{"id":385969,"date":"2026-01-03T17:10:08","date_gmt":"2026-01-03T17:10:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/385969\/"},"modified":"2026-01-03T17:10:08","modified_gmt":"2026-01-03T17:10:08","slug":"rachel-reevess-stability-obsession-is-hurting-uk-investment","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/385969\/","title":{"rendered":"Rachel Reeves\u2019s \u2018stability\u2019 obsession is hurting UK investment"},"content":{"rendered":"

Father Christmas has not been kind to Chancellor Rachel Reeves, and 2026 appears to have plenty of fiscal challenges in store. The latest Office for National Statistics (ONS) data has found that overall public and private investment in the UK is lower<\/a> than it was when she took office, and the lowest in the G7 of advanced economies.<\/p>\n

This will come as a bitter blow, for if there is one constant in Reeves\u2019s economic diagnosis, it\u2019s that many of Britain\u2019s economic woes are due to a lack of investment. In her well-received Mais Lecture<\/a> as Shadow Chancellor two years ago, Reeves attacked \u201cweak investment, with Britain alone among the G7 in having investment levels below 20% of GDP\u201d. She raised the same issue in both her Budgets last year.<\/p>\n

Worryingly, economic forecasters predict that this slump is not temporary. In November, the Office for Budget Responsibility (OBR) projected that business investment would be lower<\/a> at the end of this parliament than it was at the beginning. In the same forecast, the OBR predicted that general Government investment, something the Chancellor can control directly, will be only 0.1% of GDP higher than she inherited.<\/p>\n

The Government is stuck in a rut because it has inherited a low-investment economic model, but it is not prepared to change things. The seeds of failure were actually sown in Opposition. Once again in her Mais Lecture, Reeves said Labour would create growth through stability. Darren Jones, now the Chief Secretary to the Prime Minister, went even further ahead of the 2024 general election, saying that Labour\u2019s strategy depended on a so-called \u201cstability premium<\/a>\u201d. Investors would flock to the UK because the Government would not fundamentally change anything.<\/p>\n

When things are working, stability is fine. However, when the car is heading off a cliff edge, you don\u2019t want to hold course \u2014 you want a driver to suddenly turn the car around. Nothing can change until the Government accepts the British economy is fundamentally broken.<\/p>\n

Low levels of investment are not due to bad politicians or some technical flaws in the tax system. Britain has a cultural antipathy to investment. This is true in the private sector, where business investment has been sluggish for decades thanks to short-term pressure for higher returns and an increasing use<\/a> of share buybacks. It is true in the public sector, where politicians have sought to buy votes by prioritising things which can put money directly in voters\u2019 pockets, such as pensions, or spending on popular services including the NHS, rather than long-term investment in energy, infrastructure or industry which can drive growth.<\/p>\n

This year may be the last chance Reeves has to turn things around. She needs to start by incentivising businesses to invest rather than take cash out of their companies. Corporation tax should be increased to make tax reliefs on capital investment more attractive. Labour should also introduce<\/a> a share buyback tax, something implemented by Joe Biden in America and not scrapped by Donald Trump. Since 2022, AJ Bell estimates that UK companies have handed back \u00a3225 billion<\/a> to shareholders which could have been reinvested. A tax of 4% could generate billions for investment and encourage companies to be bolder.<\/p>\n

At the same time, Labour needs to boost domestic saving to provide more cash for investment. Tax rises on savings should be scrapped and ISA limits should be increased alongside converting them into the Brit ISA<\/a>, which would put minimum investment requirements for savers in UK companies. It is not unreasonable for the Government to ask for savings to stay in Britain in return for the \u00a37 billion given up<\/a> in tax revenues. We need to stop playing retail politics, with gimmicks such as covering green levies through the tax system which will cost over \u00a32 billion and which most bill payers won\u2019t even notice. Fix the fundamentals, and the rest will follow.<\/p>\n

The good news for the Chancellor is that she has nothing to lose by trying to overturn this broken model. Labour\u2019s polling is in the doldrums, and the constant threat of defenestration hangs over both her and Keir Starmer. With her back against the wall, Reeves must start providing a compelling story for how she can turn things around. Clinging to morbid stability will achieve nothing.<\/p>\n","protected":false},"excerpt":{"rendered":"Father Christmas has not been kind to Chancellor Rachel Reeves, and 2026 appears to have plenty of fiscal…\n","protected":false},"author":2,"featured_media":385970,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,164067,46,2512,16938,3717,6108,4390],"class_list":{"0":"post-385969","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-darren-jones","12":"tag-economy","13":"tag-investment","14":"tag-keir-starmer","15":"tag-labour","16":"tag-rachel-reeves","17":"tag-uncategorized"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/385969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=385969"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/385969\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/385970"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=385969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=385969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=385969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}