Large investments in a low-carbon economy rather than tax sops are the best bet for reviving the UK's stalling economy, say experts
According to leading economists, the UK should invest £26 billion a year in a low-carbon economy to revive growth instead of planning tax giveaways that will only exacerbate stagnation.
The researchers note that investing in energy infrastructure, transport, and innovation in new technologies such as AI and the natural environment would rapidly boost the UK's economy.
Public investment at that level could attract twice as much from the private sector and quickly pay off in higher productivity, efficiency savings, economic growth, and carbon reductions, says Lord Stern, who was a chief economist at the World Bank.
Current government plans to stifle investment, by contrast, would lead to a "continuation of stagnant productivity and weak economic growth."
The findings are strikingly similar to the commitments made repeatedly by Keir Starmer, the Labour leader, to invest £28 billion a year in a "green prosperity plan.". Those commitments have come under sustained attack from the Tories. They are now to be reviewed by the opposition leadership this week, as some figures within the party are understood to favour dropping the pledge.
The authors of the LSE paper entitled Boosting Growth and Productivity in the UK Through Investments in the Sustainable Economy, published on Monday, arrived at their conclusions independently by examining the fitness of the UK's crumbling infrastructure, the challenges and benefits of low-carbon investment, the broader economic environment, and international competition.
This means that Labour's £28bn-a-year green investment plans are of the right magnitude, consistent with investing in the structural change associated with a sustainable and resilient transition.
But he noted that the investments required—equivalent to an increase in public investment of roughly 1 percent of GDP—were also similar to those espoused by the former prime minister Boris Johnson when he held the presidency of the G7 group of advanced industrialised nations.
Zenghelis said the research suggested that any "fiscal headroom" within the public finances, owing to better than expected economic performance, would be better allocated to investment than to tax cuts, which the Conservative government is planning.