Welcome to return. The next week is the first anniversary of the UK Labor Party return to power after 14 years in the opposition. According to the Prime Minister Sir Kir Stmper, Economic Development is the “number one mission” of the government.
This week I assess the progress of labor on that mission, underline what it should do further and with the help of major thinkers on the UK economy, provide five policy recommendations.
Since Labor came to power in July 2024, the UK economy increased by 0.89 percent till April this year. According to data from May 2025 from HMRC, more than one million parold employees have more than a quarter. Economic activity has fallen in all major areas, and has flattened by trade and consumer trust.
Britain has been affected by global economic uncertainty. Nevertheless, the number so far reflects poorly against the government’s mission.
A part of it falls down to the development strategy of Labor. “It has been invested,” says Gills Wilks, a senior partner of the Institute for Government. “This means imposing money for public services, infrastructure and defense.”
As I mentioned 1 June version of this newspaperThe under-investments are central for UK’s subordinate productivity growth. The amount allocated by Chancellor Rachel Reeves is well spent, the growth rate should increase in a longer period. But the government has reduced greatly to promote economic activities in the near period.
In his first budget in October 2024, Labor spent day-to-day expenses for Britain’s stressful public services. After promising not to increase taxes on “working people”, it chose to cover the lack of its expenses by increasing the levy on employers, investment and rich. Reeves also left a small buffer against his main fiscal rule to balance the current budget.
This left the government dependent on development to increase revenue and maintain the fiscal headroom. But emphasizing economic activities in the near period with high taxes, and the wholesale of the development agenda focused on long -term, that strategy has been highlighted.
The buffer of Reeves has come under pressure. And recently as a U-turn on the cuts planned for the winter fuel payment and welfare shows, the party is struggling to save. This maintains the viewer of high taxes, which further enhances businesses and investment.
Until economic activity arises soon, Britain falls deep into a spiral of growing taxes and low growth.
“Key will now be clear and consistently indicated to companies, markets and investors that the environment will be more approximate and trade-friendly in the near future,” said William Wright, managing director of New Financial Think-Tank said, “said William Wright.
Essentially, labor needs to harass animal souls quickly, cheap and without more voters. How? I asked the UK policy experts. What he said here:
Turbocharged planning reform
The government has made efforts to streamline the plan system, but the head of the policy in the UK remake, Sam Dumitru, says that it can be more ambitious and targeted.
He urges the government to follow New Zealand and automatically simulate “good public transport infrastructure to allow planning for new six to eight-storey housing in expensive cities near the infrastructure”.
Similarly, Ben Hopkinson, head of Housing and Infrastructure at the Center for Policy Studies, said the UK should return to clearly add housing and infrastructure projects. From 1880 to 1933, the Metropolitan Railway will buy land near the proposed train routes, expand the railways and then sell high-value land for development.
Says Hopkinson, “Today the major infrastructure projects can give joint consent up to 500 houses only, a limit is so low that this capacity is almost never used.” “Housing Secretary can scrap this limit tomorrow. This can make new homes with new supporting infrastructure.”
Reduce or eliminate stamp duty on shares
Stamp duty reserve tax is levied at 0.5 percent on the purchase of shares of the UK-list company. No country with Major financial center The transactions charge as high as Britain, if at all.
A 2024 study by Oxera It was found that tax reduced the total pension savings on retirement, increased the cost of equity and limited capital expenditure.
It assumes that SDRTs are eliminated GDP can permanently increase between 0.2 and 0.7 percent. For the remedy, it can increase the annual tax to £ 6.8bn. The SDRT currently brings to £ 3.8bn in receipts.
Introduce an ‘innovation visa’
The UK is one of the most expensive and burdens of visa system for talented, high-skilled individuals in advanced economies in the UK.
New Britain Project Think-Tank founder Anna McSen recommends a special introduction Invitation-visa modelBased on Australia’s National Innovation Visa.
Even if only for a limited period, it will offer a low-cost, fast-track route for talented persons to work permanently, conduct research or start business in priority UK areas. As a regional hub for innovation, Britain’s world -class universities and research institutes can help administer them.
Nesta’s chief economist Tim Lenigs, Congress, and say that giving the ability to issue visas to research-intensive universities will be encouraged to scout for talent globally.
Fix rocks in the income tax system
The UK’s income tax system results in the result of punitive marginal tax rates. Two are particularly problematic.
First, loss of tax-free childcare support if a parent’s adjusted net income exceeds £ 100,000 per year. (My colleagues wrote about this by Claire Barrett and Emma Agamang in March.) Second, 60 percent marginal tax rate for earning between £ 100,000 and £ 125,000, as individual allowance is thin.
The UK tax expert Dan Nedley said, “These high marginal rates encourage workers to limit their earnings by reducing their hours or contributing external pension.”
The government can scrape the range of childcare support by making it universal. According to Institute for Fiscal Studies Estimates, it will probably cost in less hundreds of million.
The government may be committed to fixing other rocks and components as part of the long-term signal to the workers. “Personal allowances are likely to grow longer in income, possibly at a very low cost for the treasure,” Needle says, about more than £ 100,000 marginal tax rate.
Individual savings accounting system
According to New Financial, the joint property of the UK’s ISA system is a form of tax-free savings up to £ 20,000 per person per person per person per person, around £ 775BN.
This recommends simplifying the system – including cash and equity investment products – a single cover reproduces as “investment and savings accounts” in a single cover. The new financial records can encourage an additional £ 5.4bn alone to invest in stock-and-shears ISAs every year, promoting Britain’s retail investor market and liquidity.
Over time, the government can detect equally annual allowance, with any cash ISA savings with saving only to tax breakdown when investing above £ 10,000. For measurement, new financial finds that 80 percent cash ISA users save less than that amount every year.
These reforms are not correct, but given labor obstacles, they are practical ways to awaken business and investors. Send recommendations of your policy freelench@ft.com Or on X @Tejparikh90,
One of the biggest prominence in Britain’s history was for the party, a unique opportunity to start major reforms and cost-cutting.
Eventually, to promote large tax measures, it will move forward and cut significant expenses will be overcome by the ongoing danger of high taxes. I will return to them in future newspapers.
Instead, the first year of labor will go down as a major omission opportunity for the UK economy. It lacks boldness, and with its lack of business experience, the UK cabinet has ignored the important role of keeping the private sector up.
The bad odor around Britain has shut down the country in weak economic activity, politically loud cost-cutting and high taxes. To avoid your own net, labor must find a way to promote animal souls.
food for thought
The ambiguity for the economy is poor. this paper This explains how poorly written law damages investment, increases costs and slows down growth.
Sunday free lunch is edited by Harvey Nripia
