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Osborne’s fiscal devolution must go much further to transform local growth

The chancellor’s decision to devolve the full revenues from business rates to local areas is a radical step forward for England’s regions. But for local leaders to increase investment in infrastructure, they need to be able to set rates locally and borrow against these revenues.

The chancellor’s decision to devolve the full revenues from business rates to local areas is a radical step forward for England’s regions. But for local leaders to increase investment in infrastructure, they need to be able to set rates locally and borrow against these revenues. Without this flexibility there will be only minimal increases in investment. Full fiscal devolution to local authority partnerships that reflect local economies, if done after resolving longstanding flaws with the tax itself, could enable areas to generate up to an extra one per cent of revenues above their current trend rates. This would enable councils in London to finance large-scale projects such as Crossrail 2 or those in Manchester to fund a major regional transport hub.

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The Capital Markets Union needs to do more to help risk-takers

The CMU should focus on the fast-growth and innovative firms that truly make a difference and are capital constrained

The CMU should focus on the fast-growth and innovative firms that truly make a difference and are capital constrained 

The long awaited Action Plan on Building a Capital Markets Union was published by the European commission on 30 September. Commissioner Jonathan Hill should be applauded for the scope of the plan and also the pragmatic nature of his approach. He has constantly stated that he wishes to focus on whatever is required to drive growth and jobs, taking a bottom-up approach rather than grandiose plans per se.

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Technological change and new work

The application of new technologies that reshape production inevitably makes the skills of some workers obsolete. Managing the transition into new work should therefore be a key priority for policymakers

The application of new technologies that reshape production inevitably makes the skills of some workers obsolete. Managing the transition into new work should therefore be a key priority for policymakers

Long-run economic growth depends on the application of new technologies that reshape production, adding new kinds of work to the economy. As new work is added to the old work, the skills of some workers are inevitably made obsolete. Throughout history, this process of creative destruction has created enormous wealth, but also undesired disruptions. How places adapt and incorporate new technologies into new work can determine the fortunes of entire cities and nations. Managing the transition into new work should therefore be a key priority for policymakers.

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Skills formulation must become everybody’s business

Investing in high-quality education is the key for improving the economic and social well-being of people around the world

Investing in high-quality education is the key for improving the economic and social well-being of people around the world

In today’s world economy, education and skills are the driving forces for progress. Wealth and individual well-being, in turn, depend on nothing more than on what people know and what they can do with what they know. There is no shortcut to equipping people with the right skills and to providing people with the right opportunities to use their skills effectively. And if there’s one lesson the global economy has taught policymakers over the last few years, it’s that we cannot simply bail ourselves out of a crisis, that we cannot solely stimulate ourselves out of a crisis and that we cannot just money print our way out of a crisis. Instead, in today’s world economy, education and skills are the driving forces for progress. Investing in high-quality education will thus be the key for improving the economic and social well-being of people around the world.

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Fast finance and slow growth

How can the state deter short-termism in finance and facilitate a better environment for the ‘patient capital’ needed for growth?

How can the state deter short-termism in finance and facilitate a better environment for the ‘patient capital’ needed for growth?

Consider two countries – China and Italy. As recently as 1990, these economies were equal in size as measured by aggregate GDP at purchasing power parity exchange rates. But let us now put these countries on quite different trajectories for capital accumulation. Let China begin investing at double-digit rates for 20-plus years, while Italy accumulates capital at a rate of only two per cent per year. By 2013, China is now seven times larger than Italy. Indeed, China is creating an economy the size of Italy’s every two years; an economy the size of Greece’s every quarter; and an economy the size of Cyprus’ every week.

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