Productivity: voters have a clear choice

Sir, Given the pressing economic challenge of secular stagnation, it is disappointing that it has not been a feature of the UK general election campaign so far. As you outline in your editorial “The worst mistake is to ignore secular stagnation” (April 18), there is a unique opportunity for the government to take advantage of low borrowing costs to raise future productivity. After all, this is the only sustainable way to improve living standards, which is a central concern of voters in this election.

Nevertheless there is a clear choice available to voters in the UK. The two main parties propose very different approaches. The coalition’s last Budget committed to borrowing around £30bn a year to fund government investment, representing 1.5 per cent of gross domestic product, while achieving a current budget surplus. The Labour party’s economic plan would allow for borrowing to fund this investment if necessary. However, the Conservative party states that it would eliminate all annual borrowing by the end of the next parliament. Therefore a conservative government would either cut planned investment or fund the capital budget by reducing current spending. This would move economic policy in precisely the opposite direction to that which you propose and risk entrenching secular stagnation for years to come.

Arguably, even greater advantage should be taken of low interest rates as you suggest. Still, it remains the case that the outcome of the election will have profound consequences for the future prosperity of the UK.
 
This letter was first published in the Financial Times on 25 April 2015.