Major new study calls for policy re-think

Citation

(1999), "Major new study calls for policy re-think", European Business Review, Vol. 99 No. 5. https://doi.org/10.1108/ebr.1999.05499eab.002

Major new study calls for policy re-think

Major new study calls for policy re-think

Keywords: Long-range planning, Economic systems

A new book published today by the independent Policy Studies Institute makes a systematic critique of past and present public policies in relation to the needs of the decades ahead. The book, Britain's Future. Issues and Choices, by Jim Northcott, examines the practical policy implications of seven key longer-term issues identified in PSI's acclaimed Britain in 2010 report and argues that the laissez-faire policies of the past two decades will need substantial further modification by the New Labour government if we are to meet successfully the challenges of the next century.

Some of the key findings from the wide-ranging analysis are listed below.

Ageing population

By 2040 the number of people of working age available to support each person over 65 will fall by a half. This will put pressures on the National Health Service and put up the cost of pensions. But plans for going over from the present "pay-as-you-go" system to individual "funded" pensions will make the problem more difficult, by making one generation pay twice over, once under "pay-as-you-go" for their parents' pensions, and then a second time in contributions to "fund" their own.

Social division

Since 1979 the income gap between the richest 10 per cent and the poorest 10 per cent has more than doubled and, if this trend continues, by the year 2010 incomes in Britain would be as unequal as in Brazil. The sharp rise in inequality, equalled only in the USA and New Zealand, threatens future social cohesion, but can be averted by changes in recent policies for incomes, social security and taxation.

Unemployment

Persistent high levels of unemployment are bringing a heavy cost in personal hardship, lost output, government expenditure and lost tax revenue of more than £16 billion a year - equivalent to more than one fifth of the yield of income tax. This is neither inevitable nor "a price well worth paying" - new policies, in collaboration with our European partners, can, over a period, bring a return to full employment.

Global economy

The increasing globalisation of economies is bringing new opportunities, but also serious problems, for example in the form of massive money movements - turnover on a single day in the London market can be greater than the value of imports and exports over a whole year. National governments, acting alone, cannot withstand these pressures; but international collaboration, particularly in the European Union, can provide the means of dampening the speculative movements and ensuring a steadier rise in prosperity.

Environment

New policies are needed for dealing with Britain's many environmental problems and for meeting its treaty obligations to help stop global warming. It is estimated that eventually emissions of carbon dioxide (from burning coal, oil and gas) will have to be cut by 60 per cent worldwide, implying even greater cuts for Britain, the world's seventh largest emitter. Britain has greater potential resources for renewable energy than most other countries in Europe, but at present makes less use of renewable energy than any of them.

World development

Total world population is currently growing by more than 80 million (one-and-a-half Britains) each year. At 1990 fertility rates world population would quadruple between 1990 and 2050 - bringing natural resource crises and widespread famine. To avert this and to end Third World poverty, it will be necessary to re-focus international development aid on four areas identified by the UNDP and the World Bank as crucial for improving human welfare and checking the rise in population: family planning, clean water and sanitation, primary health care, and education for girls. This will not require massive new resources - merely the redirection of existing aid flows.

Defence

With the ending of the cold war Britain is no longer at risk of invasion and the worst threats in the future will come from proliferation of weapons of mass destruction to unstable states and international terrorist groups. It is now in the military interests of both Russia and the United States to work towards properly monitored complete nuclear disarmament, and for Britain to negotiate away Trident and reduce defence spending to the average of other European members of NATO.

The analysis concludes that the essentially laissez-faire policies that have been employed for the past two decades will not meet the needs of the decades ahead, because unrestrained market forces do not take account of important externalities ("there is more to life than the bottom line"), generate increasingly unacceptable inequalities, and bring ever greater speculative fluctuations which prevent stable economic growth.