The five key areas in which investment is essential to ensure a post-pandemic recovery that “builds back better”, have been laid out in a new report.
By taking action on infrastructure, education, innovation, the environment and local governance, the government can boost the confidence of households and businesses, and avoid fears of an economic depression becoming a self-fulfilling reality, the report authors say.
Strategy, Investment and Policy for a Strong and Sustainable Recovery: An Action Plan – which is published today by the Centre for Economic Performance (CEP) and the Grantham Research Institute on Climate Change and the Environment, both at LSE - warns that the Covid-19-induced recession must not mean a return to austerity.
In planning for recovery, the authors advocate a broad and bold strategy that can get the UK on track to reach net zero emissions by 2050. Such a strategy should also focus on helping to improve outcomes for disadvantaged children in school, providing job guarantees for workers displaced in the crisis, strengthening the UK’s research and development capabilities and investing in productivity-enhancing sustainable infrastructure projects that create more liveable cities, cleaner air and improved wellbeing.
The report sets out five key areas where investments are necessary:
- Physical capital – strategic investments in projects, such as retrofitting buildings to make them more efficient and resilient. This would create new jobs and build capacity for a smart, digital future. Such investments could be boosted by establishing a new National Investment Bank to leverage private finance.
- Human capital – investing in education and skills at all ages, with particular focus on improving outcomes for disadvantaged students, which would help to ‘level up’ opportunities and regions.
- Knowledge capital – revise the Industrial Strategy and accelerate plans for clean innovation. There is also a need to strengthen research and development capabilities.
- Natural capital – investing in land restoration, tree planting and water management, supporting this with projects to reduce air pollution and expand green spaces.
- Social capital – developing a vision for an inclusive and sustainable recovery will need the involvement of local businesses and communities. Local policy change can help embed some of the positive aspects of the recent behavioural changes, such as family-friendly working habits.
A strong green recovery programme at home could also be the foundation of credible international leadership, as the UK prepares to take on the COP26 presidency and G7 presidency. There is an urgent need for an internationally co-ordinated response to the global economic crisis to prevent a permanent slide in living standards in emerging and developing countries, the report states.
Professor Lord Nicholas Stern, chairman of the Grantham Research Institute and co-author of the report, said: “Compared with the global financial crisis of 2008/09, the Covid-19 crisis has already had both a deeper and broader economic impact, alongside the tragic direct consequences of the health crisis.
“While the rescue phase has been focused on protecting as many jobs as possible, policy-making for the recovery should seize this opportunity to build back better by creating strong, inclusive and resilient growth which offers high quality employment opportunities and the jobs of the future. That will offer much more security than pursuing the jobs of the past. The continued commitment to a net-zero emissions trajectory will also be critical to the UK’s economic and environmental wellbeing in the coming years, including not only sustainable growth but also cities where we can move and breathe and ecosystems which are robust and fruitful."
Sam Unsworth, policy analyst at the Grantham Research Institute and co-author of the report, said: “The ‘shovel readiness’ of investments for the recovery package is a critical topic of debate, particularly those needed to reach net zero emissions. But this is primarily a function of government willingness. With the right level of commitment, the UK can move quickly to deliver these investments and simultaneously deliver on the government’s stated objectives of levelling up across the UK; boosting productivity; investing in infrastructure; reaching net zero greenhouse gas emissions by 2050; and forging a new role for ‘Global Britain’.”
Anna Valero, ESRC Innovation Fellow at the Centre for Economic Performance and co-author of the report, said: “Innovation is crucial for enabling the global community to both deal with the Covid-19 crisis and plot a course out of it. Investment in innovation and its diffusion is required to achieve sustainable long-term growth and will also be vital to address climate change and other societal challenges. This can be enabled with an increased focus on skills, and direct investments and incentives for innovation.”
The full report is part of the CEP’s Covid-19 analysis series. It is available here: Strategy, Investment and Policy for a Strong and Sustainable Recovery: An Action Plan.
It is published ahead of a special event on ‘Strong, sustainable and resilient recovery: the evidence and a pathway to action’ for London Climate Action Week, including a presentation by one of the authors, Lord Stern.