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Increasing the level of UK public investment “must be a priority for the next government” and much greater scrutiny is needed of the plans of the main parties on this issue, a group of senior economists have warned in an open letter to the UK media [1].
The group of 65 academic UK and UK-based economists have issued the call following growing concern that the UK’s dismal record on public investment has not featured enough in the election campaign debate.
The letter, which was coordinated by a new campaign, Invest in Britain, argues that increasing public investment is: “the only economically responsible path to take, and is one which would ‘crowd in’ private investment and increase productivity growth”.
A recent paper from the Institute for Public Policy Research (IPPR) found that the UK had been bottom of the G7 league table for investment in 24 of the previous 30 years [2].
But despite the extensive and growing body of evidence of the impact of low investment on the economy, the economists argue that we are heading into the election next week “without a serious plan to raise public investment”.
The Institute for Fiscal Studies has concluded that public investment will fall across the next parliament based on spending plans set out by both Labour and the Conservatives, with the extra money Labour has pledged for green investment not enough to make up for the cuts baked into inherited spending plans. [3]
In fact the IPPR found that “a Starmer-led government would end its first term having cut investment more than the entire Conservative 2010-24 administration.”
This is despite the National Institute for Economic and Social Research (NIESR) arguing that “an extended period of public investment is required to address our economic failures.” [4]
Tom Railton from the Invest In Britain campaign said:
“The UK economy is stuck in a doom loop of low investment, low growth, and falling living standards. The cause is clear; for decades we have not been investing enough in our collective future.
“There is a growing consensus among economists that serious action on public investment is imperative if we are going to reboot our economy, restore our public services, raise living standards, and tackle the unacceptable squeeze on household incomes.
“With just days to go until a decisive election, it’s time we got some serious answers on public investment, because further cuts simply aren’t credible.”
ENDS
Notes to editors:
[1] The full text of the letter can be found here.
[2] Dibb G and Jung C (2024) Rock bottom: Low investment in the UK economy, Institute for Public Policy Research, pp. 8-10, https://www.ippr.org/articles/rock-bottom
[3] Zaranko B (2024) Public investment: what you need to know, Institute for Fiscal Studies, https://ifs.org.uk/articles/public-investment-what-you-need-know
[4] Chadha J (2024) A Long View Parliament, National Institute for Economic and Social Research. https://www.niesr.ac.uk/blog/long-view-parliament