The Alcoholics Anonymous prayer that could make Britain richer

“God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.” The serenity prayer is most commonly associated with Alcoholics Anonymous, but it came to mind this week as I pondered one of the most important and most perplexing policy questions of our time: what should the government do to promote economic growth?

Some of the forces shaping our economic prosperity are straightforwardly outside of the government’s control. A mid-sized, open economy like the UK’s is liable to get buffeted by global shocks, which can upset even the best-laid of government plans. The ongoing disruption to energy supplies from the Middle East is a case in point. There’s not much to be done about population ageing, or the rise of state-sponsored Chinese manufacturers, or the UK’s geology and geography.

Nor is there anything the government can do about the historic decisions that brought us to this point. The UK’s productive capacity is largely a function of its existing workforce of around 30 million people (who have, for the most part, already been educated and trained) and our existing £5.6tn stock of physical capital (things like buildings, pylons and roads). Any new policy initiative or spending programme can shift those only slowly. Policymakers need the serenity to accept that achieving economic and social change takes time.

Relatedly, we need to accept what the UK is good at – namely, services, from education and accounting to film and architecture – and lean into it, rather than hark back to a bygone era or chase unrealistic ambitions.

But it’s not all about serenity. There absolutely are things the government can do to make the UK a richer country. This is where the courage comes in, because there’s generally a reason why we haven’t done them already. Doing pro-growth things tends to incur political costs. As the economist Giles Wilkes puts it: “If it is easy, it probably isn’t pro-growth.”

Take public investment. Rachel Reeves and those around her have argued – persuasively, in my view – that low public investment has contributed to Britain’s economic weakness, and that we should aim to be a higher-investment country. We can borrow for some of this (and we are) but this has limits. Being a higher-investment country ultimately means being a higher-saving, lower-consumption country – at least until the benefits of that investment start to flow in.

That’s neither an easy sell nor an easy win. In its flagship Ending Stagnation report, led by now-pensions minister Torsten Bell and published in late 2023, the Resolution Foundation made the case for higher investment and for the implications of that to be confronted with an “unflinching eye”. The argument then was that extra borrowing from abroad is too risky, and that the government should instead look to increase domestic savings via higher minimum contributions under pensions auto-enrolment.

Needless to say, that hasn’t happened – presumably because it would mean a hit to household consumption. More generally, it’s notable and instructive that of the other pro-growth measures proposed in that Resolution Foundation report, the government has been most keen to adopt those (such as increases in statutory sick pay) whose costs are borne by employers. It’s political courage and clarity, not clever policy ideas, which is in short supply.

In some areas, government policy actively hinders growth and economic dynamism, and could and should be changed. The dysfunctional and overly adversarial planning system makes it too difficult and expensive to build. Stamp duty makes it more costly for both families and firms to relocate. The VAT registration threshold discourages small firms from growing. Eye-watering visa costs make it harder to attract the global talent critical to innovation in science and technology. Many other policies fall into this bucket. Few can be fixed cheaply or painlessly – but fix them we must. Each may be small in and of itself, but these things add up.

The government also needs the courage to back the places that want to grow. If London won’t build houses, and the wider south-east resists the building of more or less anything, leaders elsewhere in the country can reasonably ask why public funding for transport, R&D and national institutions can’t be diverted to the cities that will.

When it comes to energy, the debate about licensing in the North Sea is unnecessarily polarised, and its importance is overplayed. The North Sea is a mature, declining basin and is not the solution to our energy challenges. There is a pragmatic argument for extracting more gas, in particular, on the grounds that it would provide a modest but helpful boost to energy security, tax revenue, and the balance of payments during the transition to clean energy. Such decisions can also be symbolic, and help to shift the narrative or “mood music” among investors. But the medium-term focus really ought to be on how to accelerate and finance the shift to electric power.

If we’re serious about growth, we need a government ruthlessly and relentlessly focused on the things it can change, and willing to take on political battles in pursuit of a clear end goal, along with acceptance from both politicians and voters that results will take time. Serenity, courage and wisdom. A bit of good luck wouldn’t go amiss, either.

Photograph by Getty Images