Thursday, 16 July 2020 saw the launch of the Herefordshire 2030 project.
The event was chaired by Herefordshire Councillor, Diana Toynbee, and the speakers were Matthew Taylor, Chief Executive of the RSA and Mark E Thomas of the 99% organisation.
The event was recorded, and here is a link to the video.
Meanwhile, here is an approximate transcript of Mark’s presentation.
Matthew talked about doing things differently after the crisis. Let me start by explaining why I believe that this is such an important time to step back and take a fresh look at how we are running things.
Actually, there are at least three reasons:
- As Matthew said, we are in the middle of a pandemic: around 65,000 people have died from the coronavirus in the UK so far, and disproportionately they are the most vulnerable – the poor, the elderly, and front-line workers; and we have just seen another outbreak in Herefordshire:
- we have now had over 10 years of mass impoverishment in the UK: most people in this country are about 5% poorer today than they were in the year 2007 even though last year, the economy was slightly bigger than it was in 2007 – the pie has grown a little, but most people’s slices have shrunk; and that applies as much in Herefordshire as anywhere else;
- although to some extent the two points above have dislodged it from the front of some of our minds, we are still in the middle of a climate emergency – and there are a lot of people here who are still recovering from February’s flooding, so it is still at the front of their
Our analysis shows that, if we don’t change how we run things, we shall see further economic and environmental damage – and the younger generations and the most vulnerable in society will be the biggest victims.
On current trends, by 2050 the UK would look a bit like South Africa today: a small wealthy elite who live surrounded by expensive security which protects them from the mass of the population who are living in, or not very far away from, poverty.
Can we avoid that future and instead create a really attractive future, where our children can expect to be far better-off than their parents, rather than – as at present – looking set to be the first generation in living memory to be poorer than their parents?
Can we build a world where most people can afford to buy their own house, where there are opportunities for good jobs, not just low-paid, insecure, gig-economy jobs, and where people can shape their own future in a clean, green world?
The good news is that we can, if we are prepared to think differently:
- firstly, we should not panic: some voices on the right (though by no means all) tell us that the level of government debt is so high that we need more austerity; and some on the left (by no means all) tell us that we must forget about the whole idea of economic growth – fortunately they are both wrong, and that gives us much more freedom of action;
- secondly, we should have rational policy-making to grow the pie faster and share it more fairly; and
- thirdly, we should be prepared to think creatively and experiment with some counterintuitive ideas.
These points apply to the UK as a whole; and they also apply to Herefordshire.
A lot of the change that 99% has identified as needed to create that attractive future is top-down policy change by central government.
But fortunately, there is also enormous scope for bottom-up improvement, driven at the local level.
And that’s what this project is about.
To illustrate my three points, I’m going to talk a bit about the UK, before I get on to the reasons for launching the Herefordshire 2030 project.
My first point was that we shouldn’t panic.
It is tempting to panic.
You may well have read in your newspapers about the ‘ruinous’ levels of government debt, about the risks of ‘economic Armageddon’, about how we would be placing an ‘intolerable burden on our children and grandchildren’ if we don’t dramatically cut government spending.
And you may have heard people saying that to save the planet, we need to jettison the idea of economic growth altogether.
If we believed these two ideas, then the future would indeed look grim: we would be facing a shrinking economy with no safety net and possibly no NHS.
Fortunately, the facts don’t support either of those ideas: they tell us that we should not be worried about government debt and that economic growth is not incompatible with saving the planet.
Let’s start by looking at the debt.
Most of the data on this slide come from the Bank of England, which has compiled 300 years of economic history for the UK. At the very end come estimates from the Office for Budget Responsibility. As you can see the OBR is estimating that debt is around 100% of GDP. That means the government now owes almost £2 trillion.
Did you know that almost £750 billion of that is owed to the Bank of England … which is part of the government? It’s money the government owes to itself!
Is 100% debt:GDP a problem? There are already many voices telling us that 100% is ruinous and that we need to prepare for another round of austerity.
But that’s not what the rest of the data show.
In fact, 100% is not staggeringly high, it’s not even rather high, it is almost exactly the average level of debt that the UK has held over the last 300 years. There is no factual basis for the debt hysteria.
In fact, even if the debt went a long way above a hundred percent, there would still be no reason for hysteria. Just before the Industrial Revolution really took off, around 1820, debt to GDP was over 200%. Immediately before the Golden Age Of Capitalism (the post-war period 1945 – 1980) debt to GDP was over 250%.
These were the two most successful periods in the UK’s economic history. Very high debt is demonstrably not an obstacle to growth. And the growth itself is the only way to reduce the ratio of debt:GDP.
But it would have been easy for Clement Attlee to panic in 1945 and conclude that we couldn’t afford to create the NHS. Thank heavens he kept his nerve.
So I think you will hear a lot of noise about ‘ruinous levels of debt’ and the supposed ‘need to get government finances under control.’ Almost all of that will come from politicians and journalists; and almost none will come from economists at reputable universities – and now you can see the reason.
But what about economic growth? Isn’t it true that economic growth harms the environment? Not necessarily.
Let’s start by looking at the issue of good growth and bad growth.
We can split everything we do, all economic activities, into three ‘buckets’:
- the good bucket which contains all activities that do not harm the environment: planting trees and insulating houses, for example – doing more of these things would grow the economy, would create jobs, and would be good for the environment;
- the could-be-good bucket which contains activities which, though desirable in themselves, have at least some environmentally harmful consequences – some agriculture, public transport and energy generation – we should transform these activities before we seek to grow them;
- the bad bucket which contains activities which we would be better off without – fossil fuels, for example.
If we just grew all three buckets indiscriminately, that would be bad for the environment.
But once we know what sits where, we can grow the good bucket quickly; transform the could-be-good bucket – for example by switching to renewable energy for electricity generation – and shrink the bad bucket as fast as we can. That will be good for the environment.
When we look at the economy of Herefordshire that way, our first estimates suggest that the picture looks a bit like this.
And this is really good news. You can see that about two-thirds of our economic activities are already in the good bucket – only very minor transformation is required.
And virtually all of the rest is in the could-be-good bucket. There is major transformation needed – but in principle we can see how this would be done.
So this picture is a really good news. For Herefordshire, as for the UK as a whole, if we target investment at growing the good bucket and transforming the could-be-good bucket, while shrinking the bad bucket, we can both produce economic growth and reduce emissions extremely rapidly.
And that brings us on to the question of what sorts of policies we need.
Rational Policy making
Although it’s true that policy formulation is very complex, fundamentally there are only four types of policy. Every policy either grows the pie or it does not grow the pie; and it either shares the pie fairly or it does not.
That gives us this picture.
At the top right are the shared growth policies which both grow the pie and share it fairly. Take fundamental research, for example: we have been gradually funding less and less of this – and yet it is an engine of our future prosperity. Or education; or infrastructure; or healthcare – all of these things help everyone in society. We want to see far more of these.
At the top left are policies which do grow the pie, but they don’t share the benefits fairly. Very aggressive automation, for example, could enable us to produce lots more valuable goods and services, which might be good for society as a whole, but would also lead to many job losses. If we do nothing balance these policies, the pie may grow, but many people will find their slice shrinking dramatically. We need these policies to be balanced.
And this is why we need the policies on the bottom right. These policies balance type I policies so that everybody shares in the benefit that growing the pie can offer. So if we did have aggressive job automation over the next 10 years, some of the casualties could be mitigated by retraining and direct job creation schemes, and some of the balancing would need to come from a strengthening of the safety net. A good policy portfolio is a balanced policy portfolio.
A recent example is President Macron’s attempt to introduce a fuel tax surcharge in France to help tackle climate change. It was probably a good idea for the economy as a whole, and certainly for the environment, but it hit the poorest in French society disproportionately hard. It may have grown the pie, but the slicing was not fair.
As a result the gilets jaunes movement sprang up and Macron was forced to abandon his policy. Had he been a bit more intelligent in his policy formulation, he would have seen the need for a balancing policy. It would have been easy for him to announce a green dividend to be paid to the poorest 25% in French society, funded by a fuel tax increase.
Finally there are the vulture policies which neither grow the pie nor share it fairly. A no-deal Brexit for example. The government’s analysis shows that no-deal Brexit would be expected to shrink the pie. When that happens many people are bound to suffer, even if some hedge fund managers do extremely well. We simply should not implement vulture policies.
So if we look back over the last 10 years, we can see that the main reason for our problems is that we’ve had a preponderance of Type I and Type III policies, and far too few Type II and Type IV policies.
Some of these policies will need to be changed at the national level, but there is also enormous scope for local action.
And that brings me on to my third point: thinking creatively.
Local authorities have seen their budgets cut dramatically, and this has made it difficult for them to provide the local services that populations need. But some have found creative ways around these challenges.
Let me give you just one example.
Something dramatic has been happening in Preston. In 2015, Preston was one of the most deprived cities in the UK. In 2019, PricewaterhouseCoopers did an assessment of the most improved communities in the UK; and their number one was Preston.
Preston councillor, Matthew Brown, said
“People [were] angry with how the economy was structured… Poverty was entrenched. We were in the bottom 20% …In the most prosperous ward you would expect to live to 82, and other wards 66.
What we are doing now is in response to that, it’s about how we can change local economies to work for people who feel excluded.”
The Preston model is complex in detail, but simple in essence: spend more money locally to regenerate the local economy.
The results are dramatic. Even though like most other local authorities, Preston’s total budget has fallen by 17% over the last 4 years, the amount that it has managed to spend in-county has actually risen by almost 70% percent. That is an additional £200 million spent in the local economy.
Preston’s unemployment rate was down to 3.1% last year – compared with 6.5% in 2014, and it has seen improvements above the national average for health, transport, and for skills.
Preston still has far to go, but this is a remarkable result, which has begun to be copied by other local authorities. In fact, Herefordshire itself is already exploring this model, although it is too early for us to be able to present the results.
Preston – and indeed many other examples – shows that it is possible, even locally, to challenge ideas that might be seen as fixed nationally, globally, or even by cast-iron laws of economics.
Who would have thought that procuring other than from the cheapest source might make economic sense?
So, surprising things can be done, even without support from outside the region.
What can be done in Herefordshire? That is what the Herefordshire 2030 project aims to find out. We want to show how by 2030, we can make Herefordshire significantly more prosperous than today – perhaps 20% or more – at the same time as being greener and fairer.
Over the next four or five months, a team of volunteers – most but not all from Herefordshire – will be working to answer that question. And we would like to invite any of you who are watching today who would like to join us to help.
A lot of people in Herefordshire have already put a great deal of thought into these issues. Some but not all of them are on the team. If you have ideas that you think would make Herefordshire an even better place by 2030, please do get in touch. We would love to hear from you.
Not only do we want to make Herefordshire so successful that the Hereford model becomes something which other regions talk about and aim to copy, we want to create a toolkit so that other regions or cities who want to go undertake similar projects can do so.
So if you would like to help make Herefordshire a model region, please do make contact here and let us have your ideas.
Thank you very much.