 Welcome back. There are some seats towards the front for people who are standing at the back. Well, we are in this session, we're going to try to analyse the key trends through the 1920s, 2020s, 100 years later, 2020s, we're going to do Covid, Brexit, key changes, we want to understand how they're going to affect things. We're of course going to have a discussion of net zero. We may in the background have as well some demographics, can't resist some demographics and perhaps even some technology. We're going to start with a presentation. We're going to hear from Sophie Hale, her principal economist with here at the resolution and also we're going to hear from Anna Valero from the Centre for Economic Performance at our partners at the LSE and we'll then hear from Linda and Nick. Sophie, up to you to set the ball rolling, please. Okay, thank you, David. We're going to talk about the second chapter, which was the Decisive Decade. What is this all about? In the lead up to the financial crisis, we had this period of relative economic stability for many years, often called the Great Moderation. In the years since, we've really started to see this economic disruption that you can see a bit in this chart. The 2020s is certainly going to be a decade of change. As David says, we have the long-lasting changes that we've already been experiencing, so demographic change and technology change, but we now have these three additional drivers of change this decade, so Brexit and the long-term impacts from that, the COVID-19 global pandemic and the acceleration of the transition to net zero. We're already seeing these impacts affecting the economy at the start of this decade and even a little before, so shortly after voting to leave the EU, we saw the pound depreciation feeding into inflation and causing a cost of living increase of around 870 pounds per household before we even formally left the EU. We saw increased economic uncertainty affecting investment. Then before we even finalised the preparations to leave the EU, the COVID-19 pandemic hit. The pandemic brought with it some of the largest volatility and output that we've seen in generations. Now, what we're seeing is the recovery is bringing a similar massive volatility in prices that we've seen this year. You can see that in this chart here. The start of this decade has brought with it exceptional by recent standards, swings in GDP and inflation. There is more change still to come, so in addition to that volatile start to the decade that we've seen, the long-term impacts of the Brexit shock and the COVID-19 pandemic are still going to unfold throughout this decade, and that's going to be alongside that acceleration of the net zero transition that we'll be seeing. We need to understand how these forces are going to reshape the context for which we're setting this new economic strategy for the UK. We can't just assume that these changes are going to look like the changes that we're used to and the changes that we've seen in the past. For example, the 70s and 80s in the UK where we saw this big industrial change driving really big job losses and highly geographically concentrated economic pain, it's not necessarily going to be a good guide for the kind of change that we're going to see this decade. Instead, what we need to do is look at each of these shocks in turn and really evaluate what the impact is going to be. We'll talk through these in turn, so me and Anna will kind of take them in turn, but what we'll find overall is that while they will bring significant disruption to some sectors and to the workers and firms within them, they're not going to create this kind of radical reset of the economy that some might kind of be expecting and nor the kind of mass job losses that some have predicted. Instead, what is possible is that they will instead just kind of reinforce the risks of stagnation and therefore the importance of kind of addressing this with a kind of new approach for the economy. So the first step that we'll talk about is Brexit. So the UK kind of formally left the EU in the beginning of 2021 and started trading with the EU under the trade and cooperation agreement, but the economic impact kind of predated that and we've already talked a little bit about how inflation and the cost of living and investment were affected sort of before the UK even formally left the EU, but what wasn't affected before then was trade and what we did expect to see is the UK becoming less open and we have seen that now since we've kind of left the EU, but we haven't seen it in the way that we expected to, so what was quite widely expected was we would see quite a sharp decline in relative trade between the UK and EU sort of relative to UK non-EU trade and while we saw that a little bit in imports immediately after we left the EU we haven't really seen it for UK exports at all, so the UK share, the share of UK exports going to the EU is actually kind of increased compared to sort of pre-pandemic, but before we celebrate this as a sort of success and assume that this means that our exports are kind of more resilient than we thought to these kind of trade barriers, we should note that we have seen this big decline in UK openness and competitiveness, but just in a more kind of generalised way. Britain is the only large European country that has seen a decline in openness in 2021, so while the kind of global trade picture was recovering from the global pandemic and in addition when we compare to sort of pre-pandemic, so compared 2019 to 2021 we see that trade as a share of GDP has fallen by eight percentage points for the UK and that's sort of four times the four that we've seen in France, which is the country with the most similar sort of trading profile to the UK. The UK has also lost in market share amongst three of its kind of biggest non-EU trading partners, so the US, Canada and Japan and it's important to note that this isn't just a kind of unfavourable change in sort of import demand caused by COVID-19, so you know the shift that we've seen towards kind of durable imports, the UK has been less competitive like a cross goods product when you have a look in more detail, but there's more change to come and we expect that what Brexit will mean is that some pretty big swings in output and some potentially pretty painful shocks for some sectors and for the workers in those sectors and we have a look in this chart, fishing is kind of one example where we can see output declining by as much as 30% relative to if we'd stayed in the EU, but we also see sectors that are kind of set to grow on the other side again relative to the baseline, so for example agriculture in the absence of kind of other policy changes that are going on this decade, you would expect to see quite a kind of positive boost from from Brexit. Almost all of our professional services, so the kind of strengths that we have are set to lose out from these kind of above average barriers that are going to go in, go on services sectors because of the deal that we have agreed with the EU and the manufacturing input is quite polarised, so that's the kind of pink kind of bars that you can see in the chart and they're both kind of on the side where they're declining as well as growing and what this means is that the overall kind of net impact on the manufacturing industry will be quite small, so despite these relatively large sort of individual sectoral shocks, the overall industrial structure is going to remain pretty much unchanged, so professional services will shrink a little bit around 0.3% points of kind of its contribution to gross output, but the overall economy is going to look very much like it does now, so we're still going to be highly services dominated, highly professional services dominated and our manufacturing sector will still contribute less to the economy than it does say for France's economy and this means that we shouldn't be expecting this kind of Brexit driven industrial change to be fixing you know kind of the problems such as regional inequality in the UK. What's more as we've kind of discussed some the overall impact on manufacturing is expected to be quite small, but when we kind of look into that we see that this shifts our kind of favouring less productive sectors and that's going to kind of provide a further downward pressure on our wages and so some had hoped that this kind of manufacturing revival through Brexit could help boost productivity and it's important to kind of flag that first of all you know our services strengths is not the root of our kind of weakness in our productivity growth and we kind of talk about that in the book, but more importantly the sectors that will gain within manufacturing tend to be those that are lower productivity, so if we look here you can see one of the sectors the biggest sector set to gain is kind of food manufacturing which is quite low productivity in 2019 whereas the chemical sector and electronics are set to decline as a result of Brexit relative to the baseline which are kind of much higher productivity manufacturing sectors and in fact when we look at the weighted average productivity of sectors that are growing that is 37 pounds per hour in 2019 productivity compared to 47 pounds an hour for the sectors that are shrinking and as I said this along with the kind of falls in output that we're seeing as a result of the Brexit shock are meaning that real wages are set to be 1.8% lower each year than they would have been in the absence of this shock and that's equivalent to around 470 pounds per worker per year in the long run and so to summarise the kind of Brexit story so it has brought about change and we have seen this kind of lower openness lower competitiveness of UK exports and but this hasn't materialised in the way that we expected so we haven't seen that relative decline in EU trade and we've seen some really big sectoral adjustments but it won't close the regional divides or reinvigorate manufacturing in the way that some have hoped and instead the long lasting impact is going to be weaker productivity and real wage growth so I'm going to cover COVID-19 as well so we've also taught shown in the kind of early charts the kind of massive volatility that this has created in terms of output and in terms of inflation and so what this means is that you know COVID is very much still with us but many of the shifts the economic shifts have kind of faded at the same you know some of it so some of the long-term economic impacts that we expected as a result of this will be smaller and more diffuse than we may have expected so this chart kind of shows one of those it looks at retail sales and we see kind of online sales online retail sales kind of boosted were boosted in the pandemic so they rose from 20% pre pandemic to around 38% in the middle of the pandemic but they have since fallen back so they're now just around 4 percentage points higher than the pre crisis trend and where this it has remained elevated this is largely because of kind of elevated online food shopping rather than the kind of border online retail and as I said this means that you know some of the economic impacts that we expected from these kind of shifts that we saw during the pandemic may not be as kind of long-lasting or transformative as we expected and some have also seen silver linings in the kind of changing and working practices that took place during the pandemic so hoping that remote working could provide answers to the UK's kind of productivity challenges and solve kind of regional disparities in the UK and we argue that this is unlikely to be the case so working from home has persisted for higher earners but the evidence suggests that what will be much more material impacts will be on wellbeing rather than on productivity in the long run from this kind of increase in in home working and in terms of regional inequalities we also expect this to be quite limited and this is because hybrid working is probably most likely to be the sort of dominant model for sort of professionals and while that allows for you know some longer commutes for workers it's not going to allow a sort of mass migration of workers to sort of live in regions different from from where their employers are if we look at this chart what we see is that actually it shows that we really do have a lack of correlation between changes in in kind of workplace mobility so the amount of travel to workplace and changes in where work is actually being done across regions the only kind of clear pattern that we do see when we look at the changes is in London so in London we're seeing a shift of workers from from inner London regions to outer London regions but even there there's little sign that low earners are benefiting from these workers kind of spending money locally as a result of this home working so Haringey for example is amongst the regions that has been most worst affected by labour market okay so to summarise COVID-19 has caused huge changes to our economy and our lives and we've kind of seen that in those in those kind of really volatile economic swings and we're still living through a kind of cost of living crisis that is at least partly related to the recovery from the pandemic but many of the economic shifts in consumption and work have unwound as we've shown instead the pandemic has provided new headwinds to output with business investment remaining 9% below its pre-pandemic level even as output has kind of largely recovered and 430,000 fewer people being in work and what's more there are kind of longer-term drags on productivity as well from COVID-19 as a result of the disruption that we've seen to education so which is particularly and that has been particularly badly affecting pupils from disadvantaged backgrounds great so I'll pass over to Anna to talk about thank you very much Sophie straight over to Anna Valera Anna thanks thank you Sophie so talking about the net zero transition it's clear that thinking about this as a source of change is quite distinct from the shocks of Brexit and COVID that we've seen which of course continue to have ramifications in the economy this represents a gradual and necessary transition to a more sustainable and resilient economic model both in the UK and internationally a key feature of this is increased investment innovation and change across the economy and its systems and a lot of action is required this decade to keep on track with our commitments this investment and change is going to bring with it both opportunities and disruption for workers the firms they work in and for households and these need to be understood talking first about workers if we look at the labour market the likely labour market impacts of net zero we had some discussion in the previous session in our analysis we argue that net zero is most likely to change jobs rather than destroy them this change is going to mean adopting new technologies and processes or changing tasks within sectors creating some new roles and changing the way certain jobs are done there will of course be challenges for those working in what we classify as currently brown jobs and there are many different ways to make these classifications the way we do it is we take the occupations that are particularly prevalent in the most emissions intense industries where change is therefore particularly urgent this chart here shows that set of jobs and they're coloured in brown in general these occupations haven't been growing too much in the past decade up to 2019 as you can see on the vertical axis there and also they tend to be relatively lower wage as you can see there on the horizontal axis but in general quite few of them are likely to be completely phased out in fact a key example the biggest bubble you can see there is LGV drivers large goods vehicles drivers and we don't expect these jobs to disappear even as the vehicles they use become greener so in total the jobs that we identified in this way total about 4% of UK employment there's also as yet no agreed upon definition of classifying green jobs and different methods are useful in different ways and different purposes what we do here is again we take an occupational approach and we identify green jobs as being those are already involved green tasks to a significant extent we consider with our methodology these account for about 13% of jobs in the UK in 2019 so far we found that these jobs tend to be more highly paid you can see they're kind of further along to the right there and they tend to be held by more highly educated workers versus their non-green counterparts particularly also versus brown jobs they've also been growing as a share of employment and in more detailed analysis we show that there appears to be a wage premium to such jobs even after you control the other factors like education looking ahead as was discussed earlier too we know a lot of new green jobs will need to be created to enable the transition so looking at the past might not be the best guide to the future and it might be that many of those new jobs actually require technical skills that can be delivered by on the job training or by the further education system examples are offshore wind where we'll need more engineers and technicians there as well heat pump insulation and energy efficiency a smooth transition in labour markers is going to require the right skills policies to be in place support for transitioning workers that might find the transition particularly difficult and making sure that the opportunities that arise are accessible to all workers talking about opportunities we've done also a lot of work thinking about the opportunities for firms to innovate and grow in the net zero transition and we find that there is evidence that this transition will bring economic opportunities for the UK we take a hard headed look at the UK strengths and capabilities in clean technologies goods and services using a range of data sets and we find that there is evidence of such opportunities we're not yet a clean tech superpower but there are strengths we can build on so the bubbles in this chart represent different technology categories the bubbles in the top right quadrant are areas where we are specialized this like a measure of revealed comparative advantage and trade we have a higher share of our patenting in these technologies versus the global share and where global patenting has been growing so that's shown on the x axis there clean technologies there are highlighted that's in that top right hand quadrant and it's a mid-sized category overall as you can see globally that's shown by the bubble size but we expect further growth here clearly given enhanced commitments globally so within clean technologies there are some areas where we're particularly specialized like offshore wind carbon capture usage and storage and tidal energy too when we look at our patenting and others where we're less specialized overall for example clean cars there as an aggregate category we're not specialized in but we argue that if we invest now and build on the UK's innovative strengths we are an innovative economy with excellence in our research system we can generate opportunities to access these growing global markets and national markets together with improved resource efficiency of course and resilience across the economy and we see the urgency of that right now however important to bear in mind when we're thinking about our economic strategy such opportunities are not going to be seized in the UK without concerted and coordinated efforts to do so and this extends beyond environmental policies to growth policies innovation policies skills policies too moreover new investments in innovation and other long-term assets can of course take time to generate returns so even if we had all the right policies in place this route alone would be unlikely to provide an immediate fix to our UK the UK's productivity problems finally looking at households households are going to feel the change due to net zero this decade including in how we travel and how we heat our homes given the rapidly falling costs and rapid take up of electric vehicles and of course we expect a new a kind of second hand market to arise in the coming years we consider that the key challenge for households is going to be in decarbonising homes this chart from the ccc shows the rapid acceleration of investment that's going to be required in residential buildings and it's forecast to peak at 14 billion in 2028 energy efficiency here poses a particular risk we know that insulation installations have stalled since 2013 and the government's net zero strategy suggests we'll be upgrading a million homes per year by 2030 if we remain on track for this the policy challenge is going to be to ensure that the costs are fairly borne for example 72% of low-income homeowners are living in poorly insulated homes and addressing this is likely to cost almost as much as their average disposable income so questions in terms of how these investments are going to be paid how the costs and benefits of the transition can be managed fairly need to be urgently addressed and this is not only to achieve the transition but to ensure that public support is maintained so in summary net zero brings opportunities as well as change for firms and workers this decade there's going to be significant investment and savings which will follow later so there are inter temporal issues here and there are trade-offs in terms of how we can enable that investment to happen the concrete questions of how we're going to pay for this should receive much more attention so bringing together the kind of the session the the different sources of change we've been talking about these three large but very different shocks and transitions mean we should expect more job churn in the 2020s than say in the 2010s with both voluntary and involuntary job moves increasing but the big picture actually shown here is that change has been slowing down rather than speeding up in the uk so between 2011 and 2021 which has shown in kind of the last points there um which showed decade change um the reallocation of labour between sexes sectors was equivalent to 7% of total employment compared to 20% experience in the 1980s as labour market change often happens through people entering and leaving the labour market rather than through occupational or sectoral change demographic shifts this decade are also likely to play a role in driving economic change so over the next decade workforce exits and entrants are set to rise and this might offer a temporary boost in terms of labour market mobility so to kind of summarize on change in the 20s the 2020s will be a decisive decade of change and this is going to be brought about by brexit COVID-19 and the transition to net zero these will bring significant disruption for some firms workers and consumers but not the radical reset for our economy perhaps or large job losses many have predicted or when we're looking at our our past say in the 1980s although the scale of change the labour market will not be transformative changes are likely to add headwinds while already weak income growth particularly in the short term so rather than solving our stagnation challenges these changes particularly if we're not dealing with them properly are likely to risk reinforcing our stagnation in the short term so we kind of conclude that there aren't significant silver linings or silver bullets when we're thinking about these shocks and transitions this decade rather these shocks and transitions represent the context within which our urgently needed new economic strategy must be framed thank you thank you very much Anna and Sophie and that that chart towards the end showing the decline in job moves from one sector to another is one of the key pieces of evidence about why we're talking about a stagnation nation despite all this change going on some of the economic fundamentals it really seems to be a story of less change now we're now going to hear from two fantastic commentators and by the way if you do have questions and comments do go on to Slido and we will come to them in a moment but first let's hear from Linda you and thank you so much for joining us Linda your observations on what you've heard thank you David um just firstly great job by both Sophie and Anna and uh and it is a terrific report I do recommend um taking um a read of it I'm not going to give you specific page numbers I know Torsten's looking for that but really well done to the resolution foundation and to CEP um and of course in that field for supporting it it is absolutely critical um if you want to know how to solve economic issues you need to know you need to be very clear about the causes and I think that's where this interim report is very strong it's like going to the doctor if you don't know what's wrong with you they can't really prescribe um how to fix it so I was going to spend my few moments drawing out a few points um that um hopefully could point us to some I suppose some further thinking about uh what what can be done uh given the the the various causes um that have been a stress and of course what we've heard is that um the three big trends of this decade are only going to reinforce the long term issues um of stagnation which are driving stagnation so I'm going to start with um inequality I was fascinated by one of the surveys um that people are most concerned about it's inequality it's place and then income and wealth so I think this points to um already some very interesting potential strategies around that so the report focuses on if you to address growth and inequality um if the UK were to raise and equalize incomes in line with five similar countries that would boost incomes in the lowest quintile the bottom 20 percent of the population by over 40 percent um while the top the top 20 percent um actually are not worse off they might even be slightly better off so I'm not going to use the cake analogy because no one likes everyone loves bake off but no one likes cake analogies the pie the pie growing larger but redistributing the pie seems to be um achievable through essentially catch up growth so what do I mean by that I think the appeal of what um this report is pointing to is we normally think of advanced economies growing by growing the pie pushing out the technology frontier innovating the solo paradox why are we surrounded by the computer why is the computer age everywhere except in the productivity data um but the UK because of the context of inequality has the potential to catch up by equalizing incomes um across um its income distribution and across its regions and that is that is doable um you're not looking for um you know flying cars isn't that what back to the future told us we would have by now you're looking to increase um incomes for those people who very much um you know needed and the services economy is just worth pointing out is intangible it's not as rooted in place as manufacturing so of course the report points out the UK second biggest services exporter in the world we've done that despite the fact the global system isn't actually very open to services I do wonder if that's also part of the brexit issue which is services liberalization one of the four freedoms isn't as open in the EU single market as that term suggests but it what this does suggest is the UK has real strengths here and the problem of moving into lower end manufacturing that is a massive problem so services value added is about 50% of exports of goods embodied in the exports of goods so the service application and manufacturing recognizing that by improving services which can be across different places but doesn't mean you exclude manufacturing I think is also something um which is worth focusing on to address one of the drivers mitigate one of the drivers and there's three areas I'm just going to touch on and then um and then pause which is this this came out very strongly in the report that if you wanted this to be the decisive decade three different things need to be focused on as solutions low investment people and then play so quickly on each of these the UK does have very low private investment relative to the g7 business investment 10% of GDP versus 13% so the question is why is business investment so low there was a recent survey of European firms that said there were two reasons more than half the firms thought that they're going to have to transform because digitalization is here but the two reasons were uncertainty and skills so firms are not investing because of uncertainty so for instance to give an example um if you want more electric vehicles you need to have charging points you can't have charging points unless you have planning to put the charging points into the petrol stations a private car company can put in the charging points if they actually have the regulations this is going into mixed area to support um that to support that investment that's called crowding in so to me the questions you know around how you incentivize private investment um how do you make concrete esg commitments how do you think about targeting and those two areas um uncertainty and skills seems very important that brings me to the second point skills people researched by Henry overman um shows that people is the most important part of making local development work so in terms of participation and mobility um I think those are in the report and very much are worth stressing um but I think the issue that I would pull out is um well you don't want is to move backwards so um labour people is not just about their skills it's actually just about their it's about quantity you know it's growing uh you know so the fact that we've had four hundred thirty thousand people um come out of the labour force labour force participation rates fall since the pandemic is a massive challenge in the us there's a long-standing challenge of declining labour force participation by working age men so we cannot if you know this is one of the effects of the pandemic we need to make sure you're still getting people um supporting the back-into-work and then just finally place so the leveling up white paper um I did a recent event with Andy Heldang so it's very much front of mind um this as I've already said the issue is actually to raise human capital and agency that's what raises returns to physical and digital investment you need both but it is places you're going to get the sense minutious right all three of these things are actually around people and around skills and that brings me to the challenge how do you invest in people this is one of the this is one of the long-standing issues how do you incentivize private investment um how do you get fiscal devolution to allow places to catch up how do you prevent drops in the extensive margin with declining labour force participation I hope these are the things we'll see in the next phase of this report this is the interim report because I think policies which look at these very challenging issues um are very much needed um dare I say it's a politically opportun time to have big ideas about policies right now so I think the timing of this report is actually rather good so congratulations David for um the resolution foundation to roll it and I'll pass there thank you very much yep and you set the challenge for the latter half of the inquiry coming up with those policy ideas and I'm sure in the course of today we're going to get some great suggestions well probably the biggest of the changes that we're analyzing in this session is the move to net zero and we're so lucky to have with us Nick Stern who is of course a professor at the LSE and one of our commissioners and who better to talk about net zero nick over to you thank you thank you very much um I wanted to like Linda and and the earlier panel to welcome enormously the report um the putting together in such a clear and strong way uh gross productivity together with uh income wealth distribution is fundamental and very well done and then um Sophie digging into the um uh the causes and understanding some of the uh underlying features that are driving all this and then Anna's uh very thoughtful um introduction of the net zero it's it's all been tremendous I want to focus on investment and building the sustainable resilient and inclusive economy including of course the transition to net zero but investment is at the heart of that whole transition investment is at the heart of productivity as others have rightly emphasized very well so the next question and I'll build on what Linda has said is how does that happen what sort of investment how does it happen and how does it get financed the scale and nature of the investment the policies and institutions uh it that provide the context and the potential driving forces to translate opportunities into programs and finally the finance so it's these three parts now let me begin with the scale and nature of the investment it's not any old investment we have a clear program associated with the transition to net zero associated with building a sustainable resilient and inclusive economy particularly the energy transition and transport and if you look at those and this is what we did for the Carbys bay g7 paper which we did at the request of the then prime minister it's appears also the current prime minister the um we came up with numbers around two three percent of gdp others have come at air energy transition commission come up with similar kinds of numbers so we can understand the scale of investment and we can understand um what sort of investment and of course if we get it right it's a dynamic cleaner resource efficient healthy economy that we get as a result of all these things actually not so long ago maybe 20 years ago we were two or three percentage points of GDP higher on investment than now that's not so hard and the world macro has planned savings in excess of planned investment that's why interest rates are on the floor or negative you know but obviously not for all borrowers but for many borrowers and the answer to that is not to slash planned saving it is to increase investment so from the point of view of macro and the past and experience it's perfectly possible it's not some way out ask it's something that we can clearly do but how does investment happen and here I want to build on what Linda had to say I sat every Friday morning for six years in the ebrd on the loan committee looking at the investments deciding whether we could put the money behind those investments not all academics take very big investment decisions some do can't do quite a lot but this is something where we have to understand how it actually happens what is looked at what drives it all and I'm going to as I said I'm going to build on what Linda has to say in in the when I was chief comments to our bank in ebrd we looked closely at what we call the investment climate let me look at six things within that quickly the first is clarity on strategy I was a student of the wonderful bob solo and he talked he said in economics he's looking after his graduate students he said you need faith hope and clarity and the greatest of all these is clarity that is fundamental for the whole investment process as as linda just quite rightly emphasized it means not flip-flopping all over the place on policies um a very powerful letter from today from amazon and unilever coca cola and and Lloyd's bank and some others about the importance of being clear and strong on the road to net zero you really undermine investment if you flip-flop around all over the place the second thing that people look for is a functioning infrastructure you've got to be able to move things around and communicate in an efficient way the third thing that people look at is the ability to get things done and solve problems and actually not be persecuted I was with a in a seminar with prime minister Modi at the end of last week in deli and he expressed it very strongly and clearly in terms of governance the ability to get things done without being quotes interfered with the my close friend and colleague and co-chair of the lse growth commission tim besley has emphasized the importance of institutions in all this it's not simply getting the right policy signals of course it is that but it's also the institutional structures that allow you to solve your problems it's the workforce of course and I would not want to discriminate too much across these four first things that I've indicated it's a pleasant place to be and pleasant place to educate your children so many things are mobile you know capital and labour and technology why does something happen in a particular place lots of good economic geography on all this why does that happen in a particular place well part of it because it's a pleasant place to be on the kinds of dimensions I've just I've just described including the bridge museum and all the other stuff as well and finally in deliberately sixth is tax policy and it's astonishing how much of the investment story being discussed in this very peculiar conversation of the last few last few days thinks that investments solely about taxation it matters but it's down the bottom of of that list finally in that investment story and I'll be very brief on that zero is the finance I've already indicated that global macro finance looks quite strong the Glasgow financial alliance on net zero had now something like 160 trillion of dollars under management declared for net zero roughly half of that whole sector so it's but it's all dressed up with nowhere to go so how do you create somewhere to go it's through these kinds of six areas that I described which allow you to transform the wonderful investment opportunities into real feasible programmes so that is is fundamental but you also have to work hard on risk it's not true that those sums of money will go anywhere under any circumstance it depends on risk and there's some parts of risk that you can't get rid of and you've got to have mechanisms for assessing reducing sharing and managing risk that's why in many places development banking is so important and for very good reason we instituted the UK infrastructure bank the decisive decade and let me say just a few words if I've got what two minutes left um the this is a decisive decade above all because of climate change the world's economy will probably create in this next 15 or 20 years at least as much infrastructure as we already have it'll double in 15 or 20 years particularly in emerging markets but across the world if that extra infrastructure looks anything like the one we have say goodbye to three degrees let alone well below two degrees and that matters like anything you haven't been at three degrees for three million years homo sapiens maybe 300 000 at that time sea levels 10 to 20 meters higher than now even at two some degrees you'd probably get hundreds of millions of people having to move and those that didn't move of course their lives would be at risk with a big risk of conflict please don't trivialize this please don't say we can kick down kick the can down the road please say oh well net zero 2050 you know this is the cumulative emissions between now and 2050 this we are in a real hurry and if you have new scientific results which counteract that publish them quickly and you will be very famous this is a real hurry this is the most important sense in which is this is the decisive decade the uk is a real leader will we grow faster as a result of all this well if we kick up investment that will be a powerful contribution but there's more than that the induced technical progress is coming through very fast we're in a shimpertarian era and you're seeing so much of the discovery in these areas this is all about resource efficiency resource efficiency is productivity using something twice three times four times is productivity and remember health we killed in this country and it's worse elsewhere but it's bad enough here we kill over 30 000 people a year from air pollution that's not counting the mainly we just killed about 30 000 one in 2000 people roughly statistical value of a life it's a dodgy concept but i'm just doing orders of magnitude often 100 times GDP per capita roughly varies across country 100 times one over 2000 is one over 20 that alone is five percent of GDP it's huge and that's not counting the mainly now you can fiddle around with those numbers but whichever way you look at it it's big and it matters enormously to productivity GDP and so on but in order to get these great results have a much cleaner healthier safer you know economy you have to invest it doesn't come just by itself and you have to create the things i'm not going to say much about distribution i haven't got the time but please don't interpret that it's my thinking it's not important it's hugely important and there'll be lots to do in about distribution in the transition whole the whole transition story um finally global leadership uh we comparative advantage i won't rehearse again gregory handled that i thought very clearly but this is a world which is fractious and difficult and i spend a lot of time in places and on subjects where it's fractious and difficult if you can get together around development sustainable development and climate you're getting people together around the subject where there's some chance of getting people together if they collaborate on some things on willy on one or two very important things the probability of them getting together on others goes up may not leap up but it goes up our leadership on development and climate has been strong there's danger that it could be undermined that would be very damaging for us and for the world thank you very much let's stick with net zero for a moment and and that challenge that you referred to of the on the distributional side we've had an interesting question where about the politics of net zero being more contested and what effect this might have on the speed of the transition and of course in our report in the interim report we we draw attention to the fact that we're talking about 1.4 trillion of investment but there's going to be 1.1 trillion of savings but meanwhile there is quite a significant upfront investment cost and we worry that that means lower consumption in an environment of low growth and who's going to bear those adjustment costs so yeah why don't you talk a little bit more about that yeah um the most of it investment should be in the private sector there's significant public sector um you know public transport grids and things but most of it will be in the private sector long-term capital is absolutely available for sound long-term investments borrowing particularly private sector borrowing around those activities is very important that's why it's so important to get the whole investment climate right so that that private long-term borrowing can take place I also think that there's a real growth story there and I hope that in the next round we'll dig deeper into that growth story so um in a narrow fixed GDP more investment means less consumption and some of that will be there but I think long-term borrowing for sound long-term projects makes an enormous amount of sense and you know talk to Nigel Wilson who has to run legal in general and take very long-term investment decisions now talk to Larry Fink who runs Black Rock they say this is the big investment opportunity at the 21st century and they're ready to put long-term capital behind it of course you've got to create good long-term prospects and that's where policies and institutions are so important there's a there's a distributional side which is very important around the fact that the cost of capital for poorer people is a lot higher than for richer people and that's why the report quite rightly says we have to dig deeper into the whole story of making our homes much more efficient particularly in the content and switching from you know gas boilers to heat pumps particularly because cost of capital is high for poorer people that's a real distributional challenge similarly you know I I can park my electric vehicle in a drive because I have a drive and I've got a charger in my drive well not everybody has a drive right I've noticed that and if you are in a if you are in a poor part of London or Manchester or wherever you know Newcastle or wherever it might be you know having the means to charge your electric vehicle most electric you know obviously many people buy electric vehicles new most poorer people don't buy new cars you know there's a very important distributional aspects of all that in the transition which we have to take to head on in public policy I think let's hear Linda on this as well because there's a sort of crucial issue here emerging from the report which is that there's the report on these three changes and of course they're very different and the net zero is the most important challenge of the lot it is a bit subdued about certainly in the 2020s to what extent there's a large-scale growth opportunity for net zero it's clearly something that's got to be done but the effects on the labour market and such like the inter-report is actually quite subdued about these and if Linda and we'll then turn to say if you want to comment on that can we should we be a bit more optimistic and see it as more of a growth opportunity? I'd like to think so I think my worry about it is I guess like Nick I go to a lot of global business public various forums and there's always a lot of you know yes yes yes and then you have to go and look at what's been what's been done what the funding that's been allocated and there just does seem to be a number of things which you know I want to believe we're on the cusp because I do think there is a massive opportunity for not just growth but a proving quality of life so long as we're careful about the impact of this kind of technological change on people and wages which comes out very strongly in the report but the transition will be costly it requires funding and changing the way businesses and people work and live but there's no reason why and we can't have an efficient much better economy and society running using green sources of energy um this is a bit of history and then our cause renewables we're doing really well in the late victorian period however the discovery of oil changed all of that in the early 20th century so there's no reason why we so longs were willing to to invest, bear the costs and address the impact while we can't come out the other side um you know in a better in a better society and world and you know learn the lesson of a century ago don't go with the cheapest source of energy which I think we have but it's that motivating the actual investment I think that's going to be you know with the next points are really well made and you know by the way I don't want to be cynical about big public gatherings because that's actually how you create social change right it's called the tipping point enough times when people see there's a consensus it does move it does shift so even though we can all be sceptical go along to these big public forums continue to push and then we could have a tipping point in which case it really does change and I do hope that is the case so anyways that's why we continue to go to these things I guess thanks very much so we missed out on electric cars 100 years ago we're not going to make the same mistake again um just before I I move on let me just bring up the poll question for people on Slido including people in this room on Slido which is asking you to assess the crucial the relative significance of the different trends and in a moment I'm going to ask our panelists to comment on those trends and particularly press them on the something that hasn't happened yet and be interesting to know if there are other big trends and changes that they expect in the 2020s that we've not yet covered but first of all Anna you mean this issue of how big and you've done so much work on this the economic effect of the net zero transition in the 2020s what's your assessment of the opportunity well generally I like to be optimistic about this because my personal view is if we're not optimistic that lessens the chances of having any positive impact and as Linda said we need to create that optimism to actually inspire businesses and people to make changes but of course we have to be realistic um so a lot of investments in innovation and other long-term things whether it's skills or infrastructure can take a while to actually be fully deployed and therefore realizing benefits but having said that there are many areas of technology where we know what we need to do and the solutions exist and we need to improve the deployment across the economy and many of those things are consistent also with more productive processes so even beyond resource efficiency although very interacting with that is this intersection between digital technologies and smart systems and net zero and actually a similar analysis that we did on revealed technological advantage when we when we took the technologies that are kind of registered as being both digital and relevant for net zero we're even more specialized in that and you might expect that because we know we have a lot of kind of digital innovation going on in our country so I think there are existing innovative companies that could be helped to grow you know we know that we're not so good at scale up in the UK so there are existing growth opportunities for those inventing the technologies there are existing deployment opportunities for the solutions where we know already what we need to do but we're just not doing enough of it I would say however you can be optimistic that it's possible but we're clearly in a continued uncertain environment and perhaps now more policy uncertainty given potentially changing a prime minister and we're unsure where the kind of commitments going to be and we also know that there are skills bottlenecks so even when things are you know when there are efforts to do things sometimes we just don't have the skills in place to actually do it and many other things as well in the broader environment which is why I really emphasised that net zero in itself isn't going to solve our problems but embedding it in an actual growth strategy and has high chances of doing so yeah and I asked a senior treasury official after Rich's massive package why it was almost entirely for the costs and helping on the income effect and nothing really about investing in home insulation programmes that's a long-term solution and her explanation was we weren't confident we got the skills people to install the stuff so we could not believe that the money would necessarily be spent which brings out one of the themes in our inquiry that these different challenges hang together and the skills challenge is so important. Sophie I mean there is a slight flavour in this chapter that none of these three changes and necessarily in the 2020s going to have quite as big an impact as some people claim is that a fair summary? I mean I think that is fair particularly in terms of the job losses that some people have been expecting so we're not seeing a brand new completely different version of the UK and I think that's really important when you're thinking about what your economic strategy needs to be it needs to be set for the economy as it looks now and not for some kind of mythical economy that you're expecting to be so a kind of version of Germany or something that you might be hoping to be but it has meant that we have a lot of uncertainty we have you know uncertainty being created by Brexit and from a number of these shocks and we're talking about how important investment is in kind of delivering net zero and in kind of driving productivity for the economy and we know that kind of broad economic uncertainty in the economy is is really damaging for investment and kind of Nick's done has kind of covered that already you know that businesses need certainty they need predictability and they need a clarity of a strategy so that they can can make long-term investment decisions. Good thanks very much now a question from our audience here anybody here wants you to put a question to our panel there's a person there yes yeah well I guess it's a question but perhaps it's a bit of a statement with a bit of bias loaded in there but on that list in advance no well and I wanted to but on that list there you list all those things I'm not sure that's the biggest thing worrying me what the biggest thing worrying me is the capability and competence of the government and the machinery of the state to reorientate itself so that we can deliver the very obvious opportunities that are out there and perhaps and and I don't really know too much about this but the headline for me I was astounded when I heard I think last autumn when Richie Soonak said we spend the same amount on education today as we did 10 or 14 years ago and I'm not saying money is the answer to everything so maybe you would like to comment on that or maybe you just like to say thank you very much I tell you what we'll do right we will comment on it but what we'll do is we'll call up first of all the answers to the poll question let us see how the votes have gone and then I'm going to ask our panellists to comment on the results and yes net zero net zero wins and COVID it seems fascinating COVID how rapidly it's disappearing as a preoccupation um so let's and let's also just this will be I think our final comment to the panellists we've been into around time what about the something that hasn't happened yet that's as well as the classic issues that we have identified tell us if there is something that we should have thought of and haven't uh Anna let's start with you well I mean we have thought about it in the inquiry it's just not on this list but I think technological change because those who are say technological optimist consider that many of this current wave of digital technologies are not yet fully embedded and we you know as Greg said we're not yet fully seeing the impacts on the economy on society on productivity so it might be that as various complementary factors are in place um those technologies are deployed more widely and that could have impacts on work um you know it's hard to look into the future though and actually predict exactly how that would happen but I would say that actually those technologies do interact quite a lot with net zero as well so one example is AI technologies being used to optimise factories and something called digital twin or power plants so there's a lot of potential there many many of these ideas are being developed they're not fully deployed yet Anna and I are technophiles and it's a very important body of opinion and I hope to find some more allies today Sophie um yeah so I mean I probably would have agreed with the crowd that net zero is the biggest one in terms of the something that hasn't happened yet I mean it has already kind of happened so or at least it started to happen so you know Brexit was not the only sort of event that was going in the face of kind of the globalisation that we've seen of decades you know at the same time we had a sort of trade war emerging between the US and China and I think that kind of geopolitical context we don't I mean a little bit with the kind of war in Ukraine but we're not talking about it a lot and you know the kind of breakdown of unilateral activity and countries being able to kind of work together we saw elements of that during the COVID pandemic with kind of export restrictions and other activity and we've seen bits of it as I said with new trade barriers kind of being implemented and that could be something that we see you know trending into this decade countries sort of becoming a bit more domestically focused less internationally focused supply chains changing yeah just a kind of disruption to their kind of global system as we know it yeah and and and let's pick up on that comment and turn to to Linda then Nick that that comment and you could argue that indeed they the unspecified trend is a continuing decline in the capacity of the political systems in major democratic countries to tackle these challenges and of course America is the most vivid example of a blocked system where change has got harder and harder certainly at the federal level but things can get worse across Europe as well and we are kind of assuming that government carries on in and and functions maybe we are seeing long-term trends which make it harder and harder to a diverse country with in the vicious spiral of high inequality and no growth actually to command a majority to get anything serious done so maybe that is our extra challenge but Linda what do you what do you think how would you assess them I'm going to pick technology much as tempting as that was David to go into the politics I mean I think the so one of the lessons from history is it's actually really hard to use technology so I'll just give you an example I mentioned the solar paradox earlier so you know zoom IPO'd in 2019 you know but the technology adoption of zoom that's the change the tech was there it all zoom only works if your clients and your colleagues are willing to do zoom and that's an example of why productivity rose in the last in the last tech boom in the late 1990s CFP rose across the economy because people changed the way in which they work that's what means to embody embed the technology so I think because of the pandemic we have now embedded different ways of working you've seen wholesale change to me that's the key factor which is going to help with the net zero it's going to help because it is an embrace it's it's so obvious but but we just don't do it right that's why I gave the zoom example we could have done it in 2019 but we don't there's a lot of inertia in in work in life and I think that's where I think the something else could be very transformative for the UK economy and yes it will impact the green transition it will impact our trade position after brexit it will impact our ability to to deal with pandemics because a lot of those have been enabled in different ways by technological breakthroughs but not just the breakthroughs it's not the macro inventions that really matter it's actually the micro steps and I think that's where I think we could have a known unknown it's not an unknown unknown it's a known unknown but it's not a known unknown you know so it's a known unknown well that will settle the known unknown Nick I think solving the problems of the kind that we're just raised in in our audience here really is much easier if you've got growth and Minouche made that point and remember of course that you don't get to net zero by zero consumption you get to net zero by breaking the relationship between consumption and production as we have it and the environment more generally on the other and you do that through investment and that investment gives you some growth so we must avoid and I worked in the in in the treasury I was head of the government economic service chief economist of the world bank I've taught public finance for 50 years I think I understand fiscal responsibility but I think I also understand the difference between fiscal responsibility and premature austerity and premature austerity is not fiscal responsibility it kills growth and it did kill growth in the last decade in the UK not the only part of the story but part of it on the kind of change that I'm going to turn optimistic now in my lifetime which is longer than most of you here we've seen the UK transformed after the second world war I worked at the EBRD and this was about transfer transforming helping support the transformation of the economies of Eastern Europe and so on if you compare Poland at the beginning of the 1990s and Poland now it is an extraordinary transformation lots of bits there that don't look so pretty but at the same time you've got an enormous transformation of the economy I worked in India in the 1990s as well and that economy was transformed in 10 years or so very different examples but you can get things going reasonably quickly with the right kind of purposefulness but being being purposeful and not necessarily imperfect and all the examples I've given were not perfect environments on technology we're actually lucky that the AI digital story has come with the climate story because so much of this is about managing big complicated systems energy transport cities land and so on and in the village I've been working on in UP in a very poor village in a very poor state of India the mobile phone has a smartphone has transformed people's ability to understand where informal sector jobs are in nearby towns it's helped understand when you should plant what you should do what planting techniques you should use and so on so right from the managing the big cities and helping them be friendly towards cyclists and pedestrians and public transport all the way down the technology has been enormously important we're lucky here finally what I fear stumbling into a war with China or Russia you know that is a risk and incompetence magnifies that risk and we don't know what the next pandemic will look like there will be one and it may not be very pretty those of you want to look at these things read the wonderful Lucy Shapiro stanford biologist well thank you very much and those are some really important challenges to add to the list thank you to our excellent panel thank you for ending on that note of the of the technological opportunities and I think there we probably do understate if we get it right how rapidly it can change things for the better it's very smart software and really advanced sensors that transform the efficiency performance of turbine blades so that you get much greater performance from your offshore wind and we haven't had time today to talk about the biological revolution which I think may be as significant in the next 20 years as the AI digital revolution but now we'll break for coffee and resume at half past 11 thank you all very much indeed