HAMISH MCRAE: Pray for a productive five years under Labour
We know who will be running the show for the next five years or so, and we can make some guesses about what they will try to do.
But we also know that our day-to-day lives will be shaped as much by global economic events as by Government policies. After all, the great surge in inflation was a worldwide phenomenon.
So what are the big forces that will dominate the world economy for the rest of this decade – and that this new Government will have to tackle? Here are my top five, the first and the last broadly positive and the three in the middle to varying degrees negative.
Under new management: Prime Minister Keir Starmer and his deputy Angela Rayner
First, there is a global economic cycle, with growth phases interrupted every ten years or so by a downturn. According to past experience, we are now in a period of decent growth that will carry us through for several years.
The next such downturn, perhaps a serious recession, will probably come in the late 2020s. So the Government has a few years to fix things, years that it has to use wisely.
One of those things, point two, is Government debt. National debt is just under 100 per cent of GDP, the highest since the early 1960s, when we were still paying off the cost of the Second World War.
By international standards it may not look too bad. It's the second-lowest of the G7 nations after Germany. But it has to be serviced. Taxpayers everywhere have to pay interest on it, and ideally we, and other countries, have to start getting the numbers down.
Thus, while interest rates will fall in line with inflation a little in coming months, in the medium-term there will be a combination of fairly high interest rates and a squeeze on public finances.
Third, this squeeze will be intensified by the need for additional Government spending in two areas: care for older people, and defence.
The population of every country in the developed world is ageing, and however we and others respond, that will mean more resources devoted to healthcare, pensions and so on.
As for defence, the world is set to be at least as unstable over the next five years as it has been in the past five.
There will be no 'peace dividend' I'm afraid, whatever happens in current conflicts. Money spent on national security is money not available for other things, and we just have to hope that by the end of the decade calmer times will lie ahead.
Four, globalisation will continue to be under pressure. US-China trade barriers are likely to grow, though we should all hope the world's two largest economies avoid a full-scale trade war.
It is inevitable that the shift of economic weight between developed and emerging economies, notably India, will continue, and that will create further tensions.
But it also seems likely that financial markets will remain global, money will keep flowing across borders, and international trade in services will continue to boom. That may put the UK in a fairly strong position.
It is the world's second largest exporter of services. But disruption to trade is never good and we risk being caught in the cross-fire.
Finally, a clear positive: technology will continue to race forward, and that potentially brings huge economic benefits. We can never see the detail, not just about which technologies will take off and which will fade, but more important, about the economic consequences of the winners.
The general point – that generative artificial intelligence will be enormously important in increasing productivity in the service industries, including Government services – surely stands. This will be the decade when AI really changes things.
The challenge is to use it well, to regulate wisely, but allow innovative uses of AI to flourish. Nearer home, the Government needs to use technology to lift the dreadful productivity of our public services, which is lower than it was in 1997 when Labour last took power, and which fell during the Blair/Brown governments.
It's a mixed bag, with huge challenges but also many opportunities. Let's hope Labour doesn't make a mess of it.
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