The Delphi exercise indicated a high level of consensus among economists that business investment, trade, infrastructure and housing are top problem areas to be tackled. In their collective opinion, issues such as the impact of regional inequality, population health as well as skills and the education system were important, but ranked slightly lower.

This wasn’t just an exercise in problem definition, though. The economists involved contributed 116 unique ideas for impactful interventions the government could make to boost growth. The group collectively ranked rejoining the single market, improving transport and planning reform as most impactful, but the long list included ideas such as a land value tax, devolved skills policy and making full expensing for business investment permanent allowing investment to be tax-deductible. 

Considering the Delphi exercise, participants at our workshop reflected that many of the interventions have been identified and agreed upon repeatedly and over multiple governments. A more pertinent question may be: why is policy design and implementation failing, and how can we get the transmission of ideas to reality right? 

Top issues and interventions from Delphi exercise

The most important issues: 

1. Poor business investment
2. Impacts of Brexit and wider barriers to trade
3. Poor transport infrastructure
4. Insufficient housing supply
5. Underinvestment in public services and infrastructure

The most important interventions:

1. Rejoining the European single market
2. Improving local/regional transport
3. Planning reform
4. Rejoin EU
5. A large, sustained increase in the public transport budget for major cities
6. Improving trade deal with EU
7. Higher and more stable public investment
8. Massive investment in green transport infrastructure in the UK's second tier of cities
9. Public investment
10. Setting up bodies that can override planning constraints eg. development corporations

Infrastructure – from transport to housing – crops up again and again as a constraint on growth. The economists in our group highlighted the unfortunate combination of low-density urban areas with poor transport as “double doom”. For example, large cities in the UK are much less likely to have rapid transit systems than European counterparts.

One choice for the next government might be whether to go big on intra-city transport (one idea discussed was flipping the focus of central transport budgets to have a much higher proportion on local transport), or on building bold, ambitious and sustainable new settlements that go wider than just core cities. Here, perhaps unsurprisingly, the preference of our economists was: both. 

Across both of these problems, it seems that effective engagement with local communities and smart incentives for development are lacking. Ideas surfaced here worth further exploration include: for local property tax to be properly retained as an incentive for local communities to accept new developments near them; using new, deliberative methods of public engagement on renewable energy infrastructure; and properly facilitating cooperation between close areas to try to ensure that benefits of planning decisions can be felt in the area that feels the “cost”, given at present they are often felt over a more diffuse area. 

Considering the path to 2040, there may also be value in politicians taking inspiration from a more engineering-focused approach when it comes to long-term infrastructure. This would mean being clear about the goal and the minimum viable product, and leaving more flexibility than the government typically does for adaptations as technology develops. Imagine a transport system that could make best use of autonomous vehicles, or settlement plans that can evolve and be shaped by developments in sustainability or citizen engagement. 

Overall, there appears to be consensus that the planning system needs reform, but there is much less agreement on what the right answer is. Here lies another of the big choices the future government will have when it comes to economic growth: how should it reform planning and how directive should it be on regional developments? 

In the UK, there are higher regional economic imbalances than in many other comparable countries and this has worsened over the last 45 years.

While regional inequality was mid-ranking in our expert consensus on issues to address, the infrastructure issues identified are clearly local in nature, and our economists agreed that there is a clear prize to be won by lessening the regional productivity gap.

In particular, Britain’s second tier of cities by size (ie, those smaller than London) aren’t generating the productivity and economic growth that other countries are able to produce from similar size cities. Cities as natural units of economic agglomeration have not fully flourished in the UK. 

The choices for government to wrestle with here are focused on what the right level and type of devolution is. What kinds of power should be devolved? To what level? Accompanied by what funding or level of fiscal devolution? 

Our economists emphasised the need to be more trusting of local areas to create and build expertise and make decisions, with greater capacity built in at the regional level: for example, by backing combined authorities. A new model of public engagement is also needed to win the argument for local development that is for the benefit of all, such as  onshore wind. 

But the delegation of decision-making clearly can’t be an answer on its own, and we heard a view that devolution can be a double-edged sword. For example, when it comes to planning, we have a highly devolved system by international standards, and yet there is consensus that it doesn’t deliver the right outcomes. Devolving power for some responsibilities in isolation of a wider model that works won’t solve the problems. 

Government will need to decide what combination of central versus local planning can facilitate better growth, bearing in mind that while national politics can drive the wrong outcomes in a system that is too centralised (a focus on announceable and media-friendly infrastructure), local politics can hinder progress in a more devolved system (everyone needing to have a slice of the pie), too.

Lifting our heads from the local and regional to the national and international, poor business investment came out as the leading problem. Looking at the data, it’s easy to see why. The chart below shows the UK's investment per year as a percentage of GDP, compared to Germany and the USA. While the gap initially looks relatively small, as a percentage of GDP it is around three percentage points. This is equal to more than £100 billion per year less investment in the UK – a huge investment gap and almost equivalent to the UK’s annual expenditure on education and defence combined.

While investment is partially a direct spending choice for government, public investment was only a fifth of the size of private investment in the UK in 2019 – so creating the environment to encourage the latter will be key. As one economist described to us: “Investment is an outcome – if we get our policy right, then investment is the reward.” Another noted that “real investment is a hard business” – it typically requires thinking in longer time horizons than political cycles and perceived policy stability can be important to potential investors, who want to be sure about the rules of the game before they agree to play. 

Large-scale investment will also be required to achieve net zero, both public and private. Both the amount and the nature of the investment matters, and there will be a need for a strategic approach to green industrial policy in light of the actions the US and EU are taking.

One choice for the government after the election will be the balance it seeks to achieve between domestic and overseas investment. Geopolitical developments in recent years have thrown this into sharper context, with control over supply chains raising the importance of domestic investment. 

Policy certainty and the institutional architecture in the UK are related issues that the economists we consulted think have the potential to play a big role. As one put it, potential investors are “maddened by uncertainty” and the UK doesn’t have effective institutions that can provide a reasonable degree of certainty and regulatory consistency. And looking to 2040, we know that developments in low carbon technology or AI will provide both disruptions and opportunities for different firms and workers. How can the UK remain nimble and take advantage of those opportunities while managing disruptions effectively? One choice for government will be to decide whose job it is to anticipate and understand the implications and thread that through to the set of decisions that inform economic policy and strategy. 

Similarly, how can we alter the system that government and businesses are operating in to properly enable a long term view on, for example, infrastructure investment decisions, in order to make better informed decisions about the trade offs between short and long term cost and benefit, and between economic, societal and security needs? When we look back from 2040 on, for example, net zero, what investment decisions in which parts of the system need to be taken now to have long term positive consequences for growth?

One idea about institutional design was to create an independent institution with responsibility for monitoring growth plans, in the mould of the Climate Change Committee. Another suggestion was to create development corporation-style organisations that could override planning constraints where appropriate.

The Delphi exercise revealed a consensus that rejoining the EU or the single market would positively impact economic growth. But, in discussion, this was viewed as being potentially at odds with the need for policy certainty. Clearly though, trade and international markets are a big part of the picture and can help to build that certainty and alignment that business craves. 

Government could continue the focus on large-scale international trade deals, or it could pursue more narrower, more bilateral service-based agreements that could be quicker to negotiate, making the UK’s exports of services easier. This could seek to foster a degree of regulatory alignment to increase the market-size for services – already a significant proportion of the UK’s exports. In any case – it is uncontested that access to bigger markets is key for us to realise the benefits of scale that the US is able to, for example, on dynamism, innovation and diffusion.

In short – government must consider both the right, consistent strategy and the institutions required to deliver it.

Issues of culture and behaviour are often quoted in discussion about the economy, but can feel less tractable. Our economists discussed some of the practical differences that could be feeding into cultural differences between our businesses and those in other countries. 

For example, the UK stands out when it comes to firm ownership and governance. On the one hand, the UK has the lowest share in the OECD of blockholder shareholders big enough and engaged enough to affect firm decisions on their own. On the other hand, it is relatively unusual for UK firms to have worker representation on boards, which evidence shows can lead to improved investment and performance. This exceptionalism means that management in our large businesses arguably have less pressure from both above and below. One point potentially worth further exploration is the view that senior management themselves also appear to have different qualifications than those in the USA (with relatively more CEOs acquiring MBAs in the US compared with the UK) which could be a factor underlying a different appetite for risk when it comes to investment and scale. 

Similarly, our workshop discussed the possibility of looking more closely at the decisions individuals are making and why – where to live, what job to go for, what to study and what to buy. Using behavioural science to study these decisions that ultimately drive our economic inputs and outputs, and whether policy has the ability to influence them, could shed new light on an approach to shifting culture towards the UK’s growth objectives.