backbench nimbys, Kemi Badenoch should wholeheartedly back groups, thinkers and public figures who want to restore Britain’s prosperity. The Conservatives can reinsert themselves into the political conversation if they have the courage to grasp the opportunity.
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