How to revive Britain’s shell-shocked economy – as growth evaporates after disastrous Labor budget

After just six months in government, Labour’s growth promises are in tatters amid a stagnant economy and persistent inflation.

In her first major speech of the new year, the Chancellor will seek to restore confidence and, crucially, discredit last month’s assessment by the Bank of England that it was the record-breaking tax rises in Labour’s October budget that caused the economy to sink. brought heavy weather. come to a standstill.

Rachel Reeves will try to convince us that the government has ‘laid the foundations’.

But anyone who expects Britain to bounce back on its current trajectory in 2025 is fooling themselves.

Labour’s efforts to accelerate the recovery with planning and pension reforms are already sinking into bureaucratic clutter and the promises of a manufacturing revolution – fueled by the climate change agenda and Great British Energy, the new state investment vehicle to drive it – are simply a curse. heaven.

If the Starmer government is serious about restoring shaken business confidence and fulfilling its ‘growth mission’, it must recognize that Britain’s wealth creators do not live in Whitehall and are not represented by stubborn union bosses.

The more investment poured into an inefficient state sector, the less money there can be for entrepreneurship and enterprise – the real levers of growth.

It is not too late to change direction and support a new hi-tech, creative agenda for Britain.

Here are my ten ideas to unleash entrepreneurial spirit and entrepreneurship to boost wealth creation by 2025:

1. Invest in research and development

The best way to fully get behind Britain’s brilliant tech, scientific and medical sectors is to raise the target for government spending on research and development.

We must follow the example of America and Israel – leading innovators who spend 3.4 percent and 6 percent of their respective national output on R&D.

This has led to the global dominance of Silicon Valley and made Israel a ‘start-up’ country and pioneer of the future.

Britain officially spends a paltry 2.4 percent and then wonders why it can’t compete. We need tax breaks and direct support to be our best and brightest.

2. Fixed business rates

Labor promised to find a solution to the business rates tangle but failed to tackle the issue in the Budget. The result is that many high streets are being hollowed out and more than 13,000 shops closed last year, leading to desolation and crime.

Physical family businesses are forced to pay business rates, while high-tech giants such as Amazon, Apple and Google can avoid this.

Most of their operations are run from lightly loaded warehouses and data centers on the edges of conurbations – or from abroad – and their huge sales contribute to the impoverishment of the high street.

3. Tax benefits for investments

As Tory chancellor, Jeremy Hunt introduced permanent full spending on new physical plant and machinery, encouraging businesses to invest by cutting their corporation taxes.

As chancellor under Boris Johnson, Rishi Sunak went a step further, allowing companies to reduce their tax debt by 150 percent of the value of their investments.

This experiment gave companies the freedom to invest in the future – until it was smothered by the Treasury Department.

Technology sectors such as AI software, intellectual property and mobile computing are excluded from full cost reimbursement. That shouldn’t be the case; the system needs to be modernized to recognize the digital age we live in.

4. Lower interest rates

The Bank of England’s current mandate to meet its 2 percent annual inflation target ‘at all times’ should be expanded.

Britain could learn lessons from America, where the Federal Reserve – the US central bank – must balance its inflation target with the need to boost jobs and growth.

During the pandemic, the Bank of England’s mandate was briefly relaxed to prevent what Governor Andrew Bailey described as “scarring” – in other words, permanent damage to the economy.

The government must update the Bank’s approach and make it more flexible.

5. Abolish stamp duty on shares

Britain is one of the few Western economies that imposes a tax on buying and selling shares.

A 0.5 percent levy has destroyed the cult of retail investment and depressed values ​​on the London Stock Exchange, leading to an exodus of big companies.

If conditions were more favorable, British tech star Arm Holdings, based in Cambridge, could still be listed in the City of London instead of on Wall Street.

6. Reduce stamp duty for homeowners

If the government is serious about getting Britain building again and encouraging property-rich ‘baby boomers’ (like this writer) to downsize and move, it must end the unfair practice of charging stamp duty on homes worth less than £1 million. .

This is a serious barrier for millennials and subsequent generations to climb the housing ladder and punishes already overworked workers for moving.

7. Redraw the budget rules (again)

The Chancellor’s big squeal – to adopt a new budget rule allowing higher government spending on investment – ​​has been dismissed as a ‘budget illusion’ by the Office for Budget Responsibility.

It has undermined the position of UK bonds and government bonds on world markets and raised the cost of government borrowing.

Now the UK ten-year bond yield stands at 4.6 percent – ​​higher than during Liz Truss’s short and disastrous stay as Prime Minister. This means higher costs for our mortgages and for companies that have to borrow money to invest.

8. Stop the ominous stuff

As soon as they won the election, Keir Starmer and Rachel Reeves began destroying the economy, claiming it was in its worst state since the Second World War.

This unnecessary self-sabotage turned out to be a wet blanket for the confidence of consumers and companies.

Much damage has already been done, but it seems that even Labor is aware of the error of its ways and is trying to re-instill confidence.

9. End ‘Britain for sale’

The government has approved the sale of Royal Mail to Czech mogul Daniel Kretinsky in a debt-financed deal, ensuring we have the next Thames Water (an essential services company teetering on the brink of bankruptcy) in the have a pipeline.

Meanwhile, major British science companies, such as cyber security pioneer Darktrace, need to be supported and built up, not sold off to unaccountable private equity or foreign companies in the making.

10. Sign a trade deal with the US

The biggest prize for Britain would be a comprehensive agreement with our largest commercial partner, the US.

If the incoming ambassador to Washington, Lord Mandelson, could make this happen, his checkered past would be all but forgiven.

Maintaining such a deal because of fears about importing chlorinated chickens – or other unwarranted metropolitan hobby horses – is nonsense.

There is no better way to sidestep Donald Trump’s looming tariff war with trading partners than by pursuing the art of deal-making.

Labor promised the fastest growth among the advanced countries of the G7. Unfortunately, it has not worked so far

any growth. But a bright future of wealth creation and better living standards is still achievable – if our government can find the necessary willpower and imagination.