Is the UK considering an overhaul of its economic structure? With the rise of household debts, property prices, and rampant inequality, the Institute for Public Policy Research (IPPR) think tank is debating whether the country’s economic model needs to be changed. The Business Insider investigated the IPPR commission’s report, which looks at whether a balancing of power is necessary to address the failure to increase living standards since the 2008 financial crisis. The report notes that it’s impossible to escape the palpable feeling that the economy is not working for most people if you travel across the UK.
The IPPR Commission on Economic Justice, which includes the Archbishop of Canterbury Justin Welby, along with various industry leaders, note that the UK is being held back by a business culture dominated by short-term profit taking, weak levels of investment, and low wages. “Achieving prosperity and justice together is not only a moral imperative – it is an economic one,” Welby said.
Legal and General’s fund manager, and also one of the members of the commission, Helena Morrissey, also agrees with the report saying, “I don’t think you’ll find many in business, or the City for that matter, who think the economy is perfect… Like me, they think we need a more responsible and fairer form of capitalism.”
The Guardian lists three of the 73 recommendations from the IPPR report, which includes: a £1 rise in the minimum wage, the replacement of inheritance tax with a £9 billion-a-year “lifetime gifts” tax, and greater economic devolution across the UK. The commission’s report further argues that the shareholder-driven model of capitalism is outmoded and could be part of the reason why Britain is slipping down the international league tables for productivity. Although Britain is at record-levels of employment, low wage growth has been cited, among others, as a reason for the Brexit vote. The vote to leave the EU has in itself caused a debate on the future of the UK’s economy.
While the IPPR report has merits, it also has its weak points, too. The New Statesman claims the weakness of the report lies in its failure to detail the obstacles it faces, like the opposition it faces in the form of a finance sector that opposes the creation of a fairer Britain. Another barrier the New Statesman points to is the mainstream economics hardwired into the Treasury, which has a doctrine that tells them that state intervention, micro-scale business reform, and borrowing to invest are not long-term cures.
For international companies and multinational investors, the current state of the UK economy creates uncertainty about where they should put their money. The Economic Calendar featured on FXCM shows how different events can affect the UK’s economy, with experts keeping a close eye on customer inflation expectations, goods trade balance, and manufacturing production. All of these factors affect the value of the pound, with bearish readings leading investors to become more cautious, which in turn, can have huge effects on the economy.
Transforming the UK’s economic status to one that is fair and favourable for all might be a long way off, but it’s not at all impossible. It would take a lot to fulfil the IPPR’s plan, but with the UK already having to reassess its economic model in the near future, it could be a viable option to counter the rising inequality in the country.