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Boosting prosperity is key to tackle the cost-of-living crisis

Boosting prosperity is key to tackle the cost-of-living crisis
5 min read

There is only one way to say it. The outlook for families across the United Kingdom this autumn is bleak. But if the new prime minister is serious about tackling the cost-of-living crisis they must grasp the nettle and focus on long-term policies to boost prosperity, as well as short-term responses to the current crisis.

Poverty is already on the rise and with no sign of inflation abating, interest rates set to rise and energy prices continuing to soar, families are facing a perfect storm which will leave them having to choose to eat or to heat.

There is a clear need to target our efforts on those who need the help most. The best way of doing this is through Universal Credit

There are no easy solutions and with time before the new prime minister arrives, there is a risk of over thinking things. Ultimately, with costs rising most for those with the lowest incomes and a significant challenge of managing the public finances ahead, there is a clear need to target our efforts on those who need the help most. The best way of doing this is through Universal Credit. This policy is already targeted at those with the lowest incomes and investment in Universal Credit does not need new schemes to be designed or new delivery mechanisms to be created. In short, it’s the best way of getting money quickly to the people who need it most.

If further support is needed, perhaps for slightly higher-earning families not on benefits, the key here is to ensure that policies do not further distort the market or push inflation higher still. Squaring the circle will be difficult here. The new prime minister will ultimately have to realise that, without fundamentally damaging the economy, not everyone can be supported through times of economic upheaval. This is going to be a tough winter and across the country people will feel the squeeze.

That is why it is also important not to focus purely on managing the autumn. Households across the UK need policymakers to simultaneously tackle the longer-term issues facing the UK, which are at the heart of the current crisis. Only by doing this can we paint a more positive vision – highlighting that the current crisis is just that: a stepping-stone to a more prosperous future.

This is the focus of 2022’s UK Prosperity Index (UKPI), which the Legatum Institute is about to publish. The government should be using this tool to deepen its understanding of the issues facing the UK. It shows that, while there is much to be optimistic about, we cannot escape the fact that across many of the pillars of prosperity, the UK (and its towns and cities) are lagging compared to our competitors and, worse still, simply going in reverse. This makes us all poorer, diminishes resilience and leaves the country unprepared for shocks like the one we are currently facing.

Most concerningly, the people, families and places that are struggling the most right now are also those with the poorest health, the lowest productivity and the least stable families. That’s why, whoever is prime minister come September, must focus on the long and short term. Doing so will take a step change in action across many areas of policy and more concerted action on domestic social policy than we have seen for decades.

After decades of Jobcentre Plus churning people between low-paid insecure work and benefits, we need an employment service focussed on boosting productivity, increasing incomes and meeting employer needs, rather than just a gatekeeper for the benefits system.

For too long talk of family stability has been side-lined as being too interventionist, failing to recognise the benefits of diversity or simply, not needed. We need to cut through this debate. A recent IFS report shows why. Some 44 per cent of children born at the start of this century had not lived with both of their parents through childhood. This is not an experience shared by other Western European countries and, in the words of the authors, this parental separation “…lowers the well-being of families and diminishes the resources available to children, with legacies that reverberate into adulthood”. Turning this around will not be easy, but the first step is to acknowledge that it needs to happen. Until we accept this, we cannot have a robust and evidence-based debate on how to improve family stability.

The UKPI clearly shows that the UK’s health is depleting its prosperity. Significant improvement is needed, and not just in the NHS. We need to recognise that our approach to the national discussion on health needs to go beyond a sticking plaster when something goes wrong. We need to ask why our health is declining and why the least prosperous areas are those with the poorest health and then develop approaches to turn this around.

Those are just three areas where the new prime minister could focus, alongside tackling the autumn and winter crisis.

We need a reforming prime minister, one who is willing to do what’s right to help people through the autumn, whilst ensuring that our collective sights are set on a more prosperous Britain for the long term. Whoever it may be, I hope that they accept that challenge.

 

Baroness Stroud is a Conservative peer and CEO of the Legatum Institute.

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