How to promote growth in the UK - 10 Key Ideas

How to promote growth in the UK - 10 Key Ideas

1) Increase foreign investment by offering tax incentives and other financial benefits.

It is often argued that the Government should reduce corporate tax rates, exempt capital gains taxes, improve access to credit, reduce red tape, and simplify regulations to increase foreign investment. Traditional market theory argues that these incentives and financial reforms will make it easier for foreign investors to do business in the country.

The OECD give a more balanced view in their, "Tax Incentives for Investment – A Global Perspective". They argue that Governments should carefully consider the advisability of introducing tax incentives to stimulate investment, subject to a cost-benefit test to be conducted periodically. Such incentives should include explicit goals and objectives, and should include a "sunset clause" which enables the government to reassess the effectiveness of the incentive and determine whether an extension is warranted.

None-the-less, almost all mainstream economists agree that well-targeted tax incentives can spur foreign investment which, in turn, stimulates growth.

2) Implement a national infrastructure investment plan to upgrade roads and public transport systems.

Infrastructure investment plans promote growth by increasing the amount of money available for infrastructure projects that help stimulate economic growth. These investments can include improvements to public transportation, energy infrastructure, broadband networks, water and wastewater systems, ports, airports, and other areas that can help increase productivity and competitiveness in a region. Infrastructure investments can also create jobs in the short-term by creating construction and maintenance positions. Additionally, infrastructure investments can make a region more attractive for businesses looking to expand or relocate, which can lead to increased economic activity. HS2 continuing to London is a good start: https://www.bbc.co.uk/news/uk-64421566

3) Encourage businesses to hire more workers and provide job training programs.

The Government can encourage businesses to hire more workers and provide job training programs by providing tax incentives for businesses that hire new employees, or by offering free or reduced-cost job training programs.

The UK Government's current efforts in this area can be found on: https://find-employer-schemes.education.gov.uk/

The site details, "a range of government programmes for employers who are considering hiring employees, offering work experience or upskilling existing staff, some of which offer financial incentives."

Better incentivising businesses to hire more workers and provide job training programs, ultimately creates a stronger economy.

4) Reduce taxes for small businesses.

Reducing taxes for small businesses can have a positive effect on the economy and help stimulate job growth. To reduce taxes for small businesses, the government could lower the corporate tax rate, eliminate certain taxes and fees, simplify filing requirements, create incentives for hiring new employees, and provide tax credits for investments in research and development.

Lowering the corporate tax rate would help small businesses keep more of their profits, allowing them to reinvest in their business and create more jobs. Eliminating certain taxes and fees would also help small businesses save money and create jobs by freeing up capital for other investments. The counter argument to this is that lowering the corporate tax rate could cause a decrease in government revenue, making it more difficult to fund necessary public services.

Simplifying filing requirements would make it easier for small business owners to understand their tax obligations and file their taxes correctly - though this is often easier said than done.

5) Invest in research and development initiatives.

Investing in research and development initiatives is an important way to ensure the success of a business. Research and development (R&D) involves the creation of new products, services, and processes that can be used to improve existing products, services, and processes. By investing in R&D initiatives, businesses are able to stay ahead of their competition and create new opportunities for growth. This includes investing in new technology and equipment, conducting market research to identify opportunities for new products and services, and developing innovative approaches to existing operations. Additionally, R&D initiatives can help businesses stay up-to-date with industry trends and stay ahead of the competition. Investing in R&D initiatives can also help businesses increase their efficiency and productivity, reduce costs, and increase overall profitability.

Providing better tax credits for investments in research and development would help small businesses stay competitive by encouraging them to invest in new technology and products. HMRC’s Research and Development (R&D) Tax Relief scheme is one of the main mechanisms through which the UK government encourages innovation in the private sector. The Federation of Small Business has written extensively on this: https://www.fsb.org.uk/resources-page/how-you-can-finance-research-and-development.html

6) Provide incentives for businesses to invest in green energy solutions.

To encourage businesses to invest in green energy solutions, government can provide better incentives. This could include more generous tax credits, grants and other forms of financial support. Incentives such as these can help businesses offset the cost of investing in green energy solutions, making them more affordable and attractive. Additionally, providing information and education about green energy solutions can help businesses understand the benefits of investing in them. For example, by investing in green energy solutions, businesses can reduce their carbon emissions and save money on energy costs. Investing in green energy solutions can also help businesses become more competitive and increase their profits.

Ernst and Young have repeatedly called for developed nations to "increase research and development spending on clean energy". For example: https://www.ey.com/en_uk/recai/is-finance-the-biggest-hurdle-in-the-race-to-net-zero

Given the environmental benefits the case for government action is clear. The UK Government should create a supportive framework that encourages businesses to invest in green energy solutions.

7) Increase government spending on education and skills development.

Increasing Government spending on education and skills development is an essential part of creating a strong and prosperous economy. By investing in the education of citizens, we equip them with the knowledge, skills, and abilities needed to succeed in the modern workplace. Providing access to educational opportunities and resources helps to reduce inequality and promote social mobility.

In addition to increasing funding for education and skills development, the government should also promote policies that facilitate lifelong learning. This could include creating tax incentives for employers who invest in employee training programs, or offering tax credits to individuals who pursue additional education or training. The Apprenticeship Levy has been a rare policy success with the CMI estimating that apprentices are set to contribute almost ￡700 million a year to the UK economy (https://www.managers.org.uk/wp-content/uploads/2022/09/future-of-apprenticeship-levy-short-report.pdf).

8) Create an environment of regulatory certainty to promote business growth.

The Government should create an environment of regulatory certainty to promote business growth by developing and implementing policies and regulations that are predictable and consistent. This includes providing clear guidance on the legal, financial, and operational requirements that businesses must meet, as well as clear enforcement guidelines for non-compliance. The Government should be more open to feedback from businesses and actively work to address their concerns. By consulting with business representatives and industry experts to ensure regulations are tailored to the specific needs of the sector, engaging in public consultations and hearings to solicit feedback on proposed regulations, and working with stakeholders to develop more efficient processes for obtaining permits and licenses. The Government should also provide training and resources to help businesses understand the regulations and comply with them.

Creating an environment of regulatory certainty requires a collaborative effort between the government and businesses to ensure everyone understands their obligations and can work together towards common goals.

The BEIS research paper 'Regulator approaches to facilitate, support and enable innovation' found "good evidence that innovation-friendly approaches to regulation can support business-led innovation through two key routes: increasing investment and investor trust in new products, services or business models; and helping participating companies bring their innovations to market (or acquire a license) quicker."

9) Expand access to capital for small businesses, entrepreneurs, and innovators.

To foster economic growth and opportunity, the UK Government should expand access to capital for small businesses, entrepreneurs, and innovators. This provides them with the resources they need to start and grow their businesses, create jobs, and develop new products and services. The SEIS and EIS schemes should be expanded and improved, providing more robust tax incentives for investors. The government could also provide direct loans and grants to small businesses, as well as offer tax incentives for research and development. Furthermore, the government should create more access to mentorship and technical support for small businesses, especially those in disadvantaged communities.

Finally, the government should create more public-private partnerships to help small businesses access capital, mentorship, and resources. The Local Government Association in their 2022 paper, "Public-Private Partnerships: Driving Growth, Building Resilience" stated, "Whilst public-private partnerships (PPPs) are undoubtedly challenging to deliver and not without their controversy, robust and well-coordinated partnerships present opportunities to bring together the resources, expertise, and powers available in ways that cannot be achieved by either sector in isolation. As such, councils are now rightly exploring how this investment could unlock a range of social, environmental, and economic benefits aligned to local and national priorities."

10) Establish a robust digital economy with high-speed internet access and reliable digital infrastructure throughout the country.

Creating a robust digital economy requires reliable digital infrastructure and high-speed internet access throughout the country. This includes constructing the necessary infrastructure such as fibre optic cables and cellular towers, as well as providing free or subsidized access to high-speed internet for those who cannot afford it. The idea of free access to high-speed internet unfairly suffered from being associated with the previous Labour leadership. Free high-speed internet for all citizens should be seen as a basic necessity for a robust digital economy supporting economic growth.