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In a new paper, ‘Political Economy of Growth & Reform’, the independent think-tank warns that the UK economy suffers from persistent problems which existing political institutions seem unable to tackle. These include:

• inadequate investment in infrastructure, highlighted by the long-running debate over airport expansion in the South East, high-speed rail connections to  the North and energy generation;
• lack of affordable housing;
• insufficient skills, caused by poor education and training.

The paper finds that these problems are rooted in the nature of the British political system and can only be addressed by significant institutional reform – but this has not been suggested in the Government’s new productivity plan.

The UK now risks being stuck in a cycle of short-term, unsatisfactory fixes which fail to provide long-term solutions for deep-seated problems.

Two urgently needed reforms stand out:

• The government must improve its decision-making on infrastructure by creating independent institutions to engage local communities, interest groups and experts. That will make it easier for politicians to make well-informed long-term decisions, instead of these issues becoming political football. The Dutch government’s consultation on the expansion of Schiphol Airport is a good example of how others have tackled similarly contentious issues.
• The government needs to change the planning system to ensure the system gives less weight to current homeowners and more to a wider set of interests. It must create incentives for local authorities to encourage housebuilding and move away from the “development control” mentality which has dominated since 1947. These are critical to increase the supply of housing in the future. 

Miguel Coelho, author of the paper, said:  

“The UK economy suffers from a number of structural weaknesses that damage the country’s prospects for future prosperity. These weaknesses are built right into the very institutions that shape big policy decisions. Without significant institutional innovation, we risk locking the economy into a poor system of skills and infrastructure for many years to come, which will place a heavy burden on future prosperity.

“Rather than looking at the problems associated with individual projects, and looking at housing policy or transport development as separate issues, we must take a step back to consider the pressures and incentives that shape the way policy is made in these areas. Only then can we reform flawed institutions, address these deeply rooted problems, and ultimately, ensure the UK is able to realise its full potential for economic growth.”

The paper is sponsored by the Economic and Social Research Council and is conducted in partnership with the University of Strathclyde.

For more information please contact Nicole Valentinuzzi 07850 313 791.

Notes to editors

1. Full text of paper is published: http://www.instituteforgovernment.org.uk/publications/political-economy-growth
2. This paper forms part of a series of publications of a year-long endeavour to produce a detailed account of the political economy root-causes of structural weaknesses that hamper growth in the UK. See more on this project.
3. The Economic and Social Research Council (ESRC) is the UK's largest funder of research on the social and economic questions facing us today. It supports the development and training of the UK’s future social scientists and also funds major studies that provide the infrastructure for research. ESRC-funded research informs policymakers and practitioners and helps make businesses, voluntary bodies and other organisations more effective. The ESRC also works collaboratively with six other UK research councils and Innovate UK to fund cross-disciplinary research and innovation addressing major societal challenges. The ESRC is an independent organisation, established by Royal Charter in 1965, and funded mainly by the Government. In 2015 it will celebrate its 50th anniversary.

The Institute for Government is an independent charity founded in 2008 to help make government more effective.