Policymakers are 'petrified' to boost investment in the UK, former Treasury minister warns

Lord Jim O’Neill, who has recently also led a review of business and investment policy for Rachel Reeve, the shadow chancellor, said that businesses need encouragement to look beyond their balance sheets.

The commercial secretary to the Treasury under David Cameron said that the UK policymakers are “petrified” to take chances in order to move the country forward out of a cycle of low growth.

“As crucial and exciting as our start-up scene in the UK is, there needs to be more for the rest of the overall economy,” he said.

Writing in The Independent, Lord O’Neill added: “As is a feature of daily media discussion, infrastructure needs in the UK are vast: whether it be more new forms of cleaner energy; desperately needed Northern Powerhouse Rail – in full across the north; much more London-style transport around many other urban parts of the country; preventive health investments; solutions to logjams like the ridiculous stalemate over Hammersmith Bridge, and so on.

“And we need to get the private sector, both domestic and international companies, eager to invest in more facilities for all their businesses, instead of the seemingly endless focus on managing their balance sheets and cash flow retention.

“Whenever I speak to a policymaker, they generally agree with these views, but are petrified of doing anything to change it because they feel constrained by the fiscal health – or lack thereof – of the country, and revert to presuming such lofty goals will have to wait for some (miraculous) improvement of the fiscal position.”

It comes as Sir John Redwood, a former minister for corporate affairs under Margaret Thatcher, called for corporation tax to be slashed to 12.5 per cent in order to increase investment.

In an interview with GB News, Sir John said that “the Irish have got it right” in choosing a lower level of corporation tax.

“As I've been explaining to the Government for several years, the Irish collect four times as much tax per head from business tax than we do by setting a rate which is now half our level.

“We've watched as Ireland has attracted massive American investment, particularly in the digital industries, the really exciting growth area of the world economy, and much of that investment would probably come to Britain if we'd had the same corporation tax rate as the Republic of Ireland.”