A lack of “long-termism” in Government economic policy is leaving businesses unable to plan and invest for the future, a cross-party group of MPs has warned.
The Commons Treasury Committee said there had been too much “chop and change” and questioned whether former chancellor Rishi Sunak’s Plan for Growth represented an active strategy for co-ordinating policy across Whitehall.
The findings are potentially a setback for Mr Sunak, who is standing to replace Boris Johnson as prime minister in the Tory leadership contest.
They may also be seen as a reflection of the increasing tensions which had arisen in recent months between No 10 and the Treasury over the direction of economic policy.
In its report, the committee said the expert witnesses it took evidence from were “mostly unpersuaded” by the Government’s arguments for abolishing its Industrial Strategy in Mr Sunak’s 2021 Spring Budget and replacing it with the Plan for Growth.
“More importantly, we are particularly concerned at the ‘chop and change’ and lack of long-termism in growth strategy and policy, without which businesses themselves are unable to plan and invest themselves,” it said.
“It was suggested that there was a lack of detail and a lack of collaboration with businesses and regional bodies, and that there was no overall strategic vision of what the UK’s economic problems were, how they should be prioritised, and what policies and interventions were therefore effective.”
The committee said it was concerned that there had been no replacement for the Industrial Strategy Council, which had provided oversight and evaluation of the Government’s policies for growth and had been “a force for consistency and long-termism”.
Given the large amounts of money and time that were spent on devising growth strategies, it said it was important to have an “overarching strategy” to co-ordinate activity across departments and prevent policy “fragmenting”.
“This function may well sit best in the Treasury. However, it is unclear to what extent the Plan for Growth is an active strategy driving the Treasury’s activities as the co-ordinating economics ministry,” the committee said.
“As a result, there is a risk that growth strategy and policy are fragmenting across departments.”
While abandoning the Plan for Growth would only exacerbate the lack of long-termism and consistency in policymaking, it said there should be a renewed effort to implement a co-ordinated growth strategy across government.
The committee also warned that domestic factors – including Brexit and the weakness of sterling – meant inflation may not necessarily fall back to the Government’s 2% target when global energy prices finally stabilise.
The committee chairman, Conservative former Treasury minister Mel Stride, said: “We have a new Chancellor and shortly will have a new prime minister.
“Getting a grip on productivity will be key to kickstarting economic growth and stimulating greater business investment in the UK. The evidence that we received suggests there needs to be greater stability and long-term certainty in Government policy-making.”