 Fi oedodd. Iedodd. Yn ystod yn ôl. Yn ystod, rym ni'n gofio. Yn ystod y gallwch yn gwneud o hynny o gyfnodd. Rwyf am gweithio o'r level energiol. Rydyn ni'n bod yn yn y gweithio. Iedodd. Rydyn ni'n gweithio a gydag yma. Fy oedd yn ystod y byddai'n gweithio o gweithio a'r gweithio cymdeithasol ac o'r gweithio a'r gweithio ac y context yw'r gweithio o'r gweithio o'r hynny o'r llwyddau i gael amnoeddiaeth arall. Mae'r cilyddodd arall y bydd hynny'n gweithio'r clywed eu fforddau o fawr o'r cadwmaint sy'n gyda ni'n mynd i weld sut ydych chi'n mynd i ymweld yna pan rhaid i gael ar oed gael arall y gweithi. Yna'r rhanoedd cyfnodol yn y sefinitelyd, y ffordd. Thank you for the session and then we will be going to having discussed what on earth the Conservative Party thinks an economic strategy for the 2020s might look like. Yn ni'n go agau'r llyfr o'r paradyd mewn Rachel Reeves'r minion CER in conversation with Stephanie Flanders at 2.15. So that is the plan, as I said this morning. Go on, Slydo, put your questions in under hashtag the Stackmatian Nation. Right. So the last two chapters of the book, which I know you all read during lunch there, cover what would a plausible economic strategy, not for any country, but specifically for the United Kingdom in the 20s look like and then would it make any difference? ac yn ddwy'r llwyll? A wedi'i ddwych? Maen nhw'n siŵr na'r stym yn cael ei fod yn ymwylo? Mae'r ddweud yn dda i'ch gweithio'r cyd-dweithio, mae'n cael ei fod yn cael eu cynhyrchu. A fyddai'n ddigon i'r bobl yn ymwylo. A dyna'n fyddi'r gweithio ddefnyddio'r sefyll yn eich gweithio'r gweithio'r gweithio'r gweithio. Wrth gwrs, mydych chi'n gallu gwirionedd mewn gwirionedd yn y Senedd Cymru gyda'r iawn gydych chi'n gweithio'r gyllid ar gyfer y llwynt yn y cwestiynau. Rydyn ni'n credu fydda i'r cymrydau ymddech chi'n gweithio ar gyfer y Cyfryd, ac ymddech chi'n gweithio'n gweithio'r cyfryd, ac ymddech chi'n gweithio'n gweithio'n gweithio'n gweithio'n gweithio'n gweithio'n gweithio. First of all, you are going to hear from Dame Carolyn Furben, former director general of the CBI and commissioner for this project, Martin Wolff, chief economics commentator at the financial times, who told you what the answer was years ago if you got your subscription. Then you are going to hear from Frances O'Grady, general secretary of the trade union of the congress, until she disgracefully deserts us in when, January? End of December. End of December. We all got used to loss by then. Then you are going to hear from Professor Henry Overman, who is the research director at the Centre for Economic Performance, one of the leaders of the actual inquiry project team. I hope that is what everyone was expecting, because that is what you are going to get. Dan, what is in the book? Hello everyone. I am going to tell you what is in some of the chapters in the book. We need to get serious is the main message that comes from chapter 4 of the book, which you can leave to, I am sure, if you are here. Or you can go on the PDF online if you can download it. It is very big to read as I am going. The big task is to end stagnation, which we are defining as low growth and high income inequality. Ending those things is what we try and set a plausible economic strategy for the country. We try and provide the outlines of that in chapter 4. I am going to in 15 minutes try and run through both that and some optimism at the end as to what we could gain if we were able to close the gap with some of our competitor countries in terms of income for households across the distribution. Getting serious, what does that look like? To start with, it means being serious about the fundamentals of our economy. I think some are unserious in saying that we are all about financial services when financial services have fallen as a share of our exports over the past decade from 12% to 9% between 2009 and 2019. Others particularly here are thinking of our politicians who are likely to say that we need to revive manufacturing, talk of the march of the makers in years gone by. When we talk to the public as we have done as part of this project about this, people are much more realistic that our route to growth and prosperity and where the good jobs are is in the service sector and not in manufacturing, which is not where our strength lies. It is also not where you get that many jobs in part because it is so high, because high value added manufacturing is high productivity, there is not many jobs in it. Our strength instead lies in services and we are a services superpower as a country. It is not something that is discussed, nowhere near as much as people may discuss that Germany is a manufacturing superpower. As this chart shows, we are the second largest exporter of services in the world, second only to America, exporting $400 billion of services in 2019. What is really important to note here is that this specialism is persistent over time, it is very difficult to change and it will cost a lot of money and investment to try and change it. Seven in ten of the products that the UK was most specialised in in 2000 in 1989 were still in the top ten in 2019. So this is really difficult to change, it is also a really broad based specialism, it is not just about finance as I was saying but about the creative industries, ICT and a range of professional and business services. Service economies are also on average richer than manufacturing ones so this specialism is not the thing that is holding us back as a country and in fact demand grew faster in our key export industries than in China's in the decade to 2019 while China's exports grew twice as fast as ours. So what does recognising that we are an unusually service led economy mean? Well it means that you then move to thinking that actually a serious route to doing better as a services economy is to revive our big cities outside of London and make them a success to make a success of being services dominated. We saw a version of this chart this morning from Greg, those of you who have been with us all day where we just showed you the top bubbles which are now coloured gold but you can see here this is the productivity of different places in a selection of advanced economies including the UK. If you look at that big bubble around $74,000 you can see Manchester. Manchester is a lot less productive than London and in fact all of England's big cities outside London have productivity below the national average which is certainly not the same in France where you can see Leon and Toulouse there closer to Paris also very high productivity compared to Manchester and then you can see Germany at the bottom here Munich and Frankfurt very highly productive cities. And improving the productivity of our cities outside London is also quite a good route to share prosperity for a country like the UK that is geographically actually quite small. If you look at the OECD data you can see that 69% of us live in cities or their hinterlands compared to 56% of those in France and a much lower percentage in Italy. So we can get more bang for our buck as well not just because of services and because services and agglomeration effects mean that we should focus on cities but also because we're small and if we can connect places to cities then even more people can benefit from them. But we're not really serious about this either to be honest because we're not honest about the scale of investment that would be required to transform places like Manchester and Leeds and Birmingham. In one of the papers that we mentioned in the book and has been published as part of this we show that halving Manchester's productivity gap with London so its bubble moved up towards where Edinburgh is would involve 500,000 extra workers in Manchester and 11% increase in the graduate share and tens of billions of pounds of investment. The investment is another thing that we are lacking. It's been discussed a lot today. It's worth just pausing on the fact that really this is about business investment not at the moment on current plans and of course plans are a bit up in the air at the moment. But on current plans the government is set to increase public sector investment to its highest rates as a share of GDP since the 1970s. But business investment is where Britain is really lacking. On the left hand side here we compare the UK to Germany, France and the US where business investment is at 13% compared to 10% in the UK. And we've shown as part of our work that persistently low investment in the UK explains almost all of the gap in productivity between the UK and France. So there's a lot to be had from us getting better at investment particularly in the private sector. We also are not serious about the right things when it comes to human capital investment either. There's a lot of discussion about whether we're doing too much investment in our human capital and also the downsides of that for poorer places with lots of people leaving, people think that's happening. But actually this chart shows you that that really is not the case. There's a lot to look at here, lots of different dots and lines as we like at Resolution Foundation. But if you look at age 19 on this chart you can see that those in the most deprived parts of the country are two and a half times less likely to leave their hometown, the place where they are at age 19 to go off to higher education than those in the least deprived parts of the country. That's 17% versus over 40%. That's a massive difference. So it's not that we've got people flooding, people leaving left behind places, it's that they're staying and they're not being able to leave to access those higher education opportunities elsewhere. And we also get it wrong when we get into arguments in general about whether we're educating too many people when actually we know that the pace of human capital progress in the UK is slowing and workplace training, for example, has fallen by a fifth in the 2010s. Moving on to talk about the inequality gaps in the UK, we need to be just as serious about them as we are about tackling low growth, in part because people really care about these gaps. As this chart shows, six in ten people say that the inequality between places and of income and wealth is the most serious, it's helpful that they ask that, the most serious issue when it comes to inequality in the country. But also we should be realistic and I'm sure the panel will get to discussing this as well about the fact that a strategy that puts services and cities at its front is likely to actually push up on income and place based gaps rather than bring them down. So we need to work extra hard to combat that. And I think the place where you should start when you think about inequality in Britain is jobs and good jobs should be an explicit goal of an economic strategy to help Britain make a success of this decade rather than something that flows by accident from some of the other things that you might want to do. And we've been talking today about stagnant pay growth in the UK, but I think also we should recognise that there's been sort of stagnant or static policy when it comes to the labour market over the past 15 years or so, with the welcome exception of the minimum now national living wage. Because not much has changed in terms of our policies and our support for particularly low paid workers, but over that same time period and longer we can see that worker power has declined in the UK. The UK trade union membership has fallen quite significantly and some estimates which we discuss suggest that that could be costing the lack of worker power in the UK could be costing workers as much as £100 a week in lost earnings. And there are also unacceptable levels of uncertainty and insecurity in our labour market today. That's what these clocks are illustrating for you here if you're wondering. Half of shift workers in Britain receive less than a week's notice for their shifts. And as well as improving labour market regulations and enforcement across the board to tackle some of those problems, we can also we think be more proactive about making some of the jobs that we know are going to grow in this decade. So green jobs and jobs in social care making them good jobs. So as was discussed earlier we could pay our social care workers more but we can regulate these jobs more broadly to ensure that they're good jobs as they continue to take up a larger share of employment in the economy. So the good jobs element of any future strategy isn't getting much of the headlines this week but obviously a lot of people are talking about tax with lots of proposals to bring down the overall tax burden which is worth noting is actually lower here than in many of our comparator economies. But the problem we actually have when it comes to tax is that tax rises have been focused on earnings when they themselves have been stagnant while other revenues for raising taxes just haven't really been explored and this chart which I think David said was one of his favourite charts in the report really helps get at one of those things. So the red line shows how much household wealth has increased as a share of GDP since the 1960s and you can see it's gone up from around three times GDP to eight times over this time period since the early 1980s. A massive surge in wealth in Britain and yet taxes on wealth have remained flat at around three percent of GDP. The axes are very different here on this chart and our tax system also has a range of other wrinkles and allowances that if we're serious about raising revenue effectively in the 2020s need to be tackled rather than ignored. And before coming on to think about what could be achieved if we were to up our game in the way that we've been discussing today I did want to talk about the welfare state where I think again not being serious is something that we're seeing from some people this week in terms of focusing on people who are out of work and fretting about whether or not our benefit levels are too high and there's too many people having a nice time on benefits. We know that there's very little in the way of a cushion from our benefit system when people lose their jobs. And this chart shows for a single person that doesn't have any children on the average wage if they lose their job in the UK on average. They'd received from the welfare system 40 percent of their earnings in support compared to much higher rates of replacement in other countries such as Portugal and the Netherlands at the top of this chart where on average there'd be 75 percent of their previous earnings. And that's because the unemployment benefits in the UK are very low and they've been falling as a share of average earnings. They're now at a record low relative to average earnings at just 13 percent. More broadly and related to that but also a product of specific policy decisions as well. We know that pre pandemic almost half of families in the UK with three or more children were in poverty. And that's increased from one third of families in 2012. So any economic strategy that claims to be serious about reducing income inequality and financial hardship will need to take a different approach here. Just a few more slides then to finish on whether richer and fairer Britain is in fact possible. If something like a strategy that we've begun to outline today and will be doing a lot more work on in the second phase of the project was to be implemented. The gloomsters out there. There may be some of you in this room might say that Brexit has created the economy and we're not. That's just too much of a big headwind. Some others might say that the path this is what this path is doing for you here. The path to higher growth in advanced economies has got steeper. It's more difficult now for advanced economies to to grow. This was a discussion that I think Greg was having this morning due to some big structural reasons. And so we should just just give up and go and enjoy the sunshine rather than stay and stay in this nice warm room. But I want to take you through some charts that might give us some optimism. This is a bit of a paradox in some sense in part because we have fallen behind so far. There is a lot of room to catch up across both the inequality dimension and the income dimension. I think this chart really helps get at that. So on the vertical axis here you can see we've ranked countries from poor to rich. You can see the U.S. at the top there, average household incomes of $50,000 U.K. there in the middle. Lots of countries are richer than us. Also lots of countries are more equal than us. You can see right in the end Denmark, Belgium, Norway, much more equal in terms of their income inequality. And so moving into that quadrant would be a good thing for Britain. And we don't have to compare ourselves to the sort of best in class anymore. We don't have to be U.S. or Norway. And we pick fives of broadly comparable countries. So Canada, Australia, Netherlands, Germany and France. And you can see, yes they're doing better than us, but they're not doing a lot better. And I think probably lots of you, I definitely thought this before we started to do this research, think that we are sort of on a par with these countries. Well this chart shows you, A, that we're not really anymore. But B, I can show you that if we wanted to become a bit more like those countries, there are a lot of gains to be had. So one, the first set of bars show you on average if our income level was just increased to the average income level in those five countries, we'd all be 21% richer. It's quite a lot. The second set of bars shows you what would happen if the U.K.'s income shares, so the bottom fifth, middle and the top fifth, were to be the same as the average in those five comparator countries, because as you saw in the previous chart, these countries are all more equal than us. And on average that would mean a 20% boost to incomes at the bottom, a boost in the middle and a fall at the top. But if you combine both of those things, which the third set of bars does, it makes a really big difference. So there's a really quite striking difference between the U.K. and these countries that we think are similar to us. The lowest income households would be over 40% better off, middle income households would be 30% better off, which equates to £8,800 a year. And so that is the size of the prize that is attainable if we were to make a success of renewing our economic strategy in this decade. Very good. Thank you very much, Dan. It's a good lesson for all of us in life that you don't need to be the best. Just not being rubbish makes a lot of difference. Right, on that optimistic note, Caroline, you know, represented British business in some very straightforward times. It's all going very well. Basically you oversaw actually a lot of this stagnation. So, you know, I don't think you are on performance-related pay, but over to you. Well, first of all, Dan, absolutely a cracking analysis. And you somehow managed to combine, I think, a fantastic analysis with some hope. Because I think there's that idea that we can grow our way out and improve our income distribution in ways that aren't kind of stellar. But they get us to somewhere that's an awful lot better, is a really good starting place. But Torsten, you gave me the challenge of talking about growth and how we get there. Because I think that is the name of the game. We can grow our way out of here. And I think that it is quite easy to see growth and inequality as trade-offs. And actually, if I think about the people I represented from business for all of those years, they absolutely go hand-in-hand. A growing business can pay better, it can offer more progression, it can introduce fairer work policies, and you get better jobs. So, I think, although I'm going to talk about growth and others will talk about inequality, in my view and my experience, they absolutely go hand-in-hand. And I think what you've shown incredibly clearly in this analysis is there's no silver bullet. There is no one thing that is going to fix everything, and as they say, hope is not a strategy. But what I think, if there was a silver bullet, or perhaps there's a silver phrase, I think it is business investment, private sector investment, and how we get that going. And so what I'm going to do in my few minutes is just imagine that actually I've got all of my old CBI members behind me. What would they be telling you right now that would really make a difference to their ability to invest? Because there are one and a half million businesses in this country. They are all making daily decisions about whether they invest money here, or they put it in the bank, or they invest overseas. What would make a difference? And I think I'm going to suggest three things that any government, and who knows who they're going to be, could do right now. The first is we've got to stop the policy churn and the change. The first thing that my guys and gals behind me would say is there has been so much policy churn over the last, and it's not just the last five years, it's the last 25 years in all areas of skills policy infrastructure. So when I was looking back at the training policy that the successive governments have had over the last 30 years, we were accused of not investing enough in training. I look back at policy. In 30 years there have been 29 government changes in skills policy. We had an industrial strategy council for I think it was 18 months and it was abolished. Greg Clarke, who's come in as levelling up, new levelling up minister, he produced an industrial strategy that was this thick that was thrown in the bin. Is he going to revive it? So if you're sitting there as a business, they said to me day in, day out, tell us what the plan is, stick to it and stop changing it every five minutes. And actually as I began to think about it, one of the things that you say in the report Torsten is we can't just keep blaming the politicians. It's nice, it's easy, but actually is there something structural in the UK that explains why we have such policy instability? And I've come to the view that there is and I think one of the things that we don't have in this country is a proper structure of social partnership. We don't have a proper way of bringing workers, unions, business, other social partners into the policy debate. And actually a lot of those peers that are growing faster than we are do. So one suggestion I have is let's create something that is more conducive to policy consistency and let's look at a social partnership model. It's very interesting that in Wales they're doing exactly that. So suggestion one, we've absolutely got to stop the churn. Second, we've got to do fewer, bigger, better things. There is such fragmentation and the two areas of policy where again my CBI members behind me would say make a real difference, skills policy. Now you hear it again and again and again, but actually we are still not in the right place. So one area that I would focus on is the reskilling of probably nine in ten workers to do the jobs of the future. And that has again been subject to a lot of change at Damien Hines and Philip Hammond set up something that bit the dust, but a consistent policy around reskilling for a digital net zero world. Net zero would be the second area where we need long term policy. That's already been covered really well by Nick Stern this morning. But fewer, bigger, better strategies and skills would absolutely be at the heart of it. And the third area I would really focus on to get that big surge in investment would be restoring some of the openness in the British economy. So we've gone backwards. Coming out of the EU it's done, we accept it, it's absolutely where we are. But it has closed our economy down and we have not replaced that with new trade deals in any shape or form. So three things there. We must fix our relationship with the European Union. That is affecting trade. It is creating friction. It's about building relationships. It's about building new trade agreements. It's about solving Ireland. We also need to use our position at the WTO to get services trade deregulated. We are and can be an even greater services superpower. Use our new leverage. We've got a place at the table. Use it. And the third thing I think is resolving our incredibly difficult relationship with the emerging markets, China, India, the Middle East in terms of how we align our values as a country with the need for trade. And it's difficult. We care very much about human rights abuses in China. We care very much about human rights challenges in the Middle East. But we need to find a way of engaging and trading and building markets that we have lost in many ways through our decisions recently. So I think if you did those three things and you did them with conviction and with seriousness, I do like that word. I think you could see a surge in investment and get that 9% of GDP or the 10% of GDP heading towards 13%. Those are the jobs of the future. Investment is the fly. We live the economy. And I think you could start to see the growth that we need. Thank you very much. Over to you. So first of all, it's a great pleasure to be here. I have to say Torsten. You know, I basically think what we do as journalists is completely ludicrous and trying to sort out issues of immense importance in 800 words. But sorting out the future of British economy in seven minutes is a challenge. You can do it. I've got total confidence. So my, well, two introductory comments. First, the beautiful chart you had there convinced me that at least one of my columns, very old column, which most of you surely have never read, was actually right. It was probably my most controversial. It was not that the UK should become Singapore, but London should. That was very controversial and clearly not in the direction of levelling up, rather getting out. The more serious point I make is my meta view is that the performance of the UK economy for much of the post war period. Remember where we were in the late 40s. I won't go into that. And particularly again in the last 15 or so years proves I think that we have neither the immense and must be recognized strength of US businesses, nor the capacity for serious, stable, sensible, common sense policy making of the social market economy systems. And I think this is basically a social and political system problem. And since it's basically got worse through my lifetime, not better, I have no longer any belief it will improve. And when I look at the current Tory campaign, which is incomparably the worst of this kind, I think in British history and I studied it. So that was part of my life. I certainly am not optimistic, but if I were for those of the introductory marches, I would say the following. First, growth is important. I think my dear friend Richard Lear might challenge me on this, but I believe we can't really run a stable democratic society without growth, which should be of course sustainable and inclusive. I won't go say any more about either that because I don't have time. The second point I would make is reversing long slides of this kind is really hard to do. And I completely endorse what has been said, which is you have to get a lot of things right. It was easier for South Korea when I first went in 72 because everything was so far behind the curve. We aren't. It's much more difficult for us and we shouldn't pretend that there is something very obvious we can do which will turn this around, for instance, like cutting taxes. Third, basic policy has to have a few pretty obvious characteristics that have to be predictable. It has to take into account using resources efficiently, and Richard has got something right, macroeconomic stability actually matters. Being a Latin American economy is no fun. Don't go there. And we have been pretty close to it from time to time. Then, on policy, here are my favourite ideas in policy. Obviously, we have to raise the investment rate, and my own view for a long time is capital spending should be fully expensed. End of subject. Every economist knows this. Debt, by the way, should not be, but that's another matter. I won't go into that. Second, we need to raise savings in our economy because we already have a whacking grade current account deficit, which is a bit scary at the moment. We can't raise investment without raising savings, and that will have to be private and public, so that means that has to look at public finances. They do matter, but we have to raise savings, and I think the obvious place to do that, apart from, is to look at our pension system. Our new pension system, I think the defined contribution system is multiply defective, but one of them is that the contribution rates are clearly too low, and they should be motivated to be higher. I think we need collective defined contribution plans, because there's a real problem with imposing all the risks on individuals, and we've assassinated the defined benefit system with ludicrous regulation, and the result has made the British capital markets, in my view, the most effective pretty well in the western world, and you can see that in multiple things. Land markets are a catastrophe, and these are the biggest distortions in our system, and of course it goes without saying that deciding to wage a trade war with a principal trading partner is indefinitely in order to ensure that one of the few regions of the country that actually seems to be working economically should blow up, namely Northern Ireland, is insane even by the standards of these imbecils. Finally, finally, finally, I know I've gone over, I think we should think about some institutions, and I'll just focus on two aspects of this. The OBR was a very good institution, and I think the government should have somewhere in it, probably not the Treasury, but perhaps it has to be the Treasury, a serious unit trying to find growth strategy and changing it, and I simply ask the question, what the hell do you think the world will look like in 10 years' time? We will change our mind, and what should we be doing to prepare ourselves for it? Almost everything that goes on the Treasury in my view is irrelevant and useless, and I've thought of this for half a century. I don't have the time to go, but this is important. And the final thing, I do think we should massively increase public investment, but not by saying, ah, the high-speed rail, we really must do that. How much does it cost? Who cares? We should do proper programme planning and assessment of using of our investment resources against other things, which we don't do either. The basic point is, as was indicated, if we were serious, it would make a difference, but I'm afraid we're not. Every good. This is meant to be the uplifting session, I guess. I didn't mention that before we started, but thanks for that. Any Treasury civil servants in the room, I'm sorry, there will be therapy available afterwards to get you through this difficult afternoon. Right. Francis, any more uplifts? Well, first of all, thank you, Resolution Foundation, Torsten Daniel. Thank you very much indeed for that presentation. I think a couple of the key messages I took from it, one was there are political choices to be made. You mentioned manufacturing, for example. Manufacturing is shrunk in many countries, but why is it shrunk so much faster and further in the UK? There are choices to be made. Secondly, if you think about those big challenges that we've just heard so much about, big tech, Brexit, net zero, I wonder about energy rationing and the impact that could have this year. It's not going to be solved by a nip in a tuck and I would absolutely agree with Martin. It's certainly not going to be solved by entering a bidding war on how far to slash corporation tax or indeed to shrink the state. I mean, I really worry not just because if we face further crises, what might happen, but we need an educated, healthy workforce. And the reality is our teachers and nurses are on their knees, so we need to think very carefully before that kind of, I think, ridiculous competition. And similarly on regional equality, which clearly is really important and we have to consider place. But we should also remember that if you're a shop worker or a care worker, it doesn't much matter where you are in the country. You are facing rubbish pay and rubbish conditions on the whole. I guess kind of my message is that inequality and poverty is not just a symptom of a broken economy. It's a driver that breaks that economy. We have had the longest harshest living standard squeeze. We've all seen the numbers on child poverty. We all know that the great majority have at least one parent in work. Something has gone really, really wrong. UK consumers, I see, racked up £800 million worth of debt in May alone. That tells you something in terms of that transfer of risk and debt to real families who are struggling to cope. So I would suggest that if we're going to fix growth and if we're going to fix inequality of income and wealth, then we also need to fix inequality of power because I don't know who else is going to be arguing for a fairer greener economy if certain voices are excluded from the room. We've seen that in terms of the UK's so-called flexible labour market. Nearly four million people now on low-paid insecure zero hours and full self-employment type contracts. We saw that naked abuse of power with P&O when a crew paid the union rate for the job, were unlawfully sacked and replaced with agency labour on poverty pay. And yet, lots of crocodile tears, but nothing happened. They got away with it, they priced it in and they got away with it. What a signal to send. We've had 20 promises on 20 separate occasions, promises of an employment bill to strengthen workers' rights and deal with some of these abuses. Nothing. Instead, this week, we've had regulations instead to allow employers to replace striking workers with agency staff, doing a P&O, as we call it in Congress House, and of course, a threat from the Brexit Freedom Bill, so-called, to attack workers' EU-derived rights. Read my lips, working time is top of the list with those rights to paid holidays, breaks and maximum working hours. So, we could very well be going in the wrong direction unless we shift it. I think during the pandemic, I think, I know it's become a cliché almost, but it's important to say many of us learned the true value of labour. For the first time, we understood how much people who were keeping us alive, keeping us safe got paid and how they were treated. So pleased to hear Caroline talk about social partnership. When Caroline and I were working together, we called for a National Recovery Council. We knew it would be tough, the transition from the pandemic. We knew there were big challenges ahead. Let's all sit down together and figure out a strategy that we can agree on to rebuild Britain in a fairer, greener way. That offer, I would describe it as, was rejected, but it's still there on the table, I know, with Tony Danka too. I think in many cases, if I'm honest, maybe this is me getting old, but I feel like so many of the solutions are so well known. Some of this feels like common sense. We do need to see an extension of collective bargaining if we're going to start raising wages. We do need sexual fair pay agreements as we're seeing legislation going through New Zealand at the moment. We've seen it in Ireland. We've seen it to a degree in Scotland developing and Wales too. We need corporate governance reform. As long as businesses are incentivised only to deliver short-term bonanzas to shareholders, that's going to be a problem for us, so we need reform there. We need a proper industrial strategy exactly as Martin said, and I would say we need to equalise capital gains tax with income tax, and it's about time that we had some fairness in our tax system. I think we do need to build that new consensus for the long term. I think we need a vision of that greener, fairer economy. That is built on skilled labour. That is fairly rewarded where everybody gets the chance of a satisfying job with enough time to spend with your families, enough time and money to bring your children up well. We all need that and a voice at work, and I'll just end with the... Perhaps one of the most important issues to come out of that presentation was that the loss of worker power is costing us each £100 a week to join a union. Thank you very much. The country may not be consistent with its economic policy, but France is consistent. You should join a trade union. Henry, last but not least. Thanks. I thought I wouldn't do my list of policies. I thought I'd try and grapple just a little bit with what it would mean to have an economic strategy, and I thought I'd do that specifically on my area of expertise, which is spatial disparities. In the chapter, we say, what is a renewed economic strategy need? Clear objectives, understanding of context, trade-offs, scale, staying power. How are we doing against that list in terms of where we currently are? I think it gives us a feeling for the fact that we could do better. So staying power. The interesting thing here is that we do have staying power on this in that every Prime Minister from Blair onwards have pretty well said they want to tackle these spatial disparities early on. We just have no stability after that, so we have no stability in the institutions, policies, programmes, funding, and the current law pretend that they're the first to care about it. I mean, that's not brilliant. This is a sort of specific example of Caroline's point, that we have just a lot of churn, and that's not really very helpful. So no staying power. Do we have a good understanding of the context? I think it's improving, but I don't think we're realistic enough about what our services specialism implies for the extent of spatial disparities. A country like ours that has a strong services specialism will have large productivity disparities. This is very little we can do about that. I think we have been distracted by the overall extent of the disparities at the cost of not paying enough attention to what's going on with the second cities. I've been working with Manchester for 15, 20 years trying to make the case that the crucial thing to narrowing these spatial disparities here is to get really serious about turning around what's happening in Manchester. Are we serious on scale? I think nowhere near. We've seen those numbers. We're not going to put 500,000 extra people in Manchester because we build about five houses a year. You're going to have to do things on the effective size. Maybe that's possible, but then I don't think we're realistic at all about what would be needed on the graduate shares and the capital shares. 11 percentage point increase takes Manchester's graduate share to roughly what London's looks like, and the 30% increase in capital work that we estimate that you would need would take that to roughly London levels as well. That is a huge amount of money just to fix one of our struggling economies. I don't see anything that is really serious about the scale of the challenge. I don't think we're serious really about the trade-offs. I was struck at the launch that even Andy, who I think did some interesting analysis in the white paper, dodged it. We really have got a trade-off between national catch-up and narrowing those spatial disparities. London is 20-25% of the economy and sits way to the right of Paris. If we want the UK as a whole to catch up, London's got to be part of the story. I don't think we should ignore the other 75%, but you've got to choose what you're doing. I think you can have both if you make sensible decisions. Let's just leave that if there are some of the things that are being proposed. HS2 would be high on my list. Chief probably naive of these things really for a large amount of money. I think you can have both, but you've definitely got to think about the speed with which you're going to achieve these two objectives. We just need to be upfront about that. Now, I mentioned, Andy, people dodge this by saying there's good investment opportunities outside London. I mean, I will take that as given, but still the scale of the investment that we are talking about, at some point we're going to have to start being serious about that trade-off and where we want to be on it. The final thing is clear objectives. I still don't know what levelling up is for. Look, it's a glib and easy thing to say as an academic, but we've had a white paper and I'm only focusing on the economic side of that now. I should have a clear feeling for what it's doing and I don't really understand if it is a vehicle for improving productivity or it's a vehicle for addressing our inequality problem. I don't know which of those it is, but what I will say is we need to get serious about which of those we're trying to achieve with these kind of policies because if we go for, okay, we need to offset London, offsetting London means investing spatially concentrated in somewhere like Manchester, spreading around graduates, getting more graduates living in Manchester, et cetera. That is just no simple fix for poor households living in Manchester. I don't understand why we feel that trickle-down doesn't really work at the national level, but suddenly it works in spatial policy. The evidence is very clear. Happiness is lowest in London and poverty rates highest. So making Manchester more like London to deal with our productivity problem, it does bad stuff for poverty. So there you go, that's seven minutes of just trying to be serious about the five criteria that we set out. Could we do better? I think clearly we could. Will we? I'll leave that to the panel to discuss. Thank you very much, I think. Although you can't leave it to the panel to discuss. You literally are the panel. Anyway, if they're going to run away and hide the troubles. Right, okay, we covered a lot of ground there. I thought we'll try and vaguely go through a number of things here. So we're going through growth, growth up. We're going through inequality down. We're going through plausibility of anything happening slash what's the prize for it happening and how does that make us think about what an economic strategy looks like. So let's do those in turn. Within the growth and the inequality side of things, I'd like us to, one of the things that Henry was just setting out there that we say in the book is that being serious about an economic strategy is about reconciling yourselves to the trade-offs. So Henry was listing one of them there, which is say you got England, because we mean England's, second cities to be more successful. That would close regional productivity gaps. It would probably close regional income gaps. It would push up within region inequality. It would push up housing costs for lower earners in those cities. So these are trade-offs. You can either pretend they don't exist or you can pay your money and take your choice. A strategy only looks like the latter and the former looks like what we're doing, basically. So on each of them, let's try to bring out the trade-offs. What we're trying to do in this project is to force ourselves to say, okay, we're not ignoring this downside, but we think we should do this anyway broadly. So let's go through those in turn. So on the nature of the UK economy, whereas Dan points out, most conversations say, the problem is we're bankers and we wish we were Germans broadly. I'm a bit unfair, but that's basically the public policy consensus of the world. So my question for... Someone's got the answer. So my question from Karen is, why do we think we self-loathe? Wow. Not you, obviously. Hopefully not. Economically and society, what's the self-loathe? In Germany, everyone is like, do you have any idea how shit-hot we are at this toolmaking? Whereas here, we're like, oh, it's really awkward. It's really interesting, isn't it? Cos I spent a lot of my career in the creative industries. I know broadcasting, making programmes, all of that. And it's very interesting. It was seen as kind of the decorative bit at any trade show. They bring out a Dalek, and it was considered to be kind of eye candy for the economy. And then people suddenly woke up to the fact that this was a £100 billion sector. And if you go through our different service sectors, you go through creative industries, we are absolutely world-class, no doubt. And we look at the attraction of investment into the UK around all of that. But if you go through many other sectors, you go through architecture, you go through accountancy, you go through legal, we are absolutely fantastic. And the other thing I would say about those kinds of services is they are actually UK-wide. So you go to Bristol, you go to Belfast, you will find communities, Fintech, where we've got some new kinds of financial services. Why don't we recognise this in ourselves and celebrate them? I think there are a couple of reasons. I think one is the financial crash was absolutely ghastly. And a lot of people lost their jobs and we had a real recession on the back of it. And actually I think services just got caught up in all of that. The second thing I would say is that I think we've got ourselves caught into a bifurcation where we think manufacturing is better. And there are reasons why it's really important manufacturing because the productivity is high, the wages are high. It is definitely geographically dispersed. But we've got to find a way of recognising what we're good at celebrating them. And I've got one other little bug where I actually torswn that I will air. Only one? Only one of many. But this is one that's relevant to this conversation, which is that I think this distinction between services and manufacturing frankly is breaking down. So if your role is right, you make 40% of your income from services. I always thought a television programme was actually a manufactured product. Even though it was called a service. I wonder whether we should stop using the word services. We start talking about the creative industries and the accountancy profession and legal. And actually that might be a way to become at peace with what we're fantastic at. We should re-brand ourselves out of self-loaning. I think we re-brand. I'm going to try that in my personal life. I'm going to see how it goes. Right, okay. Now the trade-off that we focus on in the book that comes with the service economy is the productivity gaps between places. And so you can't become like Germany geographically if you're a service-led economy and you need to recognise that, largely because the range of places you will have very large productivity are more limited in that world. Henry, given that, being adult about that, where does that take you in terms of an economic strategy? In terms of making sure incomes aren't as unequal? Well, I think it must, to some extent, make it slightly harder. Because there is a tendency to say, be like Germany. And I don't see in what way that that is a helpful benchmark. But something that we do argue in the report is being more like France is, they do have a set of specialisms that look like us. So I think it informs the strength of the market forces that we're up against, but I don't think it's manifest destiny that we have the disparities that we do. Can we just make that concrete? There's no reason why loads of our large cities haven't made the transition to post-industrialisation. There are reasons, but it's not inevitable. I think whenever you have an interim report, I think there are reasons. I don't think all of our second cities need to be more. I think we can do it. I don't think that we're going to get a global city in each region, I have to say. The other thing I would say, though, is to pick up on something Francis said. If you were asking me a question about incomes, yes, the spatial disparities matter somewhat, but nowhere near as much with an area of individual inequality. So for me, actually, I actually think if we want to be serious about individual inequality, there are just far more important things than the spatial productivity disparities that we face. Very good. Now, Martin, everyone is called for business investment. You set out that we could fund that without having to just borrow squillions from abroad by higher pension savings. The trade-off there is more investment, higher savings, but lower consumption for quite some time to finance it. It's not a free lunch. Is that it? Well, that's obvious. Well... That's the kind of... The perils of arithmetic. I suppose the... If we have a very large number of very attractive investment opportunities in this country, and we are living... continue to live in a world in which, in addition, interest rates are very low, it is possible to imagine further increases in direct investment and borrowing, but we are sort of already fairly way out there among developed countries in this... So, if we're talking about raising the gross investment rate in this country by several percentage points of GDP, which is, I think, what we would need to do to make any appreciable difference, I don't see how we can do that without funding at least a significant part of that internally, and that does indeed imply a shift from our high consumption, low savings model, which is obviously a very striking characteristic. In aggregate, our private sector saves rather little compared with... And I'm talking about corporate and household savings compared with the Europeans. And that's quite a big issue in my view, and if we don't address that, we don't really have much to add growth. Could I just comment very, very briefly on this fascinating set of issues? I suppose, like many economists, I've tended to compartmentalise the growth challenge from the distributional challenge, because it's really hard to do them both together unless you happen to be in that stage of development where labour-intensive growth is natural. And it's really hard without having a commitment to a significantly more funded tax distribution system than we've ever been prepared to contemplate. And we've been, of course, spectacularly dishonest about that. So I do think that we have to separate these to some degree, and that fits in with the second point of lots of others. I'm with the view that the argument we need to make for levelling up, improving average productivity in second-tier cities relative to London is a growth one, and if you can't make that, I wouldn't bother. Otherwise, just make London and, you know, not just to get rid of all the green belt and the like, and the rest of it just have a proper city here of about 40 million people, like Tokyo region. We can do that, and everybody else, the rest of the country would be nice and beautiful and green. But that will be the efficient thing to do, and I don't want to suggest that, but growth is what we have to go for here and not regard that as a distributional issue. And final twist, I'm very sorry, but I have this theory which I've never written, and since France is here, I'm going to try it. It does seem to me, we all dance around this, that all the sectors we think we have comparative advantage in, and we probably do, have a key characteristic, and I want somebody to prove that they don't involve cross-class cooperation. And that, I'm the child of foreigners, I've always felt class is the devil here. Why can the Germans do their manufacturing we guard? Because basically people in German businesses, major manufacturing business, trust one another. Really trust one another, and they don't hear. Right. Worth pointing out that Ernie Bevan, a British trade unionist, was at least co-architect of that system. But he never managed to create it here. He never tried. Well that seemed more interesting. That's more interesting because they like the class war. Right, one second, before we get into the class war. We're not doing 1940s class war. That's next week's seminar. There's a specialist podcast of that kind of stuff. I'm all for an argument, just not about the 1940s. I want to bring up a question for Francis. You can take this one. You can use a class war answer if you must. If I can make the IT work. Which is basically, I'll read it out. Toby asks, what are the impediments to the kind of social partnership you two massive lefty hippies are advocating? And if the government won't let you do it, why don't you just get on with it anyway? Is there a slightly provocative question? Francis, why haven't we done it? I think in many ways through the pandemic we did. And that meant we didn't always agree by any stretch, but we disagreed well. And where we did agree, I think it packed a powerful punch with a government that was frankly, if I'm honest, I think was desperate for ideas and solutions. So there was an openness that's perhaps certainly in our case isn't there now. But what are the impediments? I mean, I think where you see it's done successfully, there is proper architecture. Exactly. Government does have convening power. And whilst I think there is a lot that we can get on with and do get on with and do agree on, the voluntary approach is never going to cut it for us because there are always some guys who are looking to undercut the decent guys. So you either have a level playing field, for example sexual fair pay agreements that cover whole sectors, starting we've suggested with social care so that we could begin to raise that level playing field together, or you don't. Right. So let's move on slightly more directly into the inequality space. So one of the arguments in the paper is that when people talk about hardheadedness, they find that language easier in the growth space. And the argument is they should apply it to the same way to the inequality space because basically people talk a decent game about doing something about inequality, but we haven't done a very good job. Firms say they're going to do their ESG stuff. It doesn't matter much difference while they're still giving their workers good notice periods for their shifts as Dan illustrated powerfully earlier. We haven't made big progress, but we were discussing in the first session on the gap between the middle and the bottom in terms of hourly earnings, but not enough in terms of weekly pay at the bottom, and we haven't done much about, particularly amongst men, the top basically running away. So Firms says what does getting serious on inequality look like? Not all of it, I don't do the whole answer. That was a stupid question. Give us something that would be serious. I mean I find it fascinating the way that the middle and low income workers are being forced together, and I think we're seeing that played out actually in some of the industrial relations that we're witnessing currently. And some of the gender aspects of that, by the way, because despite sometimes the media coverage, your average striker in Britain today is a middle-aged woman, which again doesn't always come through. But clearly we've had this problem of rich men at the top to put it crudely, breaking away, and distorting even our averages. When we talk about averages, it does now make a difference what's happening at the top. So that's where I come back to the issue of power, because I think that does matter and doesn't get talked about enough. There are structural things we need to change. There are structural proposals we're making in terms of the welfare state, the labour market and so on. But there's also an issue about whose voice gets heard. But a less charitable way of putting it is that we've had an investment strike for many, many years in this country that's done far more damage, frankly, than even the most right-wing newspaper would try to describe about any workers' strike. And that's where I also come back to corporate governance. It's not a very glamorous subject always, but I actually think who writes the rules and what those rules say is really, really important for how companies behave. Let's bring up a poll question while people in the room want to ask questions, get their hands up and we can get some microphones to you. So here's the question, I'll ask the panel as we go. Right, so we've talked about what a plausible approach to this might look like in much more detail in the book, read it. Do we as a country actually want to do it or are we basically fine with the status quo? And because we're reasonable people, we provide another option which is if we get totally depressive, then maybe we would be in the future basically. And by that we meet, on this question we really mean, the book basically says there are plausible strategies, they're not easy. It's politically difficult, it's substantially difficult, it involves more change, there's some losers. So Carol, do we want to do it or not while everyone votes and people get their hands up in the room and you want to ask a question? Yes, no or not right now? I don't mean today, this decade, this decade. Not right now, certainly not a yes, it's between the no and not right now, but we've got to change that. So not right now, but we have to change it. Okay, Martin. Excellent. Francis. People do yes. Henry. I'm going not right now. I'm going just to perk everyone up a little bit. Obviously, as Martin was saying, we've got like a slightly silly tax cut discussion at the moment which is the silver bullet for every economic problem. What these people are doing is people saying the status quo isn't okay about our government they've been in. The opposition is saying the status quo is not okay, Rachel Reeves is coming in a bit, just a little guess, I think she's going to say the status quo is not okay. The people that want to be the privateers are saying that. Anyway, what do I know? You're voting on that, let's get some questions, let's take a three question. So there's two here, a lot of men. Isn't there a connection between the invisible levels of investment by industry and the retreat of pension funds and insurance companies from investing in industry. You've got four trillions sitting around in these things doing to first approximation nothing and if something could be done to get them investing into industry in general and high growth industry in particular wouldn't that make a big difference to both sides of the equation, the savings and the investment. You're going to make Martin very happy. John McDonough from Recro Consulting which is an employability and recruitment solutions business. I want to join a couple of dots up and give you a silver bullet with a question and talking about the hope and also the cause and resolution which I think Linda talked about earlier. I think it was 2010 when Islington Council did the fairness commission and they had a book called the spirit level in terms of why equality matters to everybody which has got graphs quite like you guys and Islington tried but then it got difficult and nothing really happened and I think whether we like it or not the public sector owns a lot of this but they get stuck and as soon as it gets difficult the navel becomes very interesting and they're just going to denial or whatever else and we've got to change that thinking and behaviour but who leads that because Whitehall is full of resistance PM short side at the moment if we think a minister's going to come in and sort that out the corner Shift the intent Who presses go Shift the intent and get action Very good and there's a question just here I'm going to take a question from over there as well I'll just go round to the side because I'd like to take one Life's not about being first Rachel, let's have the question It's about being in the middle, right? So just a quick question about one thing that you mentioned and one thing that you didn't both of which actually this government has talked about so the first is devolution you talked a lot about policy churn we're a very centralised country with a very centralised department running that centralised country how much of a difference does it make and the one you didn't seem to mention which I'm a little surprised given David is in the room so devolution which if you look at the last 40-50 years it feels like the economy has changed quite a lot because stuff got invented we do reasonably well at this why wasn't it on the list Very good Right, let's take those in turn so Martin on financing of that investment let's combine that question with one from Pauline online which basically says Martin could you please develop on why you believe there shouldn't be our debt reliance there are so many dimensions of this so I just can't possibly get through in the time available so let me focus on a distinction in relationship to pension funds between what I might think of as the stock problem and the flow problem the we have decided essentially to impose a set of regulations which has led to the characteristic of it is that corporations had to guarantee effectively their ability to pay pensions in all circumstances and given the nature of the promise that couldn't be done it can't be done anyway but the only plausible way you can do that close to guarantee is to go into bonds and once you're in that world all pension promises become unaffordable you therefore close your pensions they become closed-end funds because exactly I will go into the nature of this mistake I think it's a very profound mistake and most of the financial economics which is I think a very serious set of errors but we can't go into that now so anyway the upshot is we close them down from a flow point of view savings don't go through them anymore because there are no new contributions and they have a stock of assets which goes essentially into the UK government's bond market and that's the end of the pension industry and we can't change that without completely and utterly changing all our regulations completely totally now that's that's ancient history I think I don't think we can reverse this so we've now gone into these defined contribution systems the problem is they don't save enough and they're individualised therefore no large funds able to make large strategic bets of the diet for instance the Canadians and the Dutch and others which I think solves quite a number of quite important collective action problems but I won't go into that so in essence what I'm saying is we have to rethink again Adair did quite a nice job 20 years ago but we have to rethink again what we want from our long-time saving system it's unbelievably important and I think we've ossified our capital markets as a by-product of these very serious policy mistakes which by the way when they happen nobody was aware or thought about the consequences and go back about 30 years why didn't I mention R&D but it was one of my points but Torsen already thought I was talking too long I did so that's rough up I was not too long just too long quickly Carolyn who needs to do the doing so like Whitehall is not going to sort it out we've got some politician pessimism where's the doing going to happen I think the business community can do quite a lot of doing but frankly we've got to create the felt need for change and that's a lot of what this is about I think this is a moment in time where we've got to say enough is enough and that's how we can get the change on the R&D point I think it's actually an example of where you have got quite a lot of cross party consensus now about public sector investment it's about how you get the private sector to crowd in now Francis last one to you centralisation is that the problem maybe all the policy chair people have talked about here how much is the centralisation means there's not enough grit in the oyster to stopping people moving things 100 degrees at a time you can't do that 90 degrees I'm all in favour of of that however I have to say politically I think we're at a point where somebody somewhere is going to have to start thinking about what binds the UK together I've always felt there was a risk following Brexit that this great victory for the UK could end up rebranding us to EW England and Wales and it's just a matter of time but that kind of appetite for more local involvement for people to listen to be able to get a grip on what needs to be done I can seal that and have a lot of sympathy for it just one point on R&D if we are in this predominantly service economy can we please remember that a lot of this comes back to people and when you've got an HE sector that is currently engaged in real conflict because of pay for sure but also pensions and insecure contracts that damages us all all the academics are nodding give us our pensions they're saying I'm going to wrap us up with the results of that poll from everybody and then we're going to hear how the Labour party is going to solve all of it in a second you're a bunch of pessimists basically thanks a lot of people I think you need to perk up a bit because it's definitely not automatic that countries turn around their stagnation but we should have taken from the back end of Dan's presentation that we need to transform ourselves we just need to start doing a bit better year on it's a hard task it's not a silver bullet it doesn't happen like all in one go but doing a bit better will make a massive difference and particularly make a massive difference to the lower middle income household so perk up everyone and on that note can you thank the panel