For the past decade, the UK has had an average growth rate of barely 1% per year – a level of growth which simply isn’t high enough to support the needs of our people.
Economic growth is the key to achieving higher levels of prosperity. We believe that Britain’s policymakers should reject the status quo and raise their sights to a much higher level of growth for which we would all benefit – to that of 3% per year.
Securing long-term growth will create more sustainable job opportunities and increase revenue for the treasury.
From mitigating against climate change to increasing demand on social care services and the National Health Service, Britain is faced with many long-term funding challenges, and only by having a higher rate of growth can we possibly afford to meet those.
To reach close to 3% growth and to compete with the rest of the world, the UK needs a new, bold economic vision and approach that tackles fundamental flaws in the UK economy.
The John Mills Institute for Prosperity believes this must start by increasing levels of investment, which stands at 17% per year – much less than the world average at 26%. Staggeringly, only 2.7% of that investment is made in sectors where higher rates of return are achieved – machinery, technology and power.
The UK must also invest in its depleted manufacturing industry, which is in fast decline. Today, manufacturing makes up less than 10% of our GDP. To rebalance the UK economy, we need to increase manufacturing to 15% of GDP, which would complement our successful services sector.
Sir Keir Starmer’s serious and sombre address to the nation on the coming Budget demonstrated how far the Labour Party has changed. Strong fiscal discipline is important for governments, particularly Labour governments. The British economy has effectively endured 14 years of stagnation and years of austerity under the Coalition and then Conservative governments did little to stimulate the economy. As Labour seeks to go for growth it must focus on making the UK an investment led economy with a competitive tax environment and not repeating the mistakes of the past.