What a bold and sensible thing for the PRG team to jump over the Brexit mess and seek clearer horizons for economic and related policies for Britain (GB).
In a series of logically-set, plain-words chapters the PRG seeks to wrench people and their posturing from the current obsession with Brexit, and to set out some relevant and mostly appealing policy options for GB to be a better place by, say, 2030. There is no chronological time frame associated with most of the proposals but 2030 is just my inference, and my obsession with being as chronological as possible.
A deliberately short review cannot touch all aspects and all policy proposals covered in such an embracing report: here I focus on just a few of them, and some issues arising.
The authors are disciplined to avoid, almost entirely, critical or any comments on the current traverse of GB from EU member to something else. Yet the springboard for any post-Brexit policy scene must surely be the exact set of budget, trade and people-movement (or domicile status) policies that arise from the Brexit process itself. Indeed, the underlying premise, not stated explicitly anywhere, seems to be that (most of) the policies are designed to drag GB from something akin to a post-war mess that would never have been created if the Brexit process had never begun, at least in the Cameron-May-Johnson way it has. This is not entirely true, as many of the proposals make implicit common-sense whatever EU status GB had, gets or even continued with. I list the following in that category: most of the climate-change, active labour market, short-term macro stabilisation policies; (social) housing and affordability policies; anti-poverty/inequality measures policies and a raft of legal/institutional change (such as greater transparency (R91-2) policies) found in the report. But the demonstrable falling-behind of public and private infrastructure (c.f. EU and elsewhere) must surely have substantial Brexit-process origins, along with the entire range of policies associated with trade, the (hard or anything) border(s), worker, visitor migration and not least non-merchandise (services) transactions that cross borders. Each of these policies gets fairly comprehensive treatment in the report(s).
Boosting the supply side, a theme running through the PRG report, makes demand management more effective and more immune to the triple-i snags of (higher) inflation, imports and interest rates. The authors recognise that this fundamental boost to productive capacity comes at a longer-term cost and that it needs the relative size of (public and private) capital outlays to increase. That will provoke the crude question, which is not entirely without merit: what will all this cost?
Some sensible PRG proposals do not carry any, or much, cost to the budget. Greater worker representation and involvement in corporate Boards; using professional valuations to contest rents inflicted on lower income people, avoiding foreign-exchange market meddling (R14), just to cite a few. But many of the PRG report’s proposals carry fiscal costs: housing benefits and building 100,000 social houses a year for a decade (R71), labour market upskilling (R18), poverty relief, and additional education and training facilities (R80), to cite some bigger-ticket items.
Yes, the report mentions boundary conditions on public spending (R11), while raising the ceiling towards European ratios of government outlays to GDP (R13, also R64), a rolling (five-year) target for fiscal balances (R12), and inevitably higher taxes and public spending relative to GDP (R82), but it is not clear how all this fits together. The report proposes significant spending on infrastructure, poverty and housing-stress relief; some of the policies to address climate-change which are not budget-costless; nor are education, training and institutional changes.
It would have been useful for the PRG team, or someone at an overview stage, to present a form of tabulation or spreadsheet, providing specimen financial data, especially government spending and revenue over, say a decade – my take on the relevant time frame embraced post-Brexit by the authors.
Many people reading the PRG report, and (I hope) many will do so, will be attracted by the innate appeal of most of the proposals and wonder why they have never to date been adopted. But they may not realise the financial implications.
The opening paragraphs of the piece on trade policy should have been mandatorily sent to every British household (before they voted in the Referendum!).
These paragraphs make plain the only realistic trade policy options for GB and how they DO depend on the sort of Brexit that does eventually occur. (I’m not giving any prospect to a Remain scenario now, however wise that might have been so long ago). The trade-policy chapter brings home some new opportunities opened up by Brexit, but also highlights the residual complexities and restricted choices. After all, a Britain that walks away from the EU is technically (to begin with) in the position of a non-member facing common external tariffs to sell into the EU, inter alia. The trade-policy team usefully provides and analyses trade-policy options that can arise from any conceivable form of Brexit. Well done.
As an Australian who came first to the UK to study trade theory and policy just when GB went into the EU (not called that then), I seek to clarify some of the references made to the Australian ‘unilateral’ freer trade policies of the Australia Labor (note the spelling) Party (ALP), pressed with such reliance in the report (R27). There were actually two relevant phases: a 1973/4 radical episode that got quickly reversed and helped dump the governing ALP in 1975; then a later Hawke-Button (also ALP) 1980s process that was a much better model of how negotiated pre-announced unilateral gradualism can work. One wonders whether GB has the patience and political process for such a strategy, especially as the authors rightly observe, GB (but explicitly not Australia) had to disentangle itself from a broader trading group, the EU.
That leads to a fundamental, practical question. It is this: by what (policy-political) mechanism could such a comprehensive set of change in GB post-Brexit policies, such as the PRG report recommends, get adopted? Remember that significant increases in the ratios of government outlays and in taxes (relative to GDP) are required (as stated at least once in the PRG report, at R82) with possibly blow-outs in fiscal balances, which frankly concern me less than it would most economists. This is not helped by paper-thin electoral majorities or monetarist-paranoid economic advisers and public servants, both of which seem common place, and not just in GB.
This nut will not be cracked by defeatism or closed exchanges among academics.
I liked most the fact and the way that this PRG team did the job by hurdling over Brexit; I liked least the open handballing of some specific policies to future groups to work them out (e.g. the exact form of a development levy, at R73).
Well done (the PRG) team for getting the package into the open so comprehensively and professionally.