How to revive the UK’s shaken economy as growth evaporates after the disastrous Labor budget

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

In her first major New Year speech, the Chancellor will seek to restore confidence and – more importantly – debunk last month’s assessment by the Bank of England that tax rises were unprecedented in Labour’s October budget. those that made the economy weaken. until stopping.

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

However, anyone expecting Britain, on its current trajectory, to recover in 2025 is kidding themselves.

Labour’s efforts to speed up the recovery with planning and pensions reforms are already sinking into bureaucratic treacle and promises of a manufacturing revolution – driven by the climate change agenda and Great British Energy, the new state investment vehicle. to push it – are simply cupcakes. the sky

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

The more investment that is poured into an inefficient state sector, the less cash there will be for entrepreneurship and entrepreneurship, which are the true levers of growth.

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

Here are my ten ideas to boost entrepreneurship and entrepreneurship to boost wealth creation in 2025:

1. Invest in R&D

The best way to fully support Britain’s brilliant technology, science and medical sectors is to raise the target for government spending on research and development.

We must follow the example of the United States and Israel: innovative leaders who spend 3.4 percent and 6 percent of their respective national output on R&D.

That is what has led to the global domination of Silicon Valley and has turned Israel into an emerging and pioneering nation of the future.

Britain officially spends a paltry 2.4 per cent and then wonders why it fails to compete. We need tax breaks and direct support for our best and brightest.

2. Set trading rates

Labor promised to resolve the tangled business rates mess but failed to address the issue in the Budget. The result is that many high streets are being emptied, and more than 13,000 shops closed last year, creating desolation and crime.

Brick-and-mortar family businesses are forced to pay trading fees, while high-tech giants like Amazon, Apple and Google can avoid them.

Most of their operations are carried out from low-tax 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 relief for investment

As Conservative Chancellor, Jeremy Hunt introduced full and permanent spending on new physical plant and machinery, encouraging businesses to invest by reducing their corporate tax bills.

As Boris Johnson’s chancellor, Rishi Sunak went even further, allowing companies to reduce their tax liability by 150 per cent of the value of their investment.

This experiment freed businesses to invest in the future, until it was stifled by the Treasury.

Technology sectors such as artificial intelligence software, intellectual property and mobile computing are excluded from total spending. They should not be: the scheme needs to be modernized to recognize the digital age in which we live.

4. Cut interest rates

The Bank of England’s current mandate to hit the 2 per cent annual inflation target “at all times” should be extended.

The UK could learn lessons from the US, where the Federal Reserve (the US central bank) is required to 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 avoid what Governor Andrew Bailey described as “scarring”; in other words, permanently damage the economy.

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

5. Eliminate stamp duty on shares

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

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

If conditions were more favourable, British tech star Arm Holdings, based in Cambridge, could still list in the City of London rather than 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 author) to downsize and move house, it needs to end the iniquitous practice of charging stamp duty on homes valued at less than £1 million. .

This is a serious barrier for millennials and subsequent generations moving up the housing ladder and punishes workers who are already overburdened by moving house.

7. Redraw the tax rules (again)

The Chancellor’s great aspiration – to adopt a new fiscal rule that would allow public spending on investment to increase – has been dismissed as a “fiscal illusion” by the Office for Budget Responsibility.

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

UK ten-year bond rates now sit at 4.6 per cent, higher than during Liz Truss’s short and disastrous stay as prime minister. That means higher costs for our mortgages and for businesses that need to borrow money to invest.

8. Stop pessimistic propaganda

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

This unnecessary self-sabotage turned out to be a wet blanket for consumer and business confidence.

Much damage has already been done, but it seems that even the Labor Party realizes the error of its ways and is trying to instil confidence once again.

9. End ‘Britain for sale’

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

Meanwhile, big British science companies, such as cybersecurity pioneer Darktrace, need to be supported and strengthened, not sold to unaccountable private equity or fledgling foreign companies.

10. Sign a trade agreement with the US.

The biggest prize for the UK would be a comprehensive deal with our biggest trading partner, the United States.

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

Maintaining such an agreement for fear of importing chlorinated chicken – or other unfounded metropolitan workhorses – is foolish.

There can be no better way to avoid Donald Trump’s threat of a tariff war with his trading partners than to resort to the art of deal-making.

The Labor Party promised the fastest growth among the advanced G7 nations. So far it has not been able to comply

any growth. But a promising future of wealth creation and higher living standards is still possible, if our Government can find the necessary willpower and imagination.