Foundations: Why Britain has stagnated (Ben Southwood, Samuel Hughes, Sam Bowman)
Between 1980 and 2008 Britain returned to its position as one of Europe’s most successful large economies. For the most part, Tony Blair’s governments were able to sustain these advances. In 2005 Britain’s GDP per capita was just 2.8 percent behind Germany’s, in purchasing power parity terms, and fully 20 percent higher in US dollar terms, according to the World Bank. Penn World Tables, the other major source, have the UK overtaking Germany on GDP per capita in the mid-2000s.
Britain’s relative success during this period is clearest when compared to other major economies. The chart below shows GDP per capita in France, Germany, Italy and the UK as a percentage of US GDP per capita. It shows Britain, after decades of relative stagnation, beginning to converge on the United States and overtake the other European countries from the early 1980s. Britain’s change of fortunes under Thatcher, and continued improvement under Blair, is clear.
But crucial parts of the economy were still left unfixed – notably land-use planning policy, which Thatcher’s Environment Secretary Nicholas Ridley had tried and failed to reform, and which Tony Blair’s government was unable to make a dent in either.
This left Britain with latent weaknesses that have become hugely problematic over the last quarter of a century. Since the 1990s, Britain has experienced rapid population growth, after decades of demographic stability, and big shifts in prosperity from some parts of the country to others. The decision to transition away from fossil fuels has created the need for huge quantities of new energy infrastructure, recently exacerbated by the war in Ukraine, but by no means beginning then. Across the developed world, great metropolitan agglomerations have become even more economically important. London has been among the biggest winners from this trend, in spite of the obstacles in its way.
What Britain needed in the last 25 years above all was a huge amount of building – of homes, energy supply, and transport infrastructure. Without it, Britain has fallen behind, weighed down by a development system that worked badly even in the 1950s and 60s, and that is positively disastrous today.