On Wednesday, the chancellor delivered a strong budget that ruled out shortsighted cuts to spending before the recovery was assured and put in place a number of important programmes that will promote sustainable economic growth over the coming years. Investments in three critical areas – infrastructure, education, and enterprise – sit at the heart of the recovery plan outlined in the 2010 budget, and have the potential to drive growth as we emerge from the deepest economic downturn since World War II.
The Red Book promises a series of measures to support critical infrastructure in the UK. Some of the most important infrastructure plans include establishing a £2 billion Green Investment Bank, investing £250 million in the national road network to increase capacity, providing £100 million to repair local roads, and creating a £120 billion grant for Accelerated Development Zones.
The UK has a historic investment gap with its continental peers. Indeed, between 1970 and 2007, we invested on average 18.2 per cent of our GDP in infrastructure, equipment, and other capital goods, while France invested 20.8 per cent and Germany invested 22 per cent. The measures announced today will not close this gap, but they will make a start on closing it. As we invest more in infrastructure, we will increase the UK’s productivity, with people up and down the country generating more output for each hour they work.
The budget also focuses on education, with plans to create 20,000 extra undergraduate places in key courses this coming September. This investment will increase the skills of our workforce, and has the potential to boost productivity in the coming years. Education is linked to innovation – another driver of growth – and the government’s plans to exploit the commercial potential of the country’s research universities hold much promise.
Finally, the budget proposes a series of measures to support small and medium enterprises. The £4 billion Growth Capital Fund, the doubling of the Annual Investment Allowance to £100,000, and the increase of the Entrepreneurs’ Relief lifetime limit to £2 million all have the potential to provide a much-needed boost to small and medium enterprises around the country. These businesses will generate high-quality jobs as they grow, and can help increase our economic resilience going forward through the benefits of diversification.
As we emerge from the economic downturn, we need to focus on growth – but we must ensure that the growth we experience over the coming years differs from that of recent decades both in quality and in composition. The government’s plans to promote infrastructure, education, and enterprise have the potential to put us on a more sustainable growth path going forward, and Labour has backed these plans with meaningful investments. Let’s hope these investments don’t get cut while the recovery remains fragile.