Britain’s bi-annual tradition of holding a fiscal circus is paralysing investment and creating its own tax, writes Liam Byrne MP
Britain has never lacked for inventive genius. We led the Industrial Revolution, built the world’s first railways and created the first global brands. Now we stand on the threshold of a new age of AI, blessed with some of the greatest scientists and innovators on earth. But the verdict of hundreds of firms we met on our Business Committee road-trip from Cambridge to Edinburgh is stark: our first-class ingenuity is held back by a second-class growth machine. Business now believes five shifts are needed.
First, we must mobilise capital – and that starts with certainty. Britain is not short of savings. We’re short of economic stability. Investors told us the same story in every city: when ministers float 13 different tax ideas in two months, investment committees hit pause.
The IMF has been very clear about what to do: countries that budget for healthy headroom make better decisions. So we need much bigger fiscal buffers and to scrap the bi-annual fiscal circus that paralyses investment half the year. A country that wants more factories, more labs, more scale-ups must first offer more predictability. Uncertainty is a tax – and business can’t bear much more.
This new certainty would help us attract foreign direct investment (FDI). But more than FDI we need ‘UKDI’: a revolution to help channel the trillions in British savings that currently flow abroad back home to help back British talent. Public finance institutions like a bigger British Business Bank should act as co-investors, crowding in private capital. And public procurement – one pound in every six of our economy – must become a lever for innovation and local growth. From the NHS to defence, public contracts should reward ingenuity – and those with the confidence to invest here.
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Second, we must improve business return on investment by attacking costs we can control. Higher employer costs are still feeding through. We can’t reverse that. But energy prices are destroying Britain’s competitiveness. When a flagship plant like Nissan’s in Sunderland faces some of the highest electricity costs in the world, we cannot shrug. Cheap, clean, reliable power is no longer just a climate commitment. It is the foundation of manufacturing strategy.
But alongside cheaper power we must cut the cost of red tape. Too many businesses are exhausted by regulators that don’t talk to each other and which move at a leisurely twentieth-century speed. We need more red carpet and less red tape.
Third, we must mobilise talent with a skills system that keeps pace with technology. Britain’s “talent density” is one of our greatest comparative advantages, but the pipeline bringing young workers through isn’t working. We have a million young people not in education, employment or training. What Pat McFadden calls “NEET Zero” is vital. But that demands a new skills partnership between business, colleges and local leaders, focused on technical mastery, practical training and lifelong learning.
Fourth, we must fix government itself. Too many departments still work on Whitehall time while the economy moves at network speed. We need a reinvention of government: flatter structures, digitised services, deeper devolution – and above all faster decisions. Local leaders must have the tools to act on housing, regional transport and growth – and the accountability that comes with it.
Finally, we need to move from signing trade deals to shifting freight and selling services. Britain’s firms need bigger markets into which to sell. That means busting the bureaucracy that actually stops business exporting. Exporters grow twice as fast as firms that sell only at home, yet too many are still wrestling with friction at the borders. The UK-US Economic Prosperity Deal and the reset with Europe offer real promise – but only if they work in practice not just in press releases.
The task ahead is simple to state and hard to dodge. Britain has always been the home of science and invention. In the science race of the 21st century, we’re at the front of the grid. We cannot legislate for genius. But we can rebuild a system that turns genius into growth: stable, ambitious, competitive, skilled, capable and open. That is how we make these isles of wonder the best place in the world to build a business.
Liam Byrne is the Labour MP for Birmingham Hodge Hill and Solihull North