A 3-3-3 Strategy for the UK

Last week, the US Senate confirmed Scott Bessent as Donald Trump’s new Treasury Secretary. Trump — never one to resist a good tag line — was reportedly sold on Bessent after hearing about his economic strategy, dubbed “3-3-3”. Under his plan, economic policy should focus on cutting the federal deficit to 3 percent of gross domestic product (GDP), boosting annual growth to 3 percent of real GDP, and producing an additional 3 million barrels of oil a day by 2028.

Even though the 3-3-3 slogan might sound a bit clumsy at first (some readers might be reminded of Chelsea chairman Todd Boehly’s suggestion that his team play a 4-4-3 formation) it boils down to three core economic principles, fiscal stability, cheap energy and a focus on pro-growth policy, in a way that is easy to communicate to the public.

Which got me thinking: As the Labour government is making strides to finally take economic growth seriously, what would a 3-3-3 plan for the UK look like?

Let’s start at the fiscal front. In the financial year 2023/24, government revenue was around £1,098 billion while spending was £1,230 billion. The deficit was therefore £131 billion, which is equivalent to 4.8 percent of GDP. Although, the OBR projects that the deficit will fall to 2 percent by 2026, both government spending and tax revenue are close to all-time highs. Interest payments on existing debt are close to 4 percent of GDP alone. And the UK, different from the US, is very much a price-taker in government bond markets, as demonstrated again by last autumn’s budget. So, sticking with Bessent’s 3-3-3 formula, bringing down debt payments below 3% of GDP would be a good start.

What about energy then? For starters, the UK has been a net importer of energy since 2003 and ranks at the bottom of basically every conceivable statistic on energy cost. To give you one example, one kilowatt hour is more than three times as expensive in the UK than it is in the US.  In 1990, about 25 percent of the UK’s electricity was generated by nuclear power. That figure has fallen to less than 15 percent. Increasing the share of nuclear to 30% would certainly go a long way in reducing energy prices. 

Finally, growth. I am sure Rachel Reeves would love to just legislate for 3 percent of annual growth. But as a matter of fact, sustained growth will only be possible if we start removing binding constraints on economic activity, not ramping up new government programmes to substitute private for public investment. As everyone has surely already anticipated, this brings me to the perennial issue – housing. 

Even if the government manages to meet its target of 1.5 million houses over the course of this parliament, which remains highly unlikely, that won’t be nearly enough. I am struggling to put a pithy multiple of 3 on it, but 3 million new private dwellings might go in the right direction. One can at least dream.