Last year will be remembered as the most turbulent for the global economy since the financial crisis of 2008. Russia’s invasion of Ukraine led to a huge increase in global energy prices, which lead to an increase in inflation around the world. And 2023 will be even tougher for many Britons; it will be a year of falling real wages at a time when the cost of essentials has never been higher.
The government would have us believe that this is purely the product of these global headwinds. But the truth is that a series of long-term structural problems have left the UK more vulnerable to massive global shocks than many other countries. From the dysfunctional housing market to sluggish economic growth to a complete failure to deal with the consequences of an aging population, these problems have been ignored by governments of both colors in recent years, but they have gotten progressively worse with 12 years of Conservative government. If left untreated, they will hinder people’s quality of life for decades.
The UK’s growth prospects are poor by international standards. This is because for years economic growth was dominated by a financial services sector whose flaws were exposed by the crisis of 2008. The dependence of the sector disguised a lack of productive capacity in the rest of the economy and large geographic variations in economic prosperity. The 2010s should have been used to generate investment in the public services and skills infrastructure needed to increase productivity across the country. Instead, public spending cuts hit poorer areas harder and the Tories pursued the hardest of Brexits for ideological reasons, wiping out an estimated 5.5% of GDP by mid-2022. It is families with lower incomes who will feel the impact on their standard of living the most. The government must urgently support exporting businesses by reorienting trade with the EU, our closest and largest trading bloc, and introduce policies that allow people to move in and out of training throughout their working lives to ensure the economy has the skills it needs. And ministers, who in recent years have reneged on pledges to promote investment in green energy, must prioritize low-carbon technologies as a way to boost growth and ensure the UK meets its commitments to cut emissions from carbon to zero by 2050.
The growing number of young people who will never be able to afford their own home is an indictment of the failure of politicians to tackle the worsening housing crisis. The UK has some of the most expensive rents in Europe and a housing market in which rising prices offer windfall profits to landlords at the expense of those who remain locked into home ownership. This will increasingly affect many aspects of life: families must move repeatedly, undermining any sense of stability for their children; people who cannot relocate to take advantage of economic opportunities in the country’s fastest-growing areas; older tenants reaching retirement with insufficient pension income to cover their rent. The number of people losing out will widen until the government gets the problem under control, not only by facilitating more house building, but also by properly taxing housing as an investment class, including buy-to-let, introducing long-term rentals and the limitation of rent. increases
After housing, childcare is one of the biggest costs faced by families with young children – the UK has the second most expensive system in the world, according to the OECD. The worst is the difference between when a parent goes back to work and when the right to the 30 free hours starts in the period after a child turns three; this leaves fathers unable to pay childcare costs and therefore unable to return to work, disproportionately affecting women’s career progression and denying children the opportunity to learn in childcare settings of high quality, which is particularly important for children from less affluent backgrounds. The system needs urgent reform to offer free universal childcare for children under five; this would lead to benefits not only for children and parents, but for the wider economy.
As in so many wealthy societies, Britain’s population is aging as a result of low birth rates. The consequence is that we will collectively have to spend ever greater amounts on health care and personal care. However, the UK invests very little in health care (18% below average per person than comparable EU countries over the past decade) and severe levels of underfunding of health care later life means that too many older people languish without the support they need to live a dignified life or spend weeks on end in hospital wards. This is unsustainable, with dire consequences for people in their final years of life; the NHS cannot do its job without more resources and it is ridiculous that politicians have neglected to fix the glaring problems in social care for two decades.
These are the thorny challenges facing the UK. They are eminently fixable, but they require a generous-spirited policy that is long-term oriented and capable of sustaining some of the cross-party consensus that developed around the NHS and the expansion of social housing in the 1960s and 1970s. Yet Britain is governed by a Tory party that has blatantly embraced populist tactics as a means of getting through Brexit and led to political chaos in 2022. More broadly, our political discourse is gradually becoming contaminated with the tribalism, culture wars and identity politics that develop. in social networks. We must hope that 2023 is the year that our political leaders seize the opportunity to rise above the fray to finally start talking about the social and economic reform that Britain desperately needs.