Liz Truss is all about growth
Liz Truss is all about growth. We saw something like this in 1972, when Barber dashed for growth with monetary and fiscal loosening. In the event, seventies Britain got no growth, just inflation. In the eighties, Thatcher got growth by addressing the supply side, specifically, capital with Big Bang; labour with the union reforms and council house sales; and microeconomic institutions with the privatisations.
We all know where the big bottlenecks lie: healthcare, energy and land-use. So where to focus? To answer that we need to consider how much opposition will reform provoke; and how may the benefits be shared. This is not just for the high road of balancing the chancellor’s books and goosing up the economy. There is also the low politics of creating constituencies of interested parties, as Thatcher did with privatisations and council house sales; and placating the opposition, as Bevan did with the doctors when he “stopped their mouths with gold”.
Healthcare. At first sight healthcare has its attractions, with Covid flushing out its dysfunctional regimes of capital, labour, organisation, research, sourcing, talent and treatment. There could be some £300 billion available to the Exchequer after turning the liability of the NHS into an asset. Politically, however, it’s still too hard. Taking money from hospital operators and insurance companies won’t mollify the King’s Fund, the Royal Colleges or the health service unions. Nor will it create a popular constituency sufficient to overcome the national sentimentality towards the NHS. On the other hand, it’s worth ventilating the issue energetically to prepare opinion for reform, after the decisive collapse in the NHS to be expected within an electoral cycle or two.
Fracking and oil in general. We could see a tax take of £280 billion on newly recognised onshore and offshore reserves, assuming that the UK levies royalties at 10%. This would be over the lifetime of the reserves, so perhaps £28 billion per year. Truss has made a good start by removing the ban on fracking, but we couldn’t be sure that the sums involved will be enough to mollify the nimbys, while net-zero campaigners plain can’t be mollified. There is much to be said for improving our energy resilience, but the climate of the times may not wear it.
Land-use reform. Once again, Truss has made a good start, speaking of her enthusiasm for “roads and houses”. This would be after a bonfire of planning, plus dysfunctional building and fire regulations. Developing green belts would give rise to at least £12 trillion of appreciation in land values, to be shared between owners, developers and the exchequer. Over a twenty year period this is some £600 billion a year. Realising these sums involves securing the land, distributing the appreciation in value and managing the flow of development to avoid depressing values. This calls for private sector development skills and capital market instruments.
Such reform would also offer an opportunity to reverse three generations of architectural misadventure. This has left Britain as something of a pre twentieth century theme-park, with inadequate roads and elderly houses which are attractive but draughty, punctuated by the popularly relished but professionally despised (e.g. the interwar suburbs and Milton Keynes) and the reverse, (e.g. the housing estates and other postwar new towns now becoming slums together with brutalist public buildings). Indeed, why not reform the listing regime so that the latter can be demolished, also taking in the last two decades of cramped private housing? Regardless of this last point, introducing international standards of design and construction would avoid repeating postwar mistakes.
The sums involved are so substantial as to hold out a realistic prospect of placating the anti-car lobby, architectural profession, heritage lobby, levelling-up campaigners, local authorities, nimbies in general, plus planning and other dysfunctional regulators. In addition, it opens the door to creating a constituency of new homeowners, enjoying something which no Briton has seen in seventy years: attractive homes with modern amenities and spacious accommodation at reasonable prices and with proper infrastructure. This makes eminent political sense.
Land-use reform offers substantial upside for the economy and the exchequer. The sums make it possible to contemplate buying out the opposition with generosity, leaving plenty left over for energy, transport and other infrastructure throughout the country. But it will call for deft communications and politics, to conciliate antagonists and create supporting political constituencies.