UK economy: stuck in a rut of low growth, and politics is to blame

“The low tax, low regulation regime combined with globalisation ended up widening income disparities in a way that not only hurt those at the bottom of the income distribution, but ended up having adverse macroeconomic effects.”

Editorial www.theguardian.com  (Extract)

….Gertjan Vlieghe was appointed to the bank’s rate-setting committee by then-chancellor George Osborne and has proved a thoughtful commentator on the UK economy. On the verge of stepping down, his valedictory speech made last week is remarkable for going beyond the usual banker’s fare.

The great weakness of the UK, he says, lies in the policies it has followed for decades. “The low tax, low regulation regime combined with globalisation ended up widening income disparities in a way that not only hurt those at the bottom of the income distribution, but ended up having adverse macroeconomic effects.” Those effects include very high levels of debt held predominantly by households and low levels of workplace productivity, which is the result of businesses not investing. Add all those together, Mr Vlieghe suggests, and the UK is stuck in a deep rut of low growth and low rates. In other words, the exact hue of Conservative most worried about low [interest] rates has been a cheerleader for the very policies that mean we are stuck with low rates. To fix this situation, the central banker proposes stronger trade unions, much tougher rules on competition and higher taxes. Such policies are not in the bank’s gift but the government’s. Will Boris Johnson implement them? If he did, he might legitimately call them “levelling up”.

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