Respect for the UK’s economic institutions is essential for setting the nation on a path towards long-term stability and growth, according to Shadow Chief Secretary to the Treasury Pat McFadden MP.
On 12 July, McFadden and Shadow Minister, Science Research and Innovation, Chi Onwurah MP took the podium at Chartered Accountants’ Hall for a special Labour Business Network event looking at how the Labour Party would drive economic growth in the UK.
“If, over the past 13 years, we’d kept the same average rate of growth as the previous 13,” McFadden said, “the public sector right now would be £30bn to £40bn a year better off, without changing a single penny of the tax rate. That’s the difference low growth can make.”
In addition to low growth, McFadden said the UK is grappling with the highest tax burden for 67 years – but that is not reflected in the condition of public services that are “creaking under pressure”. For McFadden, those issues are related: “When you’ve got seven million people on NHS waiting lists, it’s not just a health question – it’s a growth question as well.”
In McFadden’s assessment, under Sir Keir Starmer, the Labour Party is a “changed outfit” from the one offered to the electorate in 2019. “My own belief is that any serious party of government has to care as much about the activity of wealth creation as it does about spending in the public square. That is where a modern, centre-left party should be.”
With that in mind, McFadden talked attendees through Labour’s five points to growth and a thriving economy:
1) Respect for economic institutions
Alluding to the Autumn 2022 Mini Budget, McFadden said that the government had disrespected key UK economic institutions last year at “great cost” to stability and the country’s reputation. In his view, the affected parties – namely, the Office for Budget Responsibility, the Bank of England and the Treasury itself – comprise the “whole underpinning of the UK’s economic credibility”. McFadden went on to say that Labour would rebuild trust between the government and UK economic institutions.
2) Industrial policy is back
McFadden explored the development of industrial policy and the role of proactive government in Europe, the US and China during his speech. “There’s no point in turning away from industrial policy for ideological reasons. We have to embrace it.” As such, Labour is planning a “very ambitious” green transition policy, aimed at boosting energy security and supporting good-quality jobs all over the country.
3) The value of workforces and talent
Here, McFadden cited Labour’s recently launched mission to break down barriers to opportunity – plus its planned reform of the Apprenticeship Levy and its commitment to establish expert body Skills England to tackle talent shortages. “If you don’t have the right workforce with the right skills for the right tasks and the right opportunities, you’re not going to meet the challenges the country faces.”
4) Trade and the UK’s relationship with the EU
While McFadden stated that Labour would not seek to rejoin the European Union, he noted that the party would foster an “adult, positive relationship” with the UK’s continental neighbours. He also welcomed the government’s decision to negotiate a path back into the Horizon Europe research initiative – but stressed that this process should be a platform for further, similar efforts, not an isolated case.
5) Driving investment in businesses
McFadden noted that Labour is supporting the Lord Mayor on his target for 5% of defined contribution pension schemes to back high-growth, UK companies. This would help to resolve the “traditional bridge problem” of the UK having “fantastic creativity and innovation, but sometimes seeing those ideas scaled up and developed elsewhere”. The party also wants to encourage more companies to list in the UK, rather than overseas.
Amplifying McFadden’s points on Labour’s green transition plans and the importance of cooperative research, Onwurah – a chartered engineer – highlighted science as a critical enabler for the UK to tackle its macroeconomic challenges. Onwurah also thanked ICAEW for organising an EY event on skills and levelling up hosted in her Newcastle constituency.
“As well as pushing out the boundaries of humanity’s collective understanding, research is also a priceless platform for our future growth and prosperity. The Campaign for Science and Engineering found that for every pound invested by the government in research and development (R&D), you get 20p to 30p back, each and every year, in perpetuity. That’s the payback to the economy that we are seeking to expand,” Onwurah said.
Onwurah said Labour’s national missions are for the UK to secure the highest, sustained growth in the G7, build an NHS fit for the future and become a clean-energy superpower – goals intrinsically linked to science and R&D. As such, she said, Labour “will support researchers, engineers, universities – and particularly businesses and investors – to work collaboratively in partnership to fulfil those long-term missions”.
However, poor investment in long-term industrial strategy means that the UK often fails to convert its “fantastic” academic and research base into lasting commercial outcomes, Onwurah warned. “We are so fortunate because our science base is something that we've built up over centuries. However, that doesn’t translate into great jobs – or a highly skilled, high-wage and high-productivity economy.”
“While the EU and US are taking steps to secure the industries of the future and build sovereign science and technology capabilities, our own UK science start-ups and spin-outs are being bought, or moving abroad because we’re lacking in investment options,” she added. Onwurah highlighted ICAEW’s Business Confidence Monitor as an important resource for highlighting that issue.
Engines of growth
Overarching those challenges, Onwurah noted, is a fragmentary administrative climate in government. “We’ve had as many science ministers as science strategies – nine in the past five years. That’s of course as well as four changes of chancellor in the past year.”
Tallying up the 131 weeks since the government broke a key manifesto pledge to take the UK out of Horizon Europe, Onwurah said: “We got out more than we put in. Since we left, we have been losing talent and investment opportunities from an economy desperately in search of them.”
For Onwurah, innovation and science are critical not just for building national prosperity, but boosting regional economies, too. “That’s why we will champion universities – and clusters of universities – as engines of regional growth, providing them with the resources to collaborate and innovate together with local businesses to drive regional innovation.”
In response to an attendee’s question on how Labour plans to restore the UK’s image as a serious, globally competitive nation, McFadden acknowledged that, on the basis of what shadow ministers had picked up from recent visits overseas, “there’s now a question mark over the UK in a way that there hadn’t been in previous years”. That has made a real impact on Starmer and Shadow Chancellor Rachel Reeves. “My first point today was about stability,” McFadden said. “We’re really concerned about that – and we want to pass that test.”
Discover more from ICAEW Insights
Insights showcases news, opinion, analysis, interviews and features on the profession with a focus on the key issues affecting accountancy and the world of business.
Hear a panel of guests dissect the latest headlines and provide expert analysis on the top stories from across the world of business, finance and accountancy.Find out more
News in brief
Read ICAEW's daily summary of accountancy news from across the mainstream media and broader financing sector.See more
Stay up to date
You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.Sign up