The Demos think tank has called on the Labour government to boost public investment by £27 billion.
This initiative aims to attract private sector capital and stimulate UK economic growth. The call comes amid criticisms and calls for a clear economic strategy.
UK’s Investment Lag
The Demos think tank has urged the Labour government to inject £27 billion into public investment. This move aims to attract private sector capital and revive economic growth.
Currently, the UK trails other G7 nations in terms of private investment. British businesses invest significantly less compared to their French and German counterparts.
Stark Investment Contrast
Demos highlights a stark contrast: UK businesses invest £3.12 for every £1 of government spending, down from £5 in 1997. This gap underscores the need for increased public investment to stimulate private sector activity.
An overall investment increase of £112 billion annually is recommended by Demos to position the UK in the middle of the G7 pack.
Labour’s Growth Targets
Labour leader Sir Keir Starmer and Chancellor Rachel Reeves aim to raise Britain’s growth rate to 2.5% over the long term. The Bank of England forecasts a GDP growth of just over 1% annually for the next three years.
Despite Labour’s commitment to public-private partnerships, criticism has arisen. Starmer’s decision to scale back a £28 billion green infrastructure investment plan is a key point of contention.
Government Initiatives
The government has launched GB Energy, a publicly owned utility provider, and established a National Wealth Fund with £7.3 billion to invest in low-carbon energy projects.
However, Demos’ director of policy and impact, Andrew O’Brien, argues that a revolutionary approach is needed. He calls for a clearer economic strategy, greater policy stability, effective tax reliefs, updated corporate governance, and new institutional frameworks.
Business Perspective
O’Brien stresses the importance of businesses adopting a long-term perspective. He advocates for tangible commitments from businesses in return for supportive policies.
Demos also suggests reviewing business tax reliefs to strengthen investment incentives. Establishing stable policy sectors over a five-to-seven-year horizon is recommended.
Expert Insights
Dr Gerard Lyons of the Centre for Policy Studies notes that Britain’s growth challenges predate Brexit. He views leaving the EU as an opportunity to pursue advantageous trade deals and regulatory improvements.
Lyons cautions against the belief that rejoining the EU would solve Britain’s growth issues, urging a realistic assessment of the current economic landscape.
The call for a £27 billion injection into public investment by Demos underscores the pressing need for economic revitalisation.
With ambitious targets set and significant challenges ahead, the Labour government’s response could shape the UK’s economic future.