Tony Danker is Director-General of the Confederation of British Industry
For business leaders, the past few weeks have felt like peak politics. But this week has marked a shift back to economics. And it is most welcome.
Yesterday saw the publication of the long-awaited Levelling Up White Paper, with its transformational aspirations. Today there are energy price announcements and an interest rate decision. Economics is coming to the fore once more.
For me, the biggest takeaway from yesterday’s PMQs is that the debate about long term growth has now reached primetime. Here at the CBI, we’ve been banging this drum for a while now. We partnered with the Campaign for Economic Growth at Conservative Party conference back in the Autumn because we wanted the government to focus more on business investment to drive the economy. And today I was joined by the brilliant Robert Colvile from the Centre for Policy Studies at a joint CBI-CPS event to answer the question: are we actually serious about growth?
The UK currently has the fastest growing economy in the G7, but it doesn’t tell the whole story. V-shaped recoveries around black swan events are no time for credit or blame. The downward nosedive is not an accurate judgement of economic performance; and nor is the climb.
The truth of the matter, as set out in black and white by the OBR, is that we’re looking at post-recovery growth of just 1.3-1.7 per cent. For a country that has demonstrated it can do growth at around 2.5 per cent, this is not ambitious enough.
And let’s be honest, without higher, sustainable growth the ambitious, levelling-up goals set out yesterday, from improvements to public services and much more besides, will be all the harder to achieve unless we can get growth going again.
Let’s look a little closer at the bind we’re in – and importantly – how we can escape being caught in a trap.
Lumping more onto the UK’s tax burden – already at the highest sustained level seen in peacetime – cannot be the answer. The evidence is clear that raising taxes stifles growth, and cutting them drives it.
We’re not talking growth at any cost and by any means. And we’ve not lost sight of the need for fiscal responsibility. We’re talking sustainable, long-term growth stemming from greater investment, innovation and productivity.
Just as companies can’t afford not to invest in growth, nor can countries. It’s not just about money – it’s about ambition and imagination too.
And there’s never been a better time to go for growth, because right now we’re at a unique moment: when once-in-a-lifetime events have coalesced to create a burning platform for change.
One of those is Brexit. I am a big believer in the opportunity of post-Brexit Britain. I think it gives us the platform we need to push the UK’s huge economic potential and the freedom to make big bets. It can awake us from the flatlining productivity that took hold after the financial crisis.
Another is the pandemic, which has driven huge acceleration in tech and digital adoption.
And finally, we have the opportunity that flows from our world-leading position on decarbonisation. There is a wall of investment to fund decarbonisation – backed by firms with over $130 trillion in assets. British businesses are begging Conservative politicians to see the enormous economic prizes available go to those who move fast.
All this means this is our moment.
So how do we seize it? By harnessing the creativity and initiative which birthed the Super Deduction, new skills bootcamps and offshore wind investment – measures which spurned orthodoxy in public policy and showcased the boldness and vision we need.
The first step should be a permanent Investment Deduction, succeeding the Super Deduction and mitigating the looming Corporation Tax rise. It would act as a long-term incentive to invest and grow enterprise, with businesses acting across many fronts in service of the nation.
Achieving the Prime Minister’s vision of the UK as a science superpower requires nurturing a workforce fit for the future. So, how about building on the Apprenticeship Levy with a new Skills Challenge Fund to invest in the high-value skills businesses really need.
We also need to get serious now about generating more of the skills we need at home – so we’re less reliant on immigration. Nadhim Zahawi is onto something with his new Unit for Future Skills, examining where skills gaps exist. Let’s supercharge that and build an independent Council for Future Skills. It could optimise training towards future economic demand and recommend visas to overcome shortages in home-grown talent, setting the Shortage Occupation List.
On energy, ending uncertainty on hydrogen and schemes like carbon capture and storage will enable the UK to lead in global green markets.
Meanwhile, let’s build on Monday’s Benefits of Brexit paper by establishing a new Office for Future Regulation to allow a post-Brexit UK to become the smartest and most future-focused regulator in the world, with a clear remit to target competitiveness, investment and innovation.
The focus of this new body should be the big bets for our economy. Set free to be agile, now we are no longer bound by EU-wide consultation and compromise. Proportionate, so that it strikes a better balance between investment and consumer protection. And more dynamic, allowing regulators to act quickly and decisively, as we saw with the vaccine, when the MHRA saw the UK lead worldwide.
This is not all on Government. Business has a key role, and the CBI will be promoting serious growth to firms across the country. We will ask them to increase business investment. In net zero. In innovation and digital transformation. In exports. In skills. In workforce health and wellbeing. And we will gather them in clusters around the country to deliver levelling up the only way it can be done – by the private sector through better skills, jobs and wages.
Business leaders – of all sizes and sectors – will respond because they are serious about growth.
So let’s get serious, together. Let’s unite, creating sustainable growth – the only real answer to our cost-of-living crisis, rising energy prices and high inflation. Growth that propels the UK beyond recovery to a new era of prosperity.
After a disappointing decade for UK investment and productivity, this is our second chance. Let history show that, this time, we seized the moment.