Top economist schools Channel 4’s Cathy Newman over Rachel Reeves’ policy plans

Mariana Mazzucato, professor in the Economics of Innovation and Public Value at University College London, challenged chancellor Rachel Reeves on public investment, schooling Channel 4‘s Cathy Newman in the process. All this was while the Labour conference was going on.

The UK has some of the lowest investment levels

Speaking at the Labour conference, Mariana Mazzucato told Newman:

had the public sector invested as much as the average of the OECD in the last two decades, we would have invested 500 billion more. So we’re talking about a massive shift that we need.

Indeed, public investment in the UK is almost 50% lower p29 than the average OECD developed country, which has 38 members. When it comes to a percentage of GDP, the UK publicly invested 3% in 2022. That’s compared to Slovenia, which invested 5.5%, Estonia at 5.6%, Sweden at 4.9% or Norway at 4.2%.

As the Economy 2030 inquiry report notes p29, we should be investing in our future, not living off our past.

And as Mazzucato also points out, spending for the sake of it is not the answer:

by the way, this country spent 2.5 billion on consultants… So saving where we can save, trimming the fat, of course, that’s important. No one is asking to spend for spend sake, but we shouldn’t be saving on what’s actually required to strengthen the social fabric and the productive and innovative fabric.

There are many issues the UK faces. Climate change is one. Reeves scrapped plans to invest £28bn in green solutions, which was already much lower than what’s necessary.

And when it comes to healthcare spending, funding the NHS’ Long Term Workforce Plan would cost around an extra £20bn more than commitments from Labour. That’s instead of increasing profit-motivated private healthcare companies’ role in the NHS, which Labour plans to do. Private provision costs the NHS £10m a week in company profits. It remains to be seen how Labour will actually cut NHS waiting times, or if the corporate media will bother to challenge them on it.

Investment can save money

At Labour conference, Mariana Mazzucato further stated that targeted public spending actually saves money:

the key thing is to always remember that the cost of inaction by not acting now actually increases the cost later. So what might look like a saving by investing just a little bit or even cutting, ultimately if you’re actually reducing the social fabric of the country, but especially not becoming a lead innovator, increasing research and development spending on both the public and the private side, that will hurt us on competitiveness.

Indeed, investing in flood defences, for example, can save up to £13.10 for every £1 spent because of the damage costs saved.

Addressing delegates, Reeves had rhetoric on increasing capital spending, but whether that will come to fruition remains to be seen:

It is time the Treasury moved on from just counting the costs of investment in our economy to recognising the benefits too. Growth is the challenge and investment is the solution.

Reeves has to be seen to be taking concerns seriously. That coupled with Starmer’s abysmal record on the truth, means we should take what they say with a pinch of salt. At the same time, pressuring the government to act, as Mazzucato is attempting to, remains an option.

Featured image via Channel 4 – YouTube