Investing to improve economic outcomes in the UK

With the national purse strings tightened, Ethos asked a panel to identify the areas where government investment would reap the greatest rewards for the country

Investing to improve economic outcomes in the UK

 

 

Universal childcare 

Nick Pearce, Director of think tank the Institute for Public Policy Research (IPPR) 

The long-term affordability of the welfare state depends in large part on how many people are in employment and paying their taxes. One of the reasons why the public finances of the Nordic countries are in such good repair is that they have universal, affordable childcare systems. These underpin high employment rates, particularly among mothers.

Evidence gathered by the Institute for Public Policy Research shows that universal childcare in the UK would pay for itself over time, through increased taxes paid by parents returning to work. Good-quality early learning also boosts social mobility, so universal pre-school childcare would constitute a double win. 

It would, of course, cost money in the short term. We propose paying for it by freezing Child Benefit and cutting higher-rate tax relief for pension contributions, among other measures. The long-term gains would be huge.

 

Science education

Andrew Sparrow, Senior political correspondent for the Guardian 

We face a multitude of problems right now, largely to do with the economy. But if you look ahead to the concerns for Britain and the world over the next century, especially those related to climate change, you’ll see a list of crises requiring solutions from unidentified ‘scientists’ who, as well as saving the planet, are expected to cure cancer and invent gadgets to drive digital growth. 

Luckily, Britain is good at science. This is frankly amazing, given that our political class is largely science-illiterate and that most state schools teach ‘combined science’ at GCSE, instead of the three sciences as separate subjects.

Let’s plough more resources into science education. We can’t predict what our future scientists will create, but we can be sure that if the spark is never ignited in the first place, our future will be poorer for it. 

 

Apprenticeships

Nigel Morris, Deputy political editor for The Independent

No-one disputes that investing in adult apprenticeships is good value for public money. The Department for Business, Innovation and Skills calculates an economic return of £28 for every pound spent, while the National Audit Office estimates it at a more conservative £18. 

Next year, the government will spend some £1.5bn on 700,000 apprenticeships. In doing so, it is improving young adults’ job prospects and contributing towards the long-term health of businesses and the future of the economy. 

Cash that would otherwise be spent on welfare is used more productively this way, enhancing both individual and national wellbeing. And there could also be a benefit in terms of spending on criminal justice – one study suggests that 59 per cent of last year’s rioters were unemployed. 

The rewards would be even richer if extra cash were spent on advanced or higher apprenticeships (the levels above intermediate, which result in better qualifications). Perhaps we should divert resources from higher education to this?

 

Video games 

Helen Lewis, Deputy editor of the New Statesman 

When money is limited, it makes sense to target it where it will stimulate the economy, create jobs and generate products of which we can be proud. The trade body TIGA estimates that the British games industry contributes £1bn to GDP every year and employs 9,000 people, 80 per cent of them outside London. 

Some of the most famous titles of the last decade, such as Little Big Planet, Moshi Monsters and Fable, have been made here in the UK. When the last budget was announced, the industry breathed a sigh of relief as it got the tax breaks for which it had long argued. But these breaks – worth about £130m – might not be enough to reverse the  ‘brain drain’ to countries with more advantageous tax arrangements. 

Help for the games industry, in the form of grants to studios and funding for design and programming courses, would be repaid many times over. This profitable industry would grow further, we’d create skilled jobs and re-establish Britain as the most exciting place in the world to make games. 

 

Pre-distribution

Neil O’Brien, Director of think tank Policy Exchange 

Tony Blair once vowed: “We will reduce the proportion we spend on the welfare bills of social failure – judge me upon it.” But despite the long, debt-fuelled boom, spending on welfare between 1998 and 2010 increased by about three per cent as a share of GDP. 

In fact, welfare absorbed a larger proportion of the record increase in public spending than education did. The 13 years of the Labour government demonstrated the limits of income transfers – the child poverty target was missed by miles, despite a surge in spending on benefits for children. Mass redistribution failed because it doesn’t tackle the underlying causes of poverty: worklessness and poor education. Today’s educational failure is tomorrow’s inequality. 

That’s why we should be alarmed that people who live in council houses in inner London are more likely to have a degree than the average person on Merseyside. So let’s try to spend less on welfare and more on education. Let’s move from redistribution to pre-distribution.

 

Further reading

Ethos

Ethos features a wealth of insight into the world of public services, in the form of opinions, debates, profiles, interviews, infographics and photo essays.

Nick Pearce

Nick Pearce is the Director of IPPR and also the former Head of the Number 10 Policy Unit.

Andrew Sparrow

Andrew Sparrow is Senior Political Correspondent for The Guardian and the Press Awards’ Political Journalist of the Year 2011.

Neil O'Brien

Neil O'Brien is Director of the think tank Policy Exchange.

Helen Lewis

Helen Lewis is the deputy editor of the New Statesman.

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