“We should beware of easy answers to our long term productivity problem”.
That is the gist of Con Keating’s latest blog. He argues that while on the face of it , the near £3trillion store of wealth in funded pensions could be diverted to regenerating economic growth in the UK, the current regulation of the pension system works against this happening, confining most of the money to the de-risking of that most gloomy of concept – “the pension liability”.
Fortunately, Rachel Reeves appears to have worked this out too. Her ambition for a national wealth fund is for no more than £7.3bn of the wealth cake to be served up for industrial regeneration. Immediate cash on the table maybe limited , but ambition isn’t.
The majority of Reeve’s utterances so far have been directed at loosening the planning laws that are holding up things getting done. While her vision of what needs to be done seems akin to Jeremy Hunt’s, there appears to be a different confidence about Government’s capacity to make a difference. The FT picks up this theme, this weekend.
The notion that the government needs to assume an active and strategic role in steering the economy reflects a global trend towards deepening state interventions epitomised by US President Joe Biden’s Inflation Reduction Act.
The plans sound reasonably advanced
Business representatives and local government will be brought directly into the delivery of Labour’s five policy “missions” alongside new umbrella bodies — including an industrial strategy council, a British infrastructure council and a regulatory innovation office — to streamline the path for investors.
However, the delivery of meaningful change depends on the kind of decisive action we only saw in the period of crisis resulting from the unforeseen impact of COVID. For those of us running small businesses, the process of getting funding from Government through Innovation UK is too often a huge diversion from the business of getting things done.
That feeling’s well expressed by Angus Horner, who founded and scaled up the Harwell Science and Innovation Campus south of Oxford in 2013
“We’ve become a nation of process rather than being focused on output and winning. There’s something cultural that has shifted.”
I remember the glee of one civil servant who told me that he anticipated having three consultations on pension to deal with over the summer. I do not think he was being ironic.
Pensions as a micro-part of the productivity problem
The process culture has resulted in very little money flowing out of pensions into productive finance and delays in key projects such as CDC, pension dashboards and a finalised DB funding code.
To take dashboards as an example, the Government’s stated concern is that if the dashboard available point arrives without super-high inclusivity, the opportunity will be lost from public disillusionment. Meanwhile, the delay in delivering a non-advised way of finding lost pension pots and managing them to provide people a proper pension risks a kind of despair with pensions that I notice creeping into much public discussion.
I have argued for the last 8 years that getting a useable dashboard out there is preferable to launching one that is 100% right first time.
Behind the delays are the considerations that each project cannot be allowed to fail. But collectively, the failure to deliver leads to general rather than particular failure. It is the lesson that every entrepreneur addresses when they launch something new, that the fear of failure cannot jeopardise the vision of getting it right.
What the great success stories of British business have in common is that they do not countenance failure. This surely needs to be adopted as part of our industrial strategy.
There are no easy answers to Britain’s productivity problem because creating the conditions for success requires changes in the way “process” works. Whether that be in banking, or pensions or their regulation, the flow of money from stored wealth back into the economy is not going to spurt over night, as if some secret sluice had been unscrewed.
But the recognition that Government can be a part of unblocking the weeds is overdue. We are good at process, but perhaps we prize the virtues of good governance, strong controls and sound risk management too highly. Maybe we need to measure ourselves by points won, not by points not dropped.
Productivity is ultimately measured by what gets done.
