Battle royal to lift growth, says ALEX BRUMMER

The grandeur and mystical rituals of the coronation will give the Tories useful breathing space to lick their local electoral wounds.

Psephology experts argue that municipal polls are a free ride and don’t tell us what will happen in a general election.

Losses in places like Middlesbrough, Stoke-on-Trent and Tamworth, places where it was hoped the Tories could throw stardust, don’t bode well.

The reality for Rishi Sunak and Chancellor Jeremy Hunt is that, despite the resilience of Britain’s dominant service sector, there is industrial and economic disruption everywhere.

A friend, who heads a top Australian university and is returning this weekend, was advised to be at Heathrow five hours before flying. Unite’s security guards, at our gateway airport, couldn’t resist disrupting a national festival.

Growth is proving tough against a backdrop of double-digit inflation, pressure on personal incomes, rising social security costs for the millions outside the labor force, high taxes and fiscal austerity.

London School of Economics economist Anna Valero, who recently joined the chancellor’s board of economic advisers, says it is not enough to use tax cuts as a quick fix to encourage expansion.

She argues that there is a need for business investment incentives. The Chancellor is doing this through a £7.9 billion giveaway through capital grants (rising to £10 billion next year).

But if the highest tax rate in the North Sea is 75 percent and the nominal corporate tax rate has been raised in a huge gulp from 19 percent to 25 percent, the government is hardly sending a positive signal.

The Chancellor is keen to point out that the UK is a treasure trove of cutting-edge technology, creativity and much more.

Amidst the current lively debate about artificial intelligence (AI) and how it is set to take over the world, it is often forgotten that Britain and its leading science universities are big players.

At least seven of the top global AI pioneers started or are still in the UK.

Most famous is DeepMind, which was foolishly sold to Google owner Alphabet. Recently, CEO Demis Hassabis was chosen to lead a new unit, Google DeepMind, which will bring together Britain’s AI expertise with that of Google AI. Once again, brilliant British intellectual property and code writers will migrate to California.

If the SUNAK government has the ambition to make the UK the next Silicon Valley, it must act quickly. References under the National Security and Investment Act must be stepped up to ensure that valuable high-tech, biotech and aerospace resources do not escape these shores unattended.

R&D spending needs to skyrocket to meet the target of 2.6 percent of output, if not more. It is critical that the government helps release financial flows tied up in defined contribution pension funds.

One of the potential outliers is UK local government pension savings which, like their Canadian counterparts, could become sovereign wealth funds funding high-growth start-ups. The Purposeful Finance Commission, headed by Tracy Blackwell, boss of the Pensions Insurance Corporation, estimates there are £364 billion in assets, some of which could be deployed.

The administrative costs of managing these funds are £1 billion higher than their Canadian counterparts, who are already avid investors in UK plc.

This is a golden opportunity, with the money going into the hands of advisers, lawyers and asset managers – and doesn’t stop bad decisions, such as Kent council’s exposure to Neil Woodford funds, resulting in a potential loss of £84m.

If local government funds were consolidated, some of the money spent on more productive assets, such as infrastructure at research universities and high-growth UK companies, could be significant. Britain has shown during the pandemic how setting national targets can work. Lower tax rates are critical. Listing reforms would make IPOs more viable.

Equally important is creating a better culture for pension fund investments. Hardly a day goes by in the US that people don’t check how their personally monitored retirement savings are doing. In Australia, fund returns are a national obsession.

Britain needs that if a new investment climate for technology and infrastructure is to be cultivated. That would be a tasty dish to serve a king.