In the News Teaching Activity: The UK’s Poor Public Sector Investment Record (Oct 2023)

Inconsistent and fluctuating public sector investment, such as the recent cancellation of Birmingham-Manchester HS2, is contributing to the UK’s poor investment performance.

Have a go at this free teaching activity, which includes a downloadable worksheet and suggested answers.

In the week after the government pulled the plug on the HS2 railway between Birmingham and Manchester, it is worth looking back at The Resolution Foundation’s report from March 2023 on the role public sector investment can play in improving the UK’s poor record on investment in the economy.

Their report highlights how Britain's history of unpredictable public investment has resulted in the country being a low-investment nation. This issue, they argue, stems from recurrent policy failures, emphasising the need for significant reforms to utilise public investment to stimulate growth and address other challenges, such as climate change.

Public investment has not only been insufficient but also unstable, with frequent and significant alterations in investment plans, such as the recent decision to cancel HS2. The RF argue that this volatility leads to underinvestment across the whole economy.

Cutting the cuts - The Inquiry (resolutionfoundation.org)

Read the article and then answer the following questions.

1. What is meant by the ‘public sector investment’?
2. Download the PDF of the RF’s ‘Cutting the Cuts’ Report.
   1. Scroll down to page 11. How does the UK’s investment record compare to other advanced economies? Pick out some data as evidence to support your answer.
   2. Scroll on to pages 12-15. Find two examples that could be used as evidence to support the view that the UK has suffered from under-investment by the public sector.
3. Discuss the economic arguments for and against big public sector investment projects, such as HS2.