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Why Invest in Britain?

Why Invest in Britain?

Britain is in poor economic health. Growth has been largely non-existent for a decade, productivity is sluggish, public services are collapsing, and wages haven’t kept up with inflation and in many places aren’t enough to live on.

Most people in Britain feel that “nothing works any more”.

Chronic underinvestment

Decades of low investment is at the heart of the problem. Investment is crucial for building and maintaining the foundations for the economy – providing the bedrock underpinning productivity and growth. Chronically low investment from both the public and private sectors has led to the economic stagnation we see today.

The previous government repeatedly cut real public sector investment from 2010 onwards, and UK public sector investment has been consistently below other advanced economies. If we had kept pace with other G7 nations there would have been over £200bn more public investment between 2006 to 2021.

A false economy

Despite this, inherited spending plans imply extensive further real cuts to public investment across the current parliament.

These cuts, and the low level of investment over previous decades, have been driven by a framework of fiscal rules which prioritise short term budget balance over the long term health of our economy and society. These rules risk a legacy of further economic decline, volatile energy costs, runaway climate impacts, and the further collapse of essential public services.

Adherence to this framework also risks a public finance doom loop where failure to borrow to invest ultimately leads to more public debt, not less.

Government is the agent in society with the longest time horizon. It is best placed to make large, long-term transformational investment.
Andy Haldane - Chief Executive Royal Society of Arts and former Chief Economist, Bank of England

The challenges we face

Addressing this public underinvestment is vital if we are to rise to the generational challenge of transitioning to a decarbonised, sustainable and resilient economy. Such a transition requires a level of investment and order of magnitude higher than that currently on offer, and this cannot all come from the private sector. Significantly higher public investment is needed to fund essential projects and also help crowd in private finance so we can leverage Britain’s strengths in the sectors of the future.

On top of this, the impact of a decade of underinvestment in our public services is now clear for all to see. From longer NHS waiting lists to collapsing school roofs and crumbling infrastructure, yesterday’s underinvestment has become today’s public service crisis.

Why public investment is the solution

Breaking out of this cycle requires a clear strategy for long-term public investment which can improve the health, quality of life, and wellbeing of people and communities, and in turn can help boost Britain’s future economic performance. This will require addressing the imbalances in our tax system, and increasing borrowing in the short-term, so we can make the investments needed to fix the economy and ensure debt levels remain sustainable in the long term.

Increased public investment, when combined with clear policy signalling through a robust long-term industrial strategy, will also help create the healthy and skilled workforce and modern physical and social infrastructure needed to unlock a step change in private investment, further boosting productivity and growth.

It is hard to escape the conclusion that the country needs a prolonged period of rebuilding. For which, we have argued that an extended period of public investment is required to address our economic failures.
Professor Jagjit Chadha OBE - Director of the National Institute for Economic and Social Research

A Vision for Tomorrow

A different Britain is possible if we start investing in our collective future now. A country with rising living standards, flourishing local and regional economies, more good jobs in greener industries, cleaner air, cleaner cheaper energy, and high quality public services that we can rely on when we need them.

Low public investment spending is not ‘sensible economics’; it is a recipe for decline. Britain cannot afford another lost decade of stagnation. Our children and grandchildren need us to secure their future by investing in Britain today.