The UK urgently needs to invest in the transition to net zero amid the climate crisis and beyond as failure to reverse greenhouse gas emissions risks bringing eventual economic disaster for everybody. That’s according to the latest report by the National Institute of Economic and Social Research-based UK Productivity Commission – led by none other than a former Bank of England (BoE) committee member.
Fisher: invest in net zero or face disaster
Paul Fisher served at the BoE for 26 years as a member of its Monetary Policy Committee, interim Financial Policy Committee and the board of the Prudential Regulation Authority, as well as on several international committees.
He is currently the chair of the London Bullion Market Association and a non-executive director of the UK Debt Management Office. Now, he’s called on any future UK government to take drastic measures to avoid economic disaster.
According to the report’s author, Fisher, the UK – as the original home of the Industrial Revolution – must act as a global leader in the transition to net zero and the digital transformation. This investment should be seen as a net cost or a trade-off against growth and should be part a new more activist investment strategy. A fresh and rational policy approach is urgently needed.
Public services need investment too
The report, entitled Productivity and Investment: Time to Manage the Project of Renewal, explores the productivity slowdown in advanced economies through a new lens and identifies the challenges modern economies are facing – not least net zero. Policymakers must embrace and, more importantly, address these issues:
- Policy should focus on maximising welfare rather than GDP growth, taking into account the changing structure of the economy as it evolves. That means supporting much broader concepts of investment than just physical plant and machinery.
- Constant exponential GDP growth was never going to be sustainable. GDP is becoming less and less appropriate as a measure of welfare and well-being as the economy matures and continues to de-industrialise.
- The productivity slowdown does create problems for the fiscal position, but reactions to that have been counterproductive. Attempts to reduce taxes, squeeze public sector spending and reduce national debt – sometimes in the name of promoting growth – have produced the exact opposite (everywhere, not just in the UK).
- To make the public sector more productive requires more investment spending, not less. Simply squeezing budgets nearly always generates worse productivity outcomes – and that helps bring about perverse outcomes.
- The quality of health and education could and should be slowly expanded as a share of GDP. It is up to politicians to choose whether this happens by either public or private sector provision. However, the UK is not trying to do either.
‘Be more activist’ over net zero
So, even ex-BoE Fisher said:
Investing to improve economic outcomes, whether public or private, requires us to recognise the structure of the economy today and its direction of travel, not hark back to the ‘glory days’ of British manufacturing, which are long behind us.
We need to promote forward, rational, long-term thinking and be more activist in our investment strategy. That would require changes to many areas of policy from the fiscal framework to national and local planning.
Feature image via the Bank of England
