![\"Alan](\"https:\/\/ounews.co\/wp-content\/uploads\/2017\/02\/DSC01303_-300x200.jpg\")
Senior Lecturer in Economics, Alan Shipman<\/p><\/div>\n
That’s the verdict of Alan Shipman<\/a>, Senior Lecturer in economics at The Open University, who reveals why the UK economy isn\u2019t working as it should and points across the pond to a possible solution for a bold Prime Minister.<\/p>\n Not for the first time, it\u2019s the US recovery that should give us hope. Joe Biden\u2019s policies have kick-started growth while reducing inflation, by creating incentives for investment that can produce more without using more scarce resources.<\/p>\n And by promoting local substitutes for technology and raw materials that come from abroad, they\u2019re boosting national security, giving his plans cross-party appeal.<\/p>\n Biden hasn\u2019t shied away from making big corporations and high earners pay more of the bill, a strategy that can start to bring down record levels of inequality.<\/p>\n Britain doesn\u2019t have America\u2019s advantages of printing the world\u2019s currency, controlling a large internal market, and being a magnet for top talent fleeing autocratic governments all over the world.<\/p>\n But we\u2019re further down the road to renewable energy and other sustainable technologies, helped by world-class education and science. And we\u2019re not threatened with the return of a leader like Trump.<\/p>\n It\u2019s no wonder Chancellor Jeremy Hunt and Bank of England governor Andrew Bailey look a bit puzzled these days, because the normal fixes are just not available.<\/p>\n After the bounce-back from the pandemic, the Treasury would normally be looking to cut taxes and let the budget deficit rise a bit to get people spending more.<\/p>\n But those options aren\u2019t available because of high inflation \u2013 still officially 7.9% in June, far above the 2% target.<\/p>\n The usual answer would be for the Bank of England to cut interest rates, making it cheaper for business to invest. Instead they\u2019ve had to raise rates sharply, from 0.1% in late 2021 to 5.25% after the latest change a week ago.<\/p>\n And the government\u2019s having to hold budget spending down, to avoid borrowing more when its debt is already big and getting more expensive.<\/p>\n Inflation is high because we\u2019re running at full capacity. Rising output in the past two years has reduced unemployment to 4%, and left over a million unfilled vacancies.<\/p>\n Those labour shortages would usually mean we all get a pay rise, but average wages<\/a> haven\u2019t risen since October 2020 after adjusting for inflation. In terms of what they buy, pay packets are actually lower<\/em> than before the pandemic in manufacturing and most parts of the public sector.<\/p>\n Economists say that\u2019s because our productivity, the value of what we produce, has stopped rising, so there\u2019s no more money to hand out.<\/p>\n But they\u2019ve no clear idea why productivity has been slow-growing, holding down wage growth since the global financial crisis of 2008.<\/p>\nWorld-class education and science<\/strong><\/h2>\n
Why the usual answers aren\u2019t working<\/strong><\/h2>\n
No more money for increased wages<\/strong><\/h2>\n