A new taskforce of economists convened by Liz Truss to investigate causes of sluggish growth has claimed the average Briton is £10,000 worse off than their US counterpart in its first report.
The Growth Commission launched on Wednesday suggested “consistent growth levels” of 3% by 2040 are achievable and would translate to higher spending of approximately £35,000 per household.
But Shanker Singham, co-chairman of the taskforce, said “failure to act” will mean the UK misses out on opportunities to boost the economy which he said were “abundant and increasing”.
The commission has not made policy recommendations for how a GDP per capita growth rate of 3% might be reached, saying its initial work is focused on highlighting the problem of low growth.
It aims to produce further analysis before and after major fiscal events to investigate how struggling economies can be transformed, it said.
The first report, titled the Growth Challenge, makes the case for economic modelling to be more “dynamic”, meaning it takes into account the long-term effect of legislation like tax reforms.
If over the next two decades the UK economy could achieve annual GDP per capita growth of 3% ... the economy would be 65% bigger by 2040.— Growth Commission report
It comes shortly after Chancellor Jeremy Hunt said he is prioritising tackling inflation over tax cuts, in a blow to Tory MPs clamouring for a pre-election giveaway.
“As of today, UK GDP per capita is £36,568, compared to £52,996 in the US. The average American is earning a third more than the average Briton, roughly a £10,000 gap in annual spending power between the two, which represents a difference of £24,000 between the average household in the UK and the US,” the report says.
“If over the next two decades the UK economy could achieve annual GDP per capita growth of 3% – as was achieved in the UK in 1950s and is currently being achieved in a country like Poland – the economy would be 65% bigger by 2040. This translates in today’s money to nearly £15,000 more for each person to spend each year; and additional tax revenues of £670 billion.”
Growth was the dominant preoccupation for Ms Truss during her bid to become Tory leader and subsequent short-lived spell in No 10.
Ms Truss railed against the “anti-growth coalition”, as she and her chancellor Kwasi Kwarteng sought to use a mini-budget – which triggered turbulence in the financial markets and drove up mortgage rates – to boost growth in the British economy.
Following the report’s publication, Mr Singham said: “For people in an economy like the UK to be £10,000 worse off than the average American is shocking.
“It doesn’t have to always be like that.
“Opportunities for growth are abundant and increasing.
“Failure to act will see us miss out on the opportunities presented by huge technological advances that we have seen especially over the last 20 years.”
Fellow co-chairman Douglas Williams said he hoped the report would be the beginning of a “fruitful, non-partisan exploration of the reasons behind this crisis and what governments around the world can do to reinvigorate our economies and improve lives”.
