What is wrong with our economy?

The UK's current account deficit feels like another urgent and little talked about issue. Credit: PA

In last week's Budgetwe were told that we are unlikely to be as prosperous as we expected to be in the years to come, so it's a fair question to ask.

The answer, unfortunately, is: quite a lot.

Persistently weak productivity growth was the reason the Office for Budget Responsibility gave for downgrading its forecasts for economic growth but that isn't our only problem.

The UK's current account deficit feels like another urgent and little talked about issue. Since the late 1980s we have more or less continuously been importing more than we export. Put another way, we have been living beyond our means - buying more from the rest of the world than we have been selling to them and funding the difference by borrowing.

And while our economy is growing again, the benefits of that growth have not been felt everywhere. There are giant and widening imbalances between the prosperity of different regions of the UK. These regional differences are larger in the UK than anywhere else in Europe - we have some of the richest regions and some of the poorest.

London and South East England shook off the after effects of the financial crisis long ago but GDP per head (a measure of wealth per person) in every other part of the UK remains lower than it was in 2008.

This is quite remarkable.

The Great Recession should feel like a distant memory but for many people in most parts of England, Northern Ireland, Scotland and Wales the idea that the economy has recovered will feel ridiculous.

Later today the Business Secretary, Greg Clark MP, will publish a white paper designed to revive productivity, tackle the trade deficit and reinvigorate growth in every region of the UK.

Business Secretary Greg Clark Credit: PA

Clark will set out a plan for the next 20 years; a vision for how government, working with the private sector, can lead the charge. He will prophesy a "fourth industrial revolution" - one driven by robotics, artificial intelligence and big data - and express a determination that Britain and British companies will be at the heart of it.

Last week the chancellor promised an additional £2.3 billion a year for research and development and pledged to take future investment to levels we've not seen sustained for more than 40 years - an impressive commitment given the Treasury's straitened circumstances.

Greg Clark will say much of that money will be used to nurture and develop the most promising ideas that are dreamed up in our universities. The objective here is that, with a bit of public sector help, private companies will feel inspired to loosen the purse-strings and invest, creating large numbers of highly skilled and highly paid jobs as they go.

There all sorts of problems with Greg Clark's ambition. The investment he is proposing, while large by historic standards, will take years to make a difference. His vision also depends heavily on foreign investment. The sectors he wants us to excel at are currently dominated by others; US companies in particular. Persuading foreign investors to spend their money in Britain is currently a hard sell, given the uncertainties that still surround Brexit.

Politically, this is also an interesting move. The traditional Conservative ideology celebrates "laissez-faire" - the belief that wealth generation is best left to the private sector and that government should generally stay out of the way.

A number of business leaders have already grumbled about the idea of an industrial strategy for the UK. They believe that the market should pick winners not civil servants and argue that if the ideas in our universities really are much cop then they will attract funding without government support.

Clark will reasonably point out that leaving the market to get on with it isn't a strategy that is obviously working for large parts of the UK.

The idea of an Industrial Strategy is easy to mock and the detail in the White Paper is unlikely to set the average pulse racing but it should be read sceptically not cynically.

There have been repeated attempts over the years to re-balance our economy, and all of them have failed. This is at least a fresh approach, a serious attempt to address serious, long-standing problems. The test should not be ideological but instead whether the vision is credible.