The upcoming Budget must reject managed decline and instead foster a productivity revolution through investment incentives, skills support, and lower employment costs to help British business drive economic growth, says Lord Richard Walker

I thought that working across the property, retail and leisure sectors had given me a wide perspective on business and the environment in which we operate. Nevertheless, I was shocked at how different things were once I had a front-row seat inside government. 

It won’t surprise readers that I found the contrast in how decisions get made simply staggering.

In business, you can’t spend years circulating proposals between committees while technology changes, competitors move ahead and your customers expect more for less.

Yet that’s too often how we approach industrial and economic policy in Britain.

The Chancellor faces a difficult task on Wednesday. Little fiscal headroom, expensive borrowing and an uncertain global economy aren’t exactly the ideal conditions for delivering a Budget.

But there is an opportunity to do something more important if he changes the way Britain thinks about growth.

Our economic debate remains dominated by how much government can tax and spend and, but this has obscured Britain’s extraordinary strengths. World-class universities, deep capital markets, a robust legal system, language and timezone, and innovative entrepreneurs and businesses capable of competing anywhere.

I don’t believe we lack ambition. I think we’re making it unnecessarily difficult to turn ambition into investment because policy is being dictated by short-term political thinking, without a focus on growth driven by what I call a productivity revolution.

Take corporation tax.

Britain has a lower rate for smaller companies, but once profits exceed £250,000, our system makes little distinction between a growing business trying to scale up and a multinational making billions.

Surely we can do better than that?

The right approach

I’d like to see a more graduated approach, with lower corporation tax for smaller businesses and entrepreneurs investing in growth, and a greater contribution from larger companies that aren’t reinvesting their profits.

I’ve said we should use aggressive tax breaks to reward genuinely additional investment in equipment, technology, skills and jobs, fuelling a step-change in productivity and global competitiveness. 

Rather than simply taxing profits, let’s encourage businesses to put more of those profits to productive use.

We should be equally ambitious about skills and putting AI in the service of our economic interests.

Artificial intelligence is already changing how businesses operate. At Iceland we’ve launched our first AI skills programme because we can see the opportunities, and we know we cannot wait years for the education and training system to catch up.

The government should give employers much greater freedom and stronger incentives to retrain their workforce as technology changes.

But investment decisions aren’t made on tax rates alone and businesses have become obstructed by the short-term policies I mentioned earlier. Bus fare caps have their place, but to invest with confidence businesses need more – clarity on when infrastructure projects will happen, how we will make work pay, and how stable our domestic energy policy will be over the next five or ten years.

We have a 10-year industrial strategy, which is welcome, but I’d go further in that we need a credible five-year delivery plan underneath it that sets a path businesses can credibly buy into.

And we cannot ignore the cost of employing people. Labour must be the party of jobs.

Employer National Insurance is charged at 15 per cent above a threshold of just £5,000. That’s a significant consideration for any company deciding whether to recruit.

If the government wants businesses to create jobs, particularly for younger people and those trying to enter the workforce, it should make hiring easier, not more expensive.

None of this means abandoning fiscal discipline. Quite the opposite. People in work pay tax, and get off benefits. 

With debt interest costing around £110bn a year, we simply cannot afford an endless cycle of spending commitments without a credible plan to grow the economy that funds them.

Let’s be optimistic here and say the past week has seen encouraging signs from government of it actually listening to business. The dial is shifting.

To prove this is true, the Chancellor has an opportunity to show that Labour understands something fundamental: businesses are the ones making the investments, creating the jobs and generating the prosperity on which everything else depends.

This is a key moment for a government, which I supported for its pro-business pledge in opposition; the time to demonstrate its serious intention to make Britain a more attractive place to invest, employ people and grow a business.

So here’s to a Budget for business and jobs.

Lord Richard Walker is executive chairman of Iceland Foods