Britain is a stagnation nation, with next to no productivity growth and zero real wage growth post-financial crisis. And that’s before inflation hit 40-year highs. Can British politics chart a course out of this low-growth mess?
The demographics won’t help. That is the takeaway from an interesting recent paper by Oxford’s Tim Vlandas. Britain is getting older (we’ll have around 2.5 million more people aged over 65 in 2030 v 2020). Some of the growth effects are obvious (fewer workers means lower GDP), but the indirect impacts on growth via politics are Vlandas’s focus. He raises two concerns.
First, older countries don’t just spend more; they spend differently. Future growth requires us to invest for tomorrow, but older societies are keener on consumption today. He sees pensions and health crowding out education spending, but I’d widen the danger to insufficient investment in housing and transport. The government just delayed another load of transport projects and has caved into backbench pressure on housebuilding targets.
Second, older voters dish out less political punishment for weak growth, undermining one of democracy’s core economic strengths: economic accountability. Growth is more important to the living standards of workers than pensioners – it more directly affects wages and employment than pensions.
This is bad for Britain, but some Conservatives will take heart from older voters being less likely to punish incumbents for low growth and being more likely to vote than those who would: those aged 65+ are 50% more likely to vote than those aged under 35. But before it’s party time in Downing Street, I should point out what the research shows older voters are keenest on punishing governments for: high inflation.
• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org
