Rachel Reeves has pledged to “fix the foundations” of the UK economy. That starts this week with planning reform; unlocking restrictions on homebuilding and infrastructure is a no-brainer.
But there’s a lot more talk to walk.
Over the past year the Tortoise Business Roundtable, a fortnightly meeting of executives and board directors, has identified a number of drop-on-your-foot solutions to the UK’s growth problem.
For the convenience of Reeves and her team, we’ve turned them into a list.
Investment
- Encourage £2.5 trillion worth of UK pension assets to invest in UK SMEs and growth stocks.
- Consolidate funds so they have the investing power of Australian or Canadian counterparts. End the obsession with gilts and the mentality of risk avoidance.
- Review the influence of proxy advisers over shareholder decisions on pay and strategy and their impact on the UK’s competitiveness.
- Foster a culture of investment rather than saving. UK households invest only 11 per cent of their financial assets in stocks, compared with 23 per cent in France.
- Consider giving retail investors access to IPOs and secondary capital raising rounds.
Government
- Adopt the IFG’s recommendations for the reform of the centre of government. Restructure Number 10 and the Cabinet Office.
- Eliminate churn in the civil service and among ministers (and prime ministers).
- Learn the lessons of the Covid response and of national projects like the Olympics. Create partnerships with business and across departments to execute the government’s five missions.
- Split the Treasury into fiscal and economic ministries.
Europe
- Sign a reciprocal mobility agreement for young people or professionals.
- Link the UK and EU carbon prices.
- Explore deeper energy cooperation and joining the EU cybersecurity pact.
- Align food and veterinary standards.
- Become a part of the EU/EEA security zone.
Devolution
- Devolve local spending and taxation, especially for business rates and tourism.
- Give metro mayors more power to raise capital and encourage regional specialisation.
- Create urban wealth funds that combine public and private ownership of local assets, bringing in commercial expertise to boost long-term value. For example, TFL and Network Rail’s joint venture creating 20,000 new homes in London on disused train lines.
Housing
- Bring dormant housing supply back into the market – 1 out of every 25 homes in the UK is vacant.
- Build on the “grey belt” of previously developed disused land comprising roughly 2 per cent of the UK, as well as the green belt.
- Recruit more planning officers – 300, equivalent to one per local authority, is not enough.
Arts
- Broaden the definition of R&D for tax credits to include the creative industries, as in Germany and South Korea.
- Create a “Bank of Creativity” to leverage private finance into the arts. Better Society Capital, a similar scheme which invests in social enterprises, managed to bring in £3 billion to match its £925 million.
- Extend the UKRI’s successful scheme of investing in SMEs through “creative clusters” covering screen, games, fashion and AI.
Education and skills
- Digitise the system of exams and ensure that young people’s futures aren’t dictated by one-day assessments.
- Launch a strategy for adult education and lifelong learning. Currently there are more than 5 million over-55s in the UK considering quitting their job, with 500,000 saying they lack skills to keep up in the modern workplace.
- Reform the apprenticeship levy and replace it with a skills levy.
- Change the funding models of universities to drive efficiency and influence which degrees are prioritised.
Science
- Reverse the decline in UK clinical trials relative to peer countries and speed up regulatory approval for new treatments.
- Find ways to scale discoveries in the UK’s world-leading life sciences sector into investable businesses.
- Increase the availability of lab space in the Cambridge and Oxford arc.
AI
- Treat AI first and foremost as a tool – the primary focus of rolling-out AI across the public sector should be on skills and training the workforce to use new AI tools.
- Introduce AI regulatory “sandboxes”, or space to experiment, as proposed by Sir Patrick Vallance and already successfully deployed in countries like Singapore, to allow firms to test new AI technologies with consumers.
- Make sure the UK’s industrial strategy supports AI – the new government’s promise to remove planning barriers to new data centres is a good start.
Nature
- Turn London into a hub for biodiversity research by championing a public-private partnership between London Zoo, Kew Gardens and the city’s universities.
- Revitalise the UK’s deprived coastal communities by investing in nature.
- Include a goal for biodiversity within the UK’s nationally determined contribution for Cop29.
Energy
- Reform Contracts for Difference and the UK’s market pricing system. Delink gas and marginal electricity prices.
- Accept that limited dependence on low-carbon technologies from China is useful in the short term. Distinguish between physical goods (e.g. solar panels) and genuine intelligence threats.
- Address delays in the planning system and connection queues.
Tax and debt
- Commission an independent review of the fiscal rules – then analysed by the OBR – to consider how to address future borrowing for investment.
- Explore the establishment of a UK sovereign wealth fund, using assets and tax incentives to draw corporate and retail savings.
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