UK

“Sharing the proceeds of growth” has always been a nice, if also a little vague formula. It does not set the degree to which growth should be shared between tax cuts and public spending. Unfortunately – and almost by definition – it becomes an impossible task if there is no or only little growth and consequently not much to share.

The British seem to be fixated with house prices and follow the development of the property market like the weather report or the latest football results. Prices have been going up and up in the past, and if annual house price inflation occasionally drops to a mere five or six per cent, commentators clamber ever more frantically to predict a slump.

British towns and cities in receipt of substantial urban policy funding designed to bring them up to the economic standard nationally are, in fact, declining when judged by a whole range of indices. That is the worrying conclusion of Cities Limited which calls into question the value of the plethora of urban regeneration schemes delivered by a myriad of different agencies. Spending on the 14 core urban regeneration schemes in the last decade totals £30bn of public money.

Insgesamt sind die Briten heute nach 15 Jahren Wirtschaftswachstum so hoch verschuldet wie nie zuvor. Das werden sie spätestens dann schmerzlich merken, wenn sich der Wohnungsmarkt abkühlt. Denn dass auf den langen Immobilienboom eine Korrektur folgen wird, gilt als sicher. Dann wird sich auch zeigen, was der Aufschwung der vergangenen anderthalb Jahrzehnte wirklich wert war.

All this presents UK economic policy with a challenge: to improve our infrastructure while reducing tax and regulatory burdens. This would increase the UK’s still disappointing productivity. In the long run, this is the key to economic growth. An economy built on lower taxes, lighter regulation and better infrastructure will be more sustainable than one built partly on rising house prices and extra debt.

If Britain cannot shift the balance towards more local incentives and decision-making in planning, then good and affordable housing will remain something that the British will only be able to see on TV – when reporting from Germany, says Oliver Hartwich

The Chief Economist at the Policy Exchange analyses the British economy’s performance over the past decade and argues that all is not well for the UK economy. He argues we are heading in the wrong direction and urges for reform in key areas.

Private and public overspending has fuelled Britain’s economic growth of the past but it is now high time to rid ourselves of our sweet tooth for debt. The Chancellor is right but his words are just a little hollow without an acknowledgement that the Government has contributed to the current credit crisis.

The forthcoming comprehensive spending review would be a good opportunity for Mr Darling to follow his words with action. If his own finances were in order, his advice to the private sector would carry greater weight.