In a surprising economic comparison, France has emerged as a more productive nation than the United Kingdom, despite its reputation for strikes and stringent labor laws. This paradox has sparked a debate among British policymakers and economists, leading to the publication of a thought-provoking report titled "Foundations" by center-Right thinkers Ben Southwood, Samuel Hughes, and Sam Bowman.
The report argues that France's prosperity stems from its success in areas where the UK falters: constructing housing, developing infrastructure, and ensuring a robust energy supply. This analysis has gained significant traction in Westminster, with many viewing it as essential reading for understanding the UK's economic challenges.
The authors present compelling evidence of the UK's inefficiencies:
- Industrial energy prices tripled in the 15 years preceding Russia's invasion of Ukraine.
- The UK generates less electricity per capita than Germany and Japan, resembling developing nations like Brazil and South Africa.
- Each mile of HS2 costs £396 million, over eight times the cost of a comparable French high-speed rail line.
- The application process for a new Thames tunnel has already cost £297 million, more than twice the cost of building the world's longest road tunnel in Norway.
These inefficiencies are attributed to excessive regulation, bureaucracy, and the need for extensive consultation processes. The report identifies the housing sector as "the largest cause of British stagnation," limiting workforce mobility and economic flexibility.
"There are good reasons to want the UK to have a large, productive industrial base."
This stance aligns with recent conservative economic thinking, advocating for reindustrialization and reduction of Britain's trade deficit. However, the extent of industrial strategy implementation remains a topic of debate within conservative circles.
The report cites 2008 as a crucial turning point when the UK began underperforming other rich economies in productivity, competitiveness, and wages. While specific tax rules and supply-side costs contributed to under-investment, broader fiscal and monetary policies also played a role.
As the global economy faces new challenges, including China's growing influence and the rise of trade barriers, the UK must make strategic decisions to reindustrialize and rebalance its economy. The "Foundations" report serves as a reminder that economic decline is not inevitable and that prosperity depends on policy choices.
To address these issues, the report suggests:
- Implementing supply-side reforms to facilitate construction of housing, infrastructure, and energy facilities.
- Streamlining approval processes for major infrastructure projects.
- Creating incentives for local communities to accept new developments.
- Developing a balanced approach to industrial strategy that avoids excessive corporatism.
As the UK navigates these economic challenges, the "Foundations" report provides a valuable starting point for discussion and potential reform, echoing the impact of the 1977 "Stepping Stones" document that shaped Margaret Thatcher's economic policies.