In this Institute of Economic Affairs podcast, Callum Price, Director of Communications, interviews Vicky Pryce, Chief Economic Adviser at the Centre for Economic and Business Research and former Director General for Economics at the Department for Business, Innovation and Skills. The conversation examines the UK's persistent growth challenges, focusing on the country's productivity crisis that has plagued the economy since the financial crash. They discuss how the UK's failure to encourage investment, particularly in manufacturing sectors like chemicals, pharmaceuticals, and steel, has led to economic stagnation despite increased employment levels.
Pryce identifies the critical role of uncertainty in deterring investment, from global trade tensions and Trump's tariff policies to Brexit's ongoing impact on skills shortages, particularly in construction where 40% of London's workforce previously came from the EU. The discussion covers supply-side reforms, including planning system failures and procurement problems that have made infrastructure projects like HS2 enormously expensive. They explore how different government departments need to work together more effectively, drawing on Pryce's experience of inter-departmental coordination during the previous Labour government in the 2000s.
The interview concludes with an examination of the UK's mounting fiscal challenges, with the OBR projecting debt could reach 270% of GDP by 2070. Pryce outlines her three-point plan for immediate economic recovery: reversing Jeremy Hunt's National Insurance cuts, rebalancing employer National Insurance increases with income tax adjustments, and pursuing much closer trade relations with Europe. She argues that without serious productivity improvements and stronger trade partnerships, the UK faces continued economic decline and an unsustainable fiscal trajectory.
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