Financial News

  • 31 January 2013, 14:28

EU Referendum Debate 'Damaging Economic Growth'

An influential group of economists has said the government debate over having an "in or out" referendum over Europe is damaging economic growth.

The London School of Economics Growth Commission also branded Government investment in a long-term growth strategy as "inadequate", "unstable" and "failing".

The commission's 35-page report says the debate over whether to hold a referendum "is analgous to the needless self-inflicted wounds that the US is causing in its debates over the debt ceiling and fiscal cliff".

The co-chair of the panel, Professor John Van Reenen, went further saying: "The idea of leaving the EU would be very, very damaging for the UK, so I personally think the uncertainty around having the referendum is actually going to retard growth and retard investment, so I don't think there is a strong case for having that referendum."

The report examined the key factors in fostering growth, years and even decades in the future.

The findings of the nine economists are grim. They conclude that years of under-investment in education, infrastructure and innovation has left the UK economy structurally weak, with UK institutions less able to compete globally.

They accuse politicians of "short-termism" when, in their view, investment in promoting long-term growth would reap dividends now by establishing certainty in policy direction in areas such as transport and energy.

The panel identified that the singular greatest influence on economic growth was education, holding up Germany and Finland as exemplary models.

Greater autonomy for schools, longer probation periods and a shift to more "on-the-job" assessment for teachers would help redress systemic imbalances against disadvantaged youngsters.

It concedes radical change to the way teachers are hired, monitored and fired could take 30 to 40 years to achieve.

Apprenticeships were singled out for comment with the report concluding: "Apprenticeships need to be longer, they should pay a training wage (English apprenticeships are relatively highly paid by international standards) and their administration must be radically simplified."

However, the panel stopped short of advocating a cut in apprentice wages to encourage employers to join the scheme.

It also suggests Maths and English should be a compulsory element of apprenticeships.

To boost action and investment on infrastructure, the panel is recommending a radical re-structure of the current system.

It suggests an infrastructure strategy board should be created to take a long-term view impervious to changes in government and ministers.

An Independent Planning Commission would have to deliver on that strategy, funded by a specialist "Infrastructrue Bank."

By de-politicising issues such as an extra runway at Heathrow and basing arguments purely on their economic merits, the Growth Commission believes genuine progress would be swift.

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