Let us imagine a couple of scenarios of what Britain might look like in 20 years time.

2031: a prosperous and dynamic Britain
Flying back into Heathrow Terminal 7 from a successful trade mission to India (now the UK's largest trading partner), the Prime Minster, Rohan Silva, peers out of the EasyJet plane window and admires the great architectural vitality and splendid diversity of Graphene Valley. Mile upon mile of new high-tech research and production facilities gleam in the sunlight. Attracted by the low tax rates, cheap and reliable nuclear energy and a light touch employment regulation, high tech manufacturing and design has now displaced financial services as the UK's most important industry. The brilliance of the country's leading scientists and creative facilities, owe much to the education reforms of the 2010s - particularly the re-introduction of the New Grammar Schools. Social mobility has now been restored to post-War levels. Rohan sits back and looks forward to a quiet weekend at Chequers with his wife and five children.

2030: a stagnant Britain
Chuka Umunna boards the Eurostar in Paris following a successful EU Heads of Government meeting on Growth, Regeneration and Youth. In his briefcase is a draft of the new Paris Agenda, a dynamic plan which aims to make the EU "the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion", by 2050. With a four hour train journey ahead (as long as there isn't a power cut), he plans to work up a couple of press releases with his aides: the first, to announce a new government campaign for green job creation funded by a levy on new business start-ups; the second, to abolish public schools as the final stage in the programme to advance social mobility. There is so much to be done.

Which of these two scenarios will Britain most resemble in 20 years time? That will in large part be determined by decisions which the Coalition takes over the next few years. For as Norman Blackwell argues in his Centre for Policy Studies pamphlet published today, we are at a crossroads. Do we take the easy path and put off hard decisions on the reform of public services, on energy policy and on savings? Or do we imagine ourselves in the future, see where we want to be and then work out how to get there, however difficult the going might be.

For if we want a prosperous future for the UK, we must recognise that it is not enough just to get back to where we were before the recession. The uncomfortable truth is that, if we take a long-term view, our growth and wealth will need us to face up to three great challenges: the rise of the BRICs nations; our ageing population; and increasing competition for (and prices of) raw materials, particularly energy.

So what should the Coalition do? First it should accept that productivity in the public sector is notoriously poor. Enabling far greater private sector involvement - and particularly competition - in the delivery of public services will do much to remedy this. It is therefore essential that the Coalition's NHS and school reforms are implemented in full.

Second, in the long run, high rates of productivity and economic growth are associated with high savings ratios. The Coalition has taken some steps to encourage long-term savings but it should also simplify the tax incentives for retirement savings by merging pensions and ISAs. If the higher earners were also allowed to use an ISA for their full annual retirement savings, the Treasury could save a substantial part of the roughly £30 billion annual cost it currently incurs in upfront pension tax relief. This is potentially a win-win-win for government, the economy and savers.

Third, in a global economy where brain power and innovation will be the route to prosperity, we cannot afford to exclude any of the brightest children from the best education. New state-funded selective schools are needed throughout the country.

Fourth, education and health together represent 15% of our GDP. Private organisations in both sectors are now actively looking to foreign markets for growth (but are very small compared to those in the public sector). The Coalition proposals for greater freedoms for state schools, universities and NHS hospitals are welcome but more can be done to encourage them to expand rapidly as valuable export services of the future.

Finally, new nuclear plants are essential. They provide the cheapest (and cleanest) source of energy. The Coalition must ensure that these are built as quickly as possible.

In many of these areas (apart from helping the brightest children), the Coalition has announced that it plans to take the right path, the path that will indeed lead to greater prosperity. But it needs to be bolder and to get on with implementing reform. The trouble is that it has shown some worrying signs of wavering, of deferring difficult decisions, of preferring the easier path. It remains to be seen whether the Coalition - and the country - will meet the challenge that lie ahead.

Look Back from the Future: a radical path to growth and prosperity in the 21st century by Norman Blackwell is published by the Centre for Policy Studies www.cps.org.uk

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