All politicians want higher economic growth but few actively prioritise it. Outside No 10, Rishi Sunak said Liz Truss’s goal for higher growth was a “noble aim” but listed an improved economy seventh behind “a stronger NHS, better schools, safer streets, control of our borders, protecting our environment” and “supporting our armed forces” when pledging to deliver the 2019 manifesto.

This hopefully was merely a rhetorical downgrade as faster growth would make all those commitments easier and Sunak, as a former chancellor, understands its importance. UK productivity would be about 30 per cent higher if it had grown at the same rate since 2008 as the previous 40 years. While that benchmark might be ambitious, Sunak has thoughtful ideas about how to reverse the stagnation, albeit ignoring one crucial ingredient.

First, let’s outline where Sunak’s instincts on growth are correct. Fiscal conservatism, or balanced budgets, are no inherent enemy of growth. British productivity hasn’t stagnated because George Osborne cut working age welfare or the department for communities and local government’s budget between 2010 and 2015.

No, sustainable improvements in living standards come from private sector productivity boons and market-led innovation, not government borrowing for day-to-day expenditure or sugar-rush tax cuts, both of which push up taxes later. With inflation high, no one can argue that the growth problem is caused by insufficient demand-side “stimulus” or budget deficits being too small.

Sadly, political debates about growth place far too much attention on fiscal policy and the size of the state, when the nitty gritty of microeconomic policy matters more. Beyond key foundations such as the need for the rule of law, independent institutions, trust, private property rights and good foreign relations, it’s the composition and incentives created by taxes and spending, as well as regulation, through which government policies can affect gross domestic product.

In his 2022 Mais lecture, Sunak showed he understood this. He argued that raising growth required a three-pronged focus on: “Capital. People. Ideas.” With unemployment low, the potential gains from higher labour force participation are relatively small. That aside, a basic growth equation suggests that real per capita GDP improvements can then come only from more physical capital invested per worker, a higher-skilled workforce or more innovation via new technologies or ideas.

Seen this way, Sunak’s proposed solutions were coherent. Capital investment by UK businesses at 10 per cent of GDP lags the OECD average of 14 per cent, he said. So we should reform our stingy tax allowances for investment in plants and machinery. The UK is deficient in technical skills, he claimed. So governments should offer more support to technical education, reform the apprenticeship levy and rationalise qualifications.

Innovation’s role in growth is powerful yet uncertain, he admitted. Research and development support, more effective private sector tax incentives for R&D and STEM visas to allow talented people to come here might help to deliver more innovation or better applications of new technologies, from artificial intelligence to mRNA vaccines.

All this is reasonable. Yet I believe Sunak’s framework misses a fourth growth ingredient: economic mobility. A productive economy requires people and businesses being able to change jobs or locations seamlessly. Policies that make it more difficult or expensive to change location restrain growth potential.

It’s unpopular to say this, because it appears to cut against the Tory zeitgeist of bringing the mountain to Muhammad. “Levelling up” is seen as a promise to bring jobs and investment to the “left behind” areas, subverting market signals that might otherwise deliver Norman Tebbit’s message to “get on your bike” south.

Yet the real lessons are simpler. There’s no point having good tax incentives if businesses can’t invest in factories or premises where they make economic sense for customers and worker talent. Skills are key to being productive, but the most valuable are learnt on the job in good opportunities, which bad transport infrastructure or expensive commutable housing can prevent workers from accessing. Innovative R&D is often undertaken in regional clusters where people can specialise in research communities, but bad land-use rules can snuff out these agglomeration benefits.

Truss’s conference speech was dubbed “Getting Britain Moving” in part because she wanted to overhaul barriers to economic mobility. Internal migration between regions for work has declined significantly over 20 years, with high housing costs reducing young people’s ability to move. This weakened dynamism isn’t just a national issue. The Resolution Foundation’s research showed that movement between jobs even within regions was lower now than in 2001.

One way to make labour markets and investment opportunities deeper and broader is to make it cheaper and easier to change jobs, relocate or travel to work. This is what Truss meant by her esoteric-sounding “supply side reforms”. Investment zones and land-use reform aimed to deliver more housing and business premises. Childcare deregulation sought to create more job-friendly, flexible care options. Streamlining environmental hurdles was thought necessary to deliver transport infrastructure quickly to better connect towns and cities. More immigration would complement the workforce by alleviating shortages.

Yes, this sort of agenda is politically challenging, but the reforms remain desirable for the higher wages, cheaper housing and higher investment return opportunities they facilitate. Sunak has vowed to correct Truss’s mistakes, but her best growth ideas were a complement to his.