A policy to boost growth now? Thatcher had the answer
If Labour is serious about generating growth, it needs to find creative ways to attract investment. By drawing inspiration from the history of Enterprise and Investment Zones, Labour could signal it means business without a full revamp in economic policy, says Brandon Lewis
Over the past few weeks, the future of European security was reoriented at warp speed. Amid this geopolitical whiplash, Sir Keir Starmer has been right to pledge a boost to defence spending. That level of investment – slated at 2.5 per cent of GDP from April 2027 – will be a boon to sectors like AI, cybersecurity and aerospace that will play an exciting role in creating jobs and advancing the country’s technological capacities.
It never should have taken the volatile impulses of Trump to get us here.
While Sir Keir has successfully navigated the choppy waters of US foreign and economic policy, the hope that President Trump’s tariff fixation wouldn’t soon zero in on the UK was always wishful thinking.
Despite its primary mission to “kickstart economic growth” and outpace the G7, Labour hasn’t had much luck. Downgraded forecasts from the OBR have forced Chancellor Reeves to tighten the fiscal belt. Though the government has looked, appropriately, to cut where it can, it had to stare down a backbench revolt to do so.
Where economic opportunity arises, Labour has squandered it. In a furtive attempt to spur excitement at development, the government has thrown its weight behind half-baked ideas, dusted off the heap of discarded policies; Heathrow expansion, Old Trafford’s redevelopment, the Oxford-Cambridge arc all come laden with political baggage and will take years before any benefits are felt regionally or nationally.
Constructive regional investment
Rather, Labour should build on the constructive regional investment policies that have, for decades, been set by successive conservative governments.
In fact, in October 2024, Chancellor Reeves committed to the continued implementation of the UK Investment Zones. Here was a policy with deep roots in Thatcherism carried on, proudly, by the first Labour government to win a general election in nearly 20 years. Oh, how times have changed!
Introduced by Prime Minister Thatcher, the demarcated ‘Enterprise Zones’ were meant to provide focused redevelopment of forgotten industrial areas across the country. Under Cameron, the policy was revamped to provide expanded, attractive business rates and lighter touch regulation for planning so that local priorities could take precedence. Following in their footsteps, Reeves is absolutely right to maintain the government’s commitment to supporting regional zones.
Much to her luck, ex-Chancellor Jeremy Hunt deftly organised these UK Investment Zones. He co-located businesses with embedded regional institutions or existing economic advantages to streamline information, capital flows, and ensure development occurred in line with national priorities. Now, Labour can do more.
If Labour is serious about generating growth, it needs to find creative ways to attract investment. It doesn’t need to be everything to everyone all at once, but it must acknowledge how rising National Insurance costs have increased hiring expenses and how uncompetitive tax policies deter investment. By drawing inspiration from the history of Enterprise and Investment Zones, Labour could signal it means business without a full revamp in economic policy.
Given that the increase to defence spending is a widely agreed national priority, Labour ought to commit to fast-tracking investment in the sector. This could be achieved through a “Defence Zone” to provide the sort of signal that Labour is serious about growth which aligns with national priorities. Providing preferential treatment to high-growth, innovative sectors would pique the interest of other industries likely keen to make their pitch to Labour for similar treatment. Such a plan would provide positive economic feedback faster than any of Labour’s other priorities and bring with it valuable inter-party goodwill among a slate of voters already bored stiff by Labour’s lackluster performance.
Brandon Lewis is a former minister and Conservative party chairman