A Bank of England policy maker urged the UK government to move economic policy away from being an emergency response tool and onto a more sustainable footing.
Catherine Mann, who sits on the nine-member panel setting interest rates, said fiscal and monetary policy makers need to “transition from a crisis-policy phase to a longer-term agenda that tackles underlying economic, social, and environmental challenges.”
But care must be taken to ensure this isn’t done in a way which could exacerbate inequalities or worsen already-sluggish productivity growth in the UK, Mann wrote in an essay published Monday by the Resolution Foundation.
Her words represent a warning to both Prime Minister Rishi Sunak and opposition Labour leader Keir Starmer as each begins to set out their agenda and spending plans for a general election expected next year. Mann adds to concerns voiced by executives and investors that the government isn’t making the long-term decisions needed to ensure stronger economic growth.
“Shocks in the form of Brexit, the pandemic, and the Russian invasion of Ukraine came in quick succession,” Mann wrote.
“A clear focus on the net zero policy goal will help keep strategies aligned for the longer-term even as the economy is buffeted. Getting onto that path – and staying on it – is the urgent task facing today’s decision makers.”
Policies are needed in the UK to enhance fiscal, environmental and social sustainability, reduce scarring and enable transformation in the economy to increase productivity, Mann said.
Trade-offs would be involved in all of these areas, she added — while achieving sustainability would depend on productivity growth, the transformation needed to underpin that growth would inevitably come “with some degree of scarring and impact on inequality.”
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