 Right, then, I know it's been traumatic. You've turned up at a resolution foundation event. Nobody has showed you a slide. This is a clear breach of trade descriptions and all the rest. Don't worry, there's a lot of slides coming. Everyone, there's a large book. You've got 300 pages. You've got 76 slides. I'm not going to show you all of them. I'm not going to show you all of them. But I'm going to, in this session, just give you the headlines of what is this strategy. So the individual bits of policy to underpin bits of it are in the book. I'm going to cover those in the session. But this is a chance just for us to step back is the book trying to say. So, I'm going to do not much on the problem, because hopefully most of it, everybody in this room and watching online knows. And if they don't know, because they work on these kinds of issues, they know because they live in a country going through those issues. But briefly to rehearse, the economy used to grow, it isn't going as much anymore. So this is showing you 10 year growth rates of GDP per capita, Maybe declining slightly, but basically hovering around the 25% mark per 10 years over the course of most of the 1970s through to 2010, and then cratering after the financial crisis. Now one thing I will say, maybe if I'm in Bath or Bristol, is the degrowth has got what they wanted. I'm going to go through most of the parts of the country and be rude about them over the course of the next. But the degrowth has got what they wanted. The thing I then say to people is the lesson should be that is a very, very bad thing because GDP per capita is not some abstract measure. I know it's very fashionable to say who's GDP is it, who cares. The answer is it's all of our GDPs because this is what happened to wages as a result. The wages today, the same level they were when we went into the financial crisis to make that even more concrete. If anyone's still thinking about this growth thing is overrated, this is what it's actually done to actual wages. Northern Rock goes bust. Actually just after Northern Rock goes bust. No growth since then. Had we carried on growing at the rate of wage growth we saw before the financial crisis, average pay would now be £10,000 higher per worker. When you go into a cost of living crisis where you're paying £1,000 extra per household for your energy, you could have done with that £10,000. The is a large part of the motivation. When people say growth doesn't matter, maybe it doesn't for them, it definitely does for the country as a whole. Right. It's not the only thing that matters and one of the key insights from this project is that the intersection of slow growth, which is mainly a feature of the last 15 years, half the productivity growth seen across advanced economies. Yes, advanced economies have slowed down, but we've slowed down more than everybody else. We are world beating at that. That intersects with longer lasting high inequality. This is showing you one measure of inequality, the Gini coefficient. We're not going to talk about what that is. I promise I'm also not going to talk about the bumps around it even though some of us care about those a lot. I'm just showing you that income inequality in Britain surges during the 1980s into the early 90s and despite what you sometimes hear from some parts of lefty academia world, it's not constantly rising since. It's just too high. It stayed roughly the same since ever since. The most unequal large economy in Europe and the most important thing is to put together that high inequality with that slow growth and it gives you this. What we call the toxic combination and it's toxic for lower middle income households. So first complicated chart. Just focus on the middle for a second. It's showing you relative incomes of middle income households relative to the UK in Germany in blue. The Netherlands in whatever that is, yellow, France in red and Italy in green. I've added Italy to make us all feel better. Broadly, French households, middle income households are now 9% richer than middle income British households. German households are 20% richer. It's not 2%, it's 20% and we're showing you this because I think most people think of those countries as things we're similar to. But we are not anymore. Then add in the high inequality, focus on the left. The typical poor household, bottom 20% this is talking about, in Britain is now 27%, sorry, the typical poor household in France and Germany is 27% higher than in Britain. That's about £4,500 on their incomes. Again, why can't people cope with the cost of living crisis pushing out the cost of essentials and energy bills? Because they're much poorer than their equivalents in France and Germany. They're not a bit poorer, they're far poorer. That is why, if you care about inequality, you should care about the lack of growth. If you care about the lack of growth, you should care about the high inequality. We've got to deal with both of them, make that concrete, poorer Britain in 2006 spent about half its budget on essentials. When we went into the cost of living crisis, they were spending nearly 60%. So the margin of adjustment of cutting luxury spending had already been reduced before we headed into a cost of living crisis that is basically a cost of essentials crisis. That's why you end up with food bank usage going through the roof. The margin for adjustment is just not big enough in a country that isn't growing and is not sharing that wealth out. We're going to come back to this issue later. Right, then one of the things we've been pushing ourselves on in this project is to say, look, we're not going to write another load of papers about a lot of things that we already write lots of papers about. We are going to do that, obviously, but that's not all we're going to do. We're going to force ourselves to say, what does it tell us? How do you think in terms of an economic strategy? What's different about an economic strategy from another economic policy paper or another diagnosis of something in the labour market? I'm just going to flag some things about the way in which we've approached that. The first is to talk about what we've not done. Part of the danger for Britain, even after we've all accepted, things aren't going great, which I think basically everybody has. There's a reason why I wish that Sunach is telling people he's the change. There's a reason why Keir Starmer later, while I'm sure I tell you all, he's the change, is because nobody thinks the status quo is tip-top. The question is, are we serious about changing it? A lot of the problem is that we are not serious. So there's some examples of not serious here. We're not serious either. That's a bit harsh, everyone. It's a serious conference. We're not serious because we think that silver bullets will solve this all for us. A few tax cuts, or quite a large tax cuts, that will sort it. Or we think, I really want the net zero transition to happen. I'm basically going to tell myself that will solve all the other problems as well. Worried about inequality? Do the net zero transition? Worried about slow growth? Do the net zero transition? Now, we should probably save the planet. So I'm assuming most people here would like us to deliver on our net zero credentials. We should do that. It needs to be central to an economic strategy. But its main effect on GDP levels is to change the nature of GDP. More investment, less consumption, rather than to raise the level of GDP. Or indeed to crush it as some of the now rebranded cynics who don't deny net zero, but to say everything's impossible and can't be done. And that is a danger because if you think that, you don't deal with any of the other problems. Then just to be unfair on business, while I'm being unfair on people, there is a lot of money to be made in running ESG conferences. Anyone from a business being to an ESG conference? They need stopping. A load of people sit down in a posh hotel and tell each other, if we just report on things really well, really good reporting, environmental, social, the rest, then inequality will go down. I'm not a Marxist, but economic structures do matter a bit. And so do pounds and pence in people's pockets. You don't get inequality down by a load of posh bankers sitting in a conference centre, unfortunately for the bankers. So that is not what being serious about an economic strategy looks like. So what have we done instead? Focus on path dependency. You're not writing an abstract economic strategy for any given advanced economy in any given time. We're focusing on Britain in the 2020. Britain as it actually exists and Britain as it could plausibly be. And those are tough tests to put on yourselves. It's not about wishing you were like somebody else, another country. That's also true as people, by the way. I know that's hard to accept, but we are who we are, and you can't change it very much. Then we focus on trade-offs. We've tried to elevate those and be clear about the trade-offs we're wrestling with. And we're trying to offer you a strategy. So that means showing how things join up. How does your tax policy fit with the fact that you'd like to have some more investment? And help you pay for it, for example. But lots of others, okay? So that is how what we think we are trying to add value on. Right, then the short version of what I'm going to tell you about is there's three basic elements to this. How do we get serious about raising growth in an economy that's not growing? How do we get serious about reducing inequality in a country that hasn't managed to do that for the last four decades? And I think most people have kind of decided it can't be done. High inequality is just like the weather. It's kind of, you know, what happens? We'd like it to stop raining, but we've met Britain. It doesn't. How do we do that? And then lastly, how do we bring considerations of economic change back into thinking about economic strategies? Cos the only real discussion of economic change nowadays in Britain is, oh my God, it's really fast and scary, which, as I'm going to come on to, is nonsense and deeply unhelpful to how we think about where we actually want this economy to go. Right, growth. Be nice to have some. Here the wishful thinking is different from Liz Truss. The wishful thinking space in this area is often either saying, look, I just liked it in the, I liked it in the olden days. Everybody went out to work in their manufacturing plants and they came home satisfied, obviously by everyone they mean, white men in some parts of the country, but they don't say that bit. That isn't a good grounding for an economic strategy because we are not going to turn ourselves into Germany. Sorry to the Germans in the room. Countries don't quickly change what they're good at. So the first thing that I talked about is what Britain is good at. And Britain is, despite our kind of social awkwardness and embarrassment about it, a service superpower with the second biggest service exporter in the world behind the United States. Nobody ever boasts about that fact in British politics. And as I say, you don't change that much. If I look back at the 1980s and look at the 10 products Britain was best at exporting, seven of those are still in our top ten today. Now, some of those are manufactured goods. Aerospace, booze. We are very good at booze. When everyone says, like, I want to advance manufacturing, a lot of what we mean is booze. It is very tasty, advanced, but it is very tasty. And that is important. So focus on the kind of economy we actually are. And then follow where that takes you. So what is unique about high value-added services? I'm talking about services here. I really mean high value-added services. The book touches a lot on non-tradable face-to-face services. I'm going to come back to those. But here I'm talking about things that make us some money in the world, which, again, is a bit of an embarrassing topic. We don't like to talk about that anymore, but it would actually be nice to pay for that gas we're importing at some point. So services. And services does not mean banking. Our banking exports, don't worry. Everyone that's embarrassed about the bankings, that's been going through the floor since 2008. Don't worry. We're not making any money doing that anymore. So if that's what you wanted, you have got it. It's fine. Cultural services, business services, intellectual property, research, education. The thing that stands out in Britain is the breadth of the service strengths. That is what is unique about Britain. Really embarrassing. The only country that's a bit similar to us is France. I know you're all going to find hard to deal with, but life's full of tough lessons. Right. If you've accepted that that's the kind of economy you are, and you're going to be, doesn't mean lots of manufacturing isn't important. If you're in Derby, if you're in Cheshire, you definitely need to, your only route to high productivity activity is going to be your existing manufacturing strengths. But if we're looking at the country as a whole, this is where the action is going to be, particularly what we care about is employment in those high value added sectors. When everyone says to me, oh, but manufacturing's got higher productivity growth, I will say to them, follow that thought pattern. That's why there's no workers. Right. Right now we're seeing manufacturing investment go up, but no workers because manufacturing productivity is high. Who benefits from that productivity? Some people in America, but lots of people buying it abroad. Again, no one ever thinks about that. Right. So, place. This chart is showing you places across United Kingdom, France and Germany by their productivity and their size. Size of the blobs is how many people. Now, I'm showing you this for a number of things. So, trade-offs wise, Britain is unequal. You all knew this, right? The London large high productivity for Britain, then everyone else basically, all other large places below average productivity. Germany much more equal in terms of productivity. Now, you might look at that and say, I want to become Germany, but you can't, for the reasons I said. There aren't enough Germans. There aren't enough capital stock. You haven't got the skills. So, if you're thinking about an economic strategy, there's no plausible route to becoming like Germany because you do need to be a manufacturing country to have that kind of equal spread. Manufacturing goods are much more equally spread geographically. The France though does offer us lessons. As I said to you, France, more similar economy, but unlike Britain, where we rar about which of our big cities is our second city, but actually only one comes close if you're looking at productivity, Edinburgh. Edinburgh is the only other city outside of London that is high productivity. If we look at Manchester and Birmingham, 2.8 million people each, those are our big second cities. They're large, which means they are the kind of places where high productivity services should be able to cluster. So, our question for ourselves is, with that kind of economy, they should be able to be clustering in Birmingham and Manchester, but they are not. And the question is, what are we doing to make sure that they can in future? Because we need more capacity to produce those kind of services to grow this economy. We can't just do it all in London. And as we're going to come on to later, that requires a lot more change for those places than we have traditionally pretended. We're like a bit more devolution, a bit of a leveling up pot, suddenly a law gets sorted. But as we're going to come on to it, that's not what happens. If you want those cities to grow, which we all should, because Britain needs them to grow, not because they need to grow for their own sake, then it means a lot of change, a lot of investment, much bigger cities, much change transport networks, much bigger city centres. So that is the goal. If that's your economy, service led, we need to grow these big cities because that is where the activity will take place. Not the only activity that's important in the country, but we need a lot more capacity to do that kind of activity. Right. There is no route to becoming much richer that doesn't involve starting to invest. So this is showing you total economy investment. And if we look over the last four decades, Britain is the weakest investor in the G7, almost on any metric. So this chart is total investment. Public investment, 50% lower than the OECD average. That's why you have the second fewest MRI scanners in the OECD. It's why it takes British workers longer to commute than all OECD countries apart from two. If you don't invest for a few years, that's fine. Don't invest for decade after decade after decade. At some point, it does start costing you. And if we don't turn that around, there is not any other answer for us. But I said it was about trade-offs. You've got to pay. I'm going to die here. If you want higher investment, it's got to be paid for. It's either paid for by borrowing from abroad or consuming less at home, saving more at home. But this is showing you that Britain's been borrowing from abroad consistently from the last 40 years. Normally, the textbook said that's fine because you were attracting money to invest. I've just shown you, we weren't attracting money to invest. We were attracting money to consume. So that is what the kindness of strangers looks like. If you want to be higher investment, I don't think we should be doing it at the economic strategy level by borrowing more from abroad. It's time to save at home. Some of that is about household savings. That's about the proposals in this report that mention savings, but it's also about fiscal policy. It's about what firms do. Don't think about savings at the economy-wide level as just about households. Collectively, you need to save more to allow us to invest. If you're not prepared to talk about that and to fit that in with your strategy, don't pretend to yourself that the investment is going to happen on itself. Even though the textbooks I know say, yes, yes, yes, pure capital markets around the world, there is a home bias. People do, countries that save more do invest more. Right, and then just very briefly, before the Chancellor comes, it turns out having a lot of economic crisis is really, really bad for your public finances. Everyone used to enjoy and rower about whether we had 35, 36, 37% of debt in the 2000s. Welcome to 95% debt. Ignore the 100. This is before the OBR revised down their recent debt levels. 95% is where we are. This chart is showing you, if you take what both main parties say is their fiscal rule, debt falling at some point, but then you wake up to the fact that it turns out economic crises do actually keep happening. Hopefully not as regularly, but big ones happen. There's no way we're on a trajectory for debt falling if that's our fiscal stance. You have to run a tighter fiscal policy if you actually want to see debt falling. We are not on track to doing that at all. That is, again, joining that up at an economic strategy level with what I've just said to you about saving, because some of that has to happen at the level of the government. It's common to talk about being hard headed about getting growth. A half of this book is about how to get hard headed about inequality and how to get it down and to avoid wishful thinking on this. I'm going to show you a few charts that look like this. Don't worry about the numbers for a second. These are showing you income growth and income distribution. Porer households are down here, richer households up here, and it's the shape I want you to wrestle with, because it's the shape that we're using to drive our thinking through this strategy. This is telling you what happens if you just get growth. Again, ignore the numbers, focus on the shape. If you just get growth, then market income, labour markets, capital, rent, the rest, broadly will rise in line with that growth. But that income is not spread equally across the population. What you will get if you get just higher growth is higher inequality, because market income is focused on the middle and the top of the income distribution, not at the bottom. The bottom 20% gets half their income from outside the market, mainly benefits. Those rise in line with prices, not in line with growth. People will say, oh, we just need to get the growth. That's fine. That is important to raising living standards, but it will mean higher inequality given how our tax and benefit system is structured today. Right, what do we do about it? Two things. We ignore the usual row amongst lefties about we just need to get pre-distribution. Stop pretending you can redistribute, pre-distributions it, get better jobs, get more higher wages for low-paid workers. We don't need to worry about the benefit system. Or another load of people that say, we can only reduce poverty by doing redistribution. The argument here is you've got to do both. So on the pre-distribution side, we've got to get better jobs and we've got to make sure they're available and that's what I said earlier about certain kind of activity being in big cities. Every community should have good jobs. This is showing you job satisfaction focused on the top line for the lowest earners since we've introduced the minimum wage. So the minimum wage is a complete triumph. We're basically back to 1970s levels of hourly pay inequality. If you'd said that was possible in the late 90s, no one would have believed you. Complete triumph. Job satisfaction for the lowest earners has kept falling through that phase. Remember, there's a lot of reasons why that might happen. Half of shift workers only get less than a week's notice of their shifts they're going to work. If you're a low earner and you get sick, you live on £44 for the week. I'm just giving you some examples. I can give you lots of other ones too. We've got to have a good jobs agenda that goes beyond the minimum wage. We should keep raising the minimum wage but we've got to go beyond it. Let's say here I'm modelling you a pre-distribution agenda. I'm going on the minimum wage. Keep raising employment. Here I'm modelling half the increase in employment we saw in the 2010s happening again. The book sets out how we think that could happen. What it's telling you, so now compare the change between the pink bars, which was the growth-only world, and the green bars, which is us bringing pre-distribution into the picture. What it does is the minimum wage, the progressive wage growth, shifts the income gains to the middle of the distribution. Not to the bottom, it goes to the middle because that's where most minimum wage workers are. What helps the bottom is higher employment. If you want something to celebrate about the last 10 years, the employment gains are incredibly concentrated amongst the bottom 25% of the population. We need to do that again. Employment gains here, wage gains concentrated in the middle. That's what a pre-distribution agenda looks like but as you can see, the bottom is still going to see weaker income growth. This is an aggressive pre-distribution strategy that the book sets out. It's not like we're not pushing on the leaders. What do we need to do as well? We need to care about the benefit system. This chart is showing you the change in incomes across the distribution, poorest households on the left, richest households on the right in red due to benefit changes in green from the pensions changes since 2010. It's telling you that the poorest households on average have lost £3,000 per household. It's not £50. It's £3,000 from repeated freezes in benefits or caps and then other changes. If you want to know why you've got record homelessness, if you want to know why you've got 37% increase in food banks last year, these are not abstract numbers. These are real numbers about people's real incomes. You've got to fix how you're treating the benefit system. You've got to have not just higher taxes. You're probably all used to versions of this chart now. Tax burden heading to its highest level in ever, basically. The £4,000 increase per household over the course of the next few years, 37.7%, with the exception of some quite good changes that got announced at the autumn statement two weeks ago, we haven't increased the quality of our taxes at the same rate as increasing their quantity. If you're a high earner, you can pay 50% roughly on your earnings. If you're a high-income person that takes their money from capital gains, 28%, or nought, if you're really clever, our tax system tells James Dyson how should he hold all his wealth? Farms. Why did he hold it in farms? Not because he loves the sheep, because the inheritance tax system says would you like to have all of that tax-free. I'm just giving you examples. I can give you a long list of other ways the tax system is what you might technically call bananas. We've got to sort the quality of the tax system if we want inequality up, down, and growth up. So let's put those changes into our last version of this chart that I'm going to show you. Progressive set of tax changes allowing working-age benefits to rise in line with wages, not just with prices, and remove some of the most punitive cuts to benefits since 2010, particularly the two-child limit. This is what you get. It is possible, and the book shows this in detail, it is possible to have growth up and inequality down if you bring together all of the elements of the strategy. Just to make you confident about that, on the pre-distribution side, we have seen inequality fall. Minimum wage ramped up. Employment up for lowest earners. It's the benefit cuts happening at the same time as the pre-distribution working that means inequality hasn't fallen. So it can happen if you put the two together. We're not set with that flat line. We've got to bring all the pieces together at once. Briefly then on change. We're going to have a whole session on this this afternoon, so I won't talk about a great length, because all we do in terms of economic change is write angsty and quite annoying books about how it's all going really fast, there's robots everywhere, no one's going to have a job, it's all a complete waste of time. The problem with that is that it's nonsense. Just to prove it, there's lots of charts like this in the book, but economic change on almost any measure has been falling, not rising. So this is showing you sectoral change, the movement of workers between different sectors of the economy over time, and it's showing you we're now at the lowest levels at least since the 1930s. There are different sectoral measures. There's actually a third one in the book for the really keen, but whatever measure we use of sectors, the level of change between sectors is coming down. That bump up is just the pandemic, that's gone away because we have actually opened the economy. Change is getting less. Fewer workers moving jobs, fewer firms growing and fewer firms shrinking. Young people don't drink, they don't have sex. The whole economy has basically gone to the dogs. We need, we should be less angsty about change and want some more of it, but we're not pro change for its own sake. We're pro change in the service of an economic strategy which wants to raise growth and cut inequality. Again, the book goes through a lot more of ways in which you can do that. I'm going to touch on one here, which is the shape of your economy. This is showing you the share of consumption that goes on goods and services like hotels and restaurants on the left-hand side across European countries, and on the x-axis it's showing you the relative price of those things relative to other stuff you can buy in that economy. So this end, cheap hotels and restaurants, this end expensive hotels and restaurants relative to other stuff in the economy, and this is showing you how much of it we buy. Britain, we have cheap hotels and restaurants relative to other stuff, not least because housing is quite expensive and we consume a lot of it relatively. The lesson I want to leave you with there from this is the shape of your economy isn't just about technology and all this stuff. We are what we eat. The economy is to a large part what we consume and the relative price of these kind of sectors which are low earner heavy is mainly determined by the nature of the labour market for those kind of works. We have choices. There's no international competition for this much, except for the really rich. We decide what people pay to go out and eat because it's basically determined by low wage labour. If you have higher labour standards, you will in time push up the relative price of those kind of things and it will reduce the level of consumption of those things. That is a choice but that is what a pro-growth because these are low productivity sectors and we need capacity to deliver the high productivity service activity I started with. Over time, nothing drastic but over time. And secondly, this is a pro inequality strategy. More good work means higher incomes for low income households who are more reliant on labour and it means higher prices for people that go out and eat a lot. Us. And countries that do that have lower inequality than Britain. If you're not prepared to face up to those kind of things, then you haven't got an economic strategy, you've got some economic policies. Right, then just to wrap up, fatalism. Everyone's probably a bit depressed. This is all very difficult, it's all very hard and all the cynics of you, I can see quite a lot of Treasury civil servants, you've all cynics, are saying we're quite a mature economy, we haven't got that much control, it's just about the technological frontier, there's only so much we can do, let's not overstate our agency. So just to end on a bit of upbeatness, what is the advantage of having done very badly? Catch up potential. So this chart is showing you on the x-axis inequality across countries and on the y-axis how rich they are. And it's showing you Britain in the middle, United Kingdom in the middle and it's showing you most of the places are now both richer and more equal than us. They all used to be, most of them have been more equal for a long time, they used to be about the same as us in terms of how rich they were, they're all now significantly richer than us. Obviously the Yanks are kind of a basket case inequality wise, but much richer. The average American is now 60% richer than us, that's why all your friends look shocked when they come to see 60% richer. And remember we buy our iPhones from the global market, right? It does matter how much richer people are than us. So the question is, you can look at that and get depressed, or you can look at that and say, how about we don't need to become as rich as the Americans, we don't need to become as equal as the Scandinavians and don't worry, we're not going to, neither are we going to get their design taste and all the other advantages that come from the Scandinavian choices you can make. We just need to become a bit richer and a bit more equal over time or what you might call normal and just to illustrate that, let's take the five countries I think most people would associate ourselves with, Australia, the Netherlands, Canada, Germany and France. If we had the same inequality as them and the same average incomes, not richer than them, not loads more equal, just the same as the average of those countries, then the average British household would be £8,300 better off. That is what we are trying to achieve. That is what success looks like. It's huge. Even if you get half that, that is what a successful economy looks like. So my ending point is that Britain is time to be a bit more normal. Do it for a long time. Sort yourself out and that is what a better country looks like. Right, we're going to wrap up there. Thank you very much everyone.