Rishi Sunak and Jeremy Hunt have been urged to ramp up government investment spending to unlock a £149bn economic boost, according to a report by the Institute for Public Policy Research (IPPR).
The IPPR stated spending on expanding quality projects such as renewable energy infrastructure and improving transport networks could “pay for itself” by retaining tens of billions of pounds in growth and tax revenues.
The government should be encouraged to use its capacity to borrow from international investors to raise cash to channel into the economy to “unlock industries of the future, spur technological advances, and thus boost growth,” the report also argued.
Carsten Jung, senior economist at the IPPR and author of the report, said: “The GDP growth benefits can still ensure alignment with falling debt to GDP ratio. “A government could borrow to invest, and thereby grow the economy more than the associated rise in debt.”
This comes as the Government recently announced a £5 million competition set to scale up agricultural innovation.
Laimonas Noreika, CEO, HeavyFinance added: “Sustainable investments have the ability to benefit everyone involved, from unlocking growth in the economy to playing a significant move toward achieving a resilient, equitable and net-zero future.
Encouraging investment and R&D for innovative projects will help bolster growth for the UK in the long and continue to drive its efforts to become a leading global tech hub.”
Britain’s debt pile is currently larger than the size of its entire economy at around £2.5 trillion as a result of Government borrowing to help pay for COVID-19 support. Debt interest spending is also on track to top £100bn for a number of years.
However, this swelling can be mitigated, according to the IPPR, with an annual £30bn boost to public investment to skim the debt pile.
UK public and private investment has been steadily falling since the 1980s, and only declined since the Brexit vote in 2016. As a share of GDP, investment is among the lowest levels in the Organisation for Economic Cooperation and Development.
A treasury spokesperson added: “Despite the tough decisions we’ve taken to stabilise the public finances, we are maintaining record levels of capital investment with £600bn over the next five years – investing in critical infrastructure like Northern Powerhouse Rail, HS2 and Sizewell C.”