The Hippocratic method for economic growth
The Chancellor is looking for more ideas for growth. She should first do no harm.
It is fair to say the Government has had a rocky start to the year. Elon Musk’s X posts and the debate around a possible inquiry into grooming gangs has now been superseded on the front pages by developments in the bond markets, as the cost of government borrowing has surged. The yields on ten-year bonds reached their highest level since the financial crash, and on thirty-year bonds the highest since the nineties.
As borrowing costs increase, the limited amount of headroom the Chancellor left herself at the budget (just under £10bn) has been almost entirely eaten up. The Government risks breaking its own self-imposed fiscal rules.
The Government faces a choice: break or amend their fiscal rules, raise taxes, or cut spending. The Treasury has already seemingly ruled out the first. The second is less clear – Rachel Reeves seemed to rule out more tax rises following the budget but has been less eager to make such strong statements since. The third option, to cut spending, they won’t like – but it may be all they’re left with.
That is unless they can magic up more economic growth from somewhere. The Times reported this week that the Chancellor has asked her cabinet colleagues to come up with some ideas to boost growth. Lucky for them, the IEA has loads.
They would do well to start thinking about reducing barriers to growth, instead of creating growth from Whitehall. They must treat the private sector for what it is, the source of sustained growth, rather than a cash-cow there to be milked. Once they do that, they can start working out what is getting in the way of growth.
The harsh reality of asking that question is that they will be left looking into a mirror. Last year’s budget has done nothing for growth, by making it more expensive for businesses to hire new people through tax hikes and minimum wage increases, and easier for them to do very little. Elsewhere the Government’s Employment Rights Bill will add swathes of new burdens to businesses. Taken together, with an added dash of pessimistic messaging, and the prospects for business and the wider economy are looking down.
If the Government wants to try and grow out of the hole they find themselves in, they should take a leaf from Hippocrates’ book: first, do no harm. So instead of asking themselves how might they drive growth, they should ask what are they doing to harm it – and stop.
That would mean putting the breaks on the worst parts of their plans, or ideally dropping them entirely. Then asking what each government department does to hold back growth, and how might they be able to get out of the way a little more.
Only once government minds start thinking in this way will we see a much-needed shift in our economic prospects.
Callum Price
Director of Communications
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Executive Director Tom Clougherty, Editorial Director Kristian Niemietz, and Director of Communications Callum Price discuss the economic outlook, NHS reform and the new Schools Bill on the IEA Podcast
No Room! No Room!
We are proud to have republished the seminal “No Room! No Room! The Costs of the British Town and Country Planning System”, by the late Professor Alan Evans. Originally published in 1988, this hard-hitting analysis of the planning system can be considered the original manifesto of “YIMBYism” and is still just as relevant in 2025.
Britain's housing market is broken, with housing affordability in London so poor that median house prices are nearly 12 times the median annual income. Rent consumes over a third of gross income for private renters in London, and 29% in the West Midlands, the South West, and the South East, leaving little for savings or other essentials. Britain lags dramatically behind its European counterparts in housing supply, with a shortfall of millions of homes.
We have been writing about the housing crisis and the chronic supply shortage since the 1980s, and the same arguments in “No Room! No Room!” apply today.
This edition features a new foreword by Dr Kristian Niemietz, Editorial Director at the IEA, emphasising how the planning system continues to stifle Britain’s housing market and economic growth.
How a 1988 Paper Predicted Today’s Housing Nightmare, Editorial Director and Head of Political Economy Kristian Niemietz, IEA YouTube
Back to the 80s to fix the housing crisis, IEA Editorial Director and Head of Political Economy Kristian Niemietz, CityAM
News, Views & Upcoming Events
The Best and Worst Economic Decisions of 2024, IEA Podcast
This January, let’s say boo to the nanny state, and let Britain lead Europe for consumer freedom, Head of Lifestyle Economics Chris Snowdon, ConservativeHome
The planning system is not just choking our housing market, but blocking progress across the board, Director of Communications Callum Price, Times Radio
The Illiberal Logic of Mission-Directed Governance
By Research Director of the Hayek Program at the London School of Economics, Bryan Cheang
Labour’s NHS reforms are a step not a leap, but in the right direction, Economics and Policy Fellow Matthew Lesh in The Telegraph
An outright ban would be disproportionate, Economics Fellow Julian Jessop quoted on the debate about banning Quantitative Easing, The Express
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Nice overview Callum. However my view is that Growth is a red herring. Piggybank economics tells us that the pot can’t grow on its own and it’ll only grow if you don’t take any out! And off course you have to put money in! We are in debt to the tune of a trillion £s and that’s still not enough! The key to a true economy that flows at its optimum and perpetually is making ALL money move Sll at once, perpetually. But most of our money is not in use. It’s sidelined, unspent and hoarded. So the majority of us are devoid of that money, hence why we are short of it! The bulk of money is held unused by a very small minority. Where the majority of us have to work with an ever decreasing pot of usable money. That’s not good and not at all democratic! Tax revenue to the exchequer only happens when money is spent or has to change hands. So tax collection is only effective on money moving or being spent. The rich and wealthy don’t spend their holding so, no tax is generated! It doesn’t matter what tax is applied or what rate, if money isn’t spent it won’t contribute to the exchequer. Also the rich get richer by the poor getting poorer, except the poor are now all of us! We are all poor and all our money goes to the rich non taxpayers eventually. My fix would be put a spend by date on that unused hoarded money. Be rich with stuff bought when it’s spent not the money itself.