The Week, 4 March 2022

As the world continues to watch in horror at Putin’s invasion of Ukraine, the strength and courage of the Ukrainian people is awe-inspiring. If you would like to help, but are not sure how, you can donate to the?Disasters Emergency Committee’s fund?— and the Government will match donations up to a total of ￡20 million.

The cost to Ukraine of this unprovoked war is already unimaginable, but as politicians across the globe have been warning, the repercussions will be felt far and wide. This week, The National Institute of Economic and Social Research published?analysis?of the economic impact of the war, predicting a ￡1 trillion hit to global GDP. For the UK, GDP growth this year will likely be 0.8% lower, and inflation will average 7%. Risks of recession in the West are “mounting”.

This is the price we must pay to, as the PM?put it, “defend the cause of peace and justice”, but as the cost of living crisis deepens, the Government should look at what further steps it can take to alleviate the impact on the poorest households.

Away from war, we have had a flurry of think tank reports. The Institute for Fiscal Studies published the?latest chapter?of their Deaton Review of Inequality, focused on ‘Firms and Inequality’. It identifies “increasing between-firm differences in productivity, wages, size and markups”, and calls for a strengthening of competition (particularly in relation to mergers and acquisitions in the tech sector) and sustainable, long-term investment in productivity boosting skills, innovation and infrastructure.

On the latter, the authors don't mince their words: “the UK suffers a kind of policy ‘attention deficit disorder’– a near-constant shifting, re-branding and elimination of policies as the political and media winds change...the almost overnight abolition of the Industrial Strategy Council in 2021 was a case study in how to waste business effort and create greater unnecessary uncertainty.” Amen. Here at?Reform?we have long argued for government to overcome its short-termist tendencies — watch this space for future work on exactly that topic!

Yesterday, our friends over at the Institute for Government published?A new statutory role for the civil service, proposing a new statute to address the “lack of a clear identity, or defined responsibilities”, which the Institute argues is impeding the effectiveness of government. One of the main objectives would be to clarify the accountability of ministers and civil servants, which is currently blurred, leading to “ministers and officials pass[ing] responsibility back and forth”. The IfG calls for: “A clearly defined objective for the civil service, with specific aligned responsibilities for its head, overseen by a Civil Service Board, [to] increase the accountability of civil servants for what they do.”

On to our recommended reads from the week...

First up is this?‘commentary’?published alongside the IFS Deaton Review chapter discussed above. Written by Mariana Mazzucato, it makes the case for an entrepreneurial state. Rather than seeing the role of the state as, “at best”, facilitating wealth creation, she argues that it should adopt a “mission-orientated” approach to investment and innovation that focuses on solving the biggest challenges facing the world (e.g. climate change). Mazzucato highlights some of the game-changing innovations that public investment has enabled (think the internet) and argues if the public sector is taking the risk by investing in early stage research, they should also reap some of the rewards when this research succeeds and leads to huge commercial success. “The different mechanisms for distributing rewards can work either directly through profit-sharing (via equity, royalties) or indirectly through conditions attached, focused more on the market-shaping role.” With the Government having established its own version of the US DARPA (responsible for the internet) — ARIA — now is the time to think carefully about how taxpayers can fully benefit from its work.

Our second read is this?article?from RUSI, written by Ed Arnold, on the “seismic” shifts in European security. “In some regards, policy evolution has skipped a decade or even a generation”, he says, and goes on to detail what additional steps must be taken to secure Europe — including re-doing key strategic documents, building a strategic division of labour to meet different geographical threats, and, predictably, increasing defence spending.

Finally, Nuffield Trust Chief Exec Nigel Edwards shared his thoughts on the state of the NHS and DHSC policymaking in a Q&A?blog?published by the think tank. As well as sharing our frustrations with the integration white paper, he reflects on the “uncertainty about the exact change mechanism expected to make such things happen, which was also a problem with the Long Term Plan and the Five Year Forward View”.