- Britain is living beyond its means. Without immediate, credible action to rein in spending, contain debt and keep inflation under control, a fiscal crisis may be looming
- This is the key message in a major new report by Dr Gerard Lyons, arguing that the UK needs a complete economic overhaul. Instead of tax, spend and borrow, the UK must save, invest – and compete
- The report – to be launched on Monday at an event with Shadow Chancellor Mel Stride – shows that annual per capita growth is stagnating, while government spending is on course to reach £1.5 trillion a year, eating up almost 45% of GDP
- Lyons argues that the overriding aim of economic policy should be to grow GDP per capita. This should be built on three foundations: restoring fiscal discipline; a supply-side agenda to boost economic growth; and low inflation. This must also involve the state shrinking substantially as a proportion of GDP
The UK has a low-growth, low-productivity, low-wage economy – but a high-spend, high-tax, high-borrowing state. Before the 2008 financial crisis, a 21-year-old would have seen the economy double in size by the time they were aged 47 and their living standards rise accordingly. Now they would have to wait until they are at least 64, if not much older.
‘Breaking the Cycle’, a major new report by CPS Research Fellow Dr Gerard Lyons, sets out the full scale of Britain’s economic problems, and offers a comprehensive blueprint for addressing them.
Lyons highlights that GDP per capita growth has stalled, while productivity growth has collapsed to just one-third of pre-2008 rates. Despite spending approaching £1.5 trillion annually, public sector productivity has stagnated. On current trends, public debt will breach 100% of GDP this decade and continue rising. The tax burden is already on track to a hit post-war high of 37.5% of GDP. And the financial markets are already signalling concern, with the UK increasingly dependent on international investors to finance its debt.
Dr Lyons sets out a strategy for bringing growth back to the economy and getting living standards rising again, based on three foundations:
- Fiscal credibility achieved through controlling public spending and reducing the debt-to-GDP ratio
- A radical supply-side reform agenda focused on the 4 I’s: investment, innovation, infrastructure and incentives
- The need for low inflation, financial stability and a competitive City that serves domestic growth.
Based on these foundations, Lyons outlines five immediate policy priorities that politicians should address: controlling immigration; reducing energy costs; addressing the housing crisis; rejecting harmful wealth taxes and enhancing Britain’s resilience. He highlights the failure of politicians over many years, as well as the errors in the Bank of England’s economic management and the need for an improved fiscal and monetary framework.
Rt Hon Mel Stride MP, the Shadow Chancellor, will be making a speech at the paper’s launch on Monday 15, followed by remarks from Dr Lyons and then a Q&A hosted by Robert Colvile, the CPS’s Director.
Dr Gerard Lyons, Research Fellow at the Centre for Policy Studies and author of ‘Breaking the Cycle’, said:
‘The issues we face are real, sizeable but are solvable with the right policies. The central aim should be to grow GDP per capita. All policy decisions should be geared to this.
‘Although a repeat of 1976 is not inevitable, a fiscal crisis is a genuine risk. The current focus is on the Budget in late November, but if the Government loses the confidence of international investors a crisis is possible at any time.
Commenting on the report, Shadow Chancellor Rt Hon Sir Mel Stride MP said:
‘This report highlights a simple truth: we are living beyond our means. Urgent action is needed to fix our public finances and restore confidence in the UK economy.
‘For too long now we have lagged behind other countries in terms of growth and productivity. But the current government’s answer to that has been higher spending and higher borrowing. That is unsustainable, crowds out the private sector and pushes up inflation.
‘As the paper argues, what we need is a radical supply side agenda to unleash growth, coupled with responsible fiscal management.’
ENDS
NOTES TO EDITORS
- Dr Gerard Lyons is a senior economist and Research Fellow at the Centre for Policy Studies
- ‘Breaking the Cycle: Three foundations to boost British prosperity, drive up growth and escape the debt trap’ is available under embargo here
- The report will be launched at an event with the Shadow Chancellor Rt Hon Sir Mel Stride MP Monday 15 Sept at 9am. To attend, email [email protected] or sign up here
- For further information and media requests, please contact Emma Revell on 07931 698246 and [email protected] or Melisa Tourt on 07399 251110 and [email protected]
- The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, housing, immigration, and energy abundance, its goal is to develop policies that widen enterprise, ownership and opportunity
Date Added: Sunday 14th September 2025
