As we approach election day, political commentators seem increasingly confident that we’ll see a change of government with all signs currently pointing to a Labour majority. While the outcome of the election won’t be known for sure until the early hours of Friday, 5th of July, we’ve examined Labour’s manifesto to get a sense of how a Labour government would approach UK innovation for driving research and development (R&D) and business growth.
Industrial strategy
Labour’s manifesto paints a picture of a Britain filled with innovative and cutting-edge businesses, but it suggests that more needs to be done to turn these companies into commercial success stories across the country.
In terms of how they plan to achieve this, much time is devoted to their “industrial strategy”, where the manifesto speaks of plans to work with employers, universities, colleagues and industry bodies to identify “growth sectors” so that they can create the programmes and infrastructure needed to support key industries both locally and nationally. While the implication is that it will take time to identify where investment and support are needed for their industrial strategy, the manifesto does list several sectors of particular focus based on their strength compared to other countries. These sectors include research institutions, professional services, advanced manufacturing, and creative industries, which will all receive support from a new Industrial Strategy Council.
The manifesto also explicitly mentions plans for several other key sectors, including construction, financial services, artificial intelligence, automotive, aviation, life sciences and energy, as well as transport and communications infrastructure. Increased investment in these sectors, which we discuss in more detail below, is likely to drive R&D – especially as there is often specific mention of the need for greater innovation and better use of cutting-edge technology in these areas.
Construction
There is a promise to “get Britain building again” by building 1.5 million new homes over the next parliament, many of which are due to be social and affordable housing. Labour’s approach prioritises building on brownfield land (previously used urban land) and grey belt land (poor quality green belt land). They’ve also committed to building a new generation of new towns and a series of urban extensions and regeneration projects.
The assumption is that they plan to help drive their building strategy by continuing the full expenses regime for Capital Allowances (see below for Labour’s plans on business taxation).
Financial services
The manifesto also says that a Labour government will look to drive innovation and growth in financial services by supporting new technology, giving the examples of Open Banking and Open Finance where financial data (such as bank accounts, pensions and investments) is shared with third parties to help create new services and products.
Artificial intelligence
Labour plans to support the development of Artificial Intelligence (AI) by making it easier to build new data centres and removing existing planning barriers. It also states that greater regulation will be needed for some of the more powerful forms of AI, and that misuse of the technology (such as the creation of explicit deep fakes) will be banned.
Automotive
There is mention of an automotive sector plan, which will focus on the UK’s transition to electric vehicles through increased EV manufacturing and a faster rollout of charging points.
Aviation
The manifesto briefly suggests that a Labour government would back sustainable aviation fuels and support airspace modernisation.
Life sciences
There are plans for an NHS innovation and adoption strategy, which includes reformed incentive structures to increase innovation and deliver faster regulatory approval for new medicines and healthcare technology.
Energy
Delivering clean energy by 2030 is a clear priority for a future Labour government, with investment promised for a zero-carbon electricity system that includes onshore and offshore wind, solar, carbon capture and storage, hydron, and marine energy. This is planned to be delivered by a proposed new publicly owned company, Great British Energy, which will receive £8.3 billion worth of funding over the parliamentary term. The manifesto commits to continuing to use oil and gas for the foreseeable future (it reads “for decades to come”), while the UK transitions to more sustainable options. There is also the promise of more investment in new nuclear power stations and small modular reactors (SMRs).
Transport and communication infrastructure
The manifesto declares that infrastructure planning needs a boost to encourage innovation and investment. Labour aims to deliver this by making it easier to build laboratories, digital infrastructure, and gigafactories (factories that mass-produce batteries for energy storage or electric vehicles).
As well as this, there are plans for a ten-year infrastructure strategy to improve roads, reservoirs, and railways, which will be managed by a new National Infrastructure and Service Transformation Authority. As part of the strategy, a particular focus is on improving rail connectivity in the north of England through public and private investment.
The manifesto also promises to increase investment in 5G, aiming to deliver full gigabit and national 5G coverage by 2030.
Private investment
Labour aims to increase public investment to “de-risk” private investment. They plan to manage this with a National Wealth Fund of £7.3 billion over their first parliamentary term. The fund aims to create more jobs, benefit economic growth, and support their clean energy plans. In the hope of creating three pounds of investment for every pound invested, they say they will be investing:
- £1.8 billion to upgrade ports and build supply chains across the UK
- £2.5 billion to rebuild the steel industry
- £1.5 billion for new gigafactories
- £1 billion to accelerate the deployment of carbon capture
- £500 million to support the manufacturing of green hydrogen
Research and development (R&D)
While there is nothing specifically mentioned on R&D Tax Credits, the manifesto does refer to plans for boosting R&D in several ways.
Specifically, the manifesto reveals that the Labour party will create a National Data Library to bring together existing research programmes. Aside from helping with R&D, the intent of the National Data Library is also to support the delivery of data-driven public services.
There are plans to replace short funding cycles for key R&D institutions with ten-year budgets – the stated intention being that this will help to keep Britain globally competitive. They also talk of supporting university spinouts.
The lack of finance available for UK startup growth is frequently discussed, along with the suggestion that Labour will do more to make this available for innovative businesses by reforming the British Business Bank.
The manifesto also states a desire to improve the adoption and regulation of new technologies, citing slowness in updating existing and approving new regulations. To tackle this, they want to create a Regulatory Innovation Office, specifically for pioneering technologies when they have cross-sector applications.
Business taxation
To help give businesses certainty about the direction of taxation policy, Labour intends to publish a “roadmap for business taxation” at the start of the next parliament. Even before this is published, there is some detail on business taxation, with the pledge to cap corporation tax at its current level (25 per cent) for the whole of the parliamentary term. They also say that they will cut corporation tax if other countries make changes to their own taxation systems that could damage UK competitiveness.
They commit to keeping the permanent full expensing Capital Allowances and the Annual Investment Allowance for small businesses. There is a note that says they will provide “greater clarity” on what qualifies for these allowances.
There is a promise to replace the current Business Rates system with a “fairer” scheme that will help support the high street, improve investment, fill empty properties, and make it easier to compete with online giants like Amazon.
In line with what they’ve said about giving the business community certainty, the manifesto warns of too many fiscal events in the past. Instead, they aim to have just one major fiscal event every year so that there is more time to prepare for any changes in tax and spending policies. In keeping with this, the Shadow Chancellor has said that there won’t be an emergency summer budget in 2024 if Labour were to win. They will instead wait for the Office of Budget Responsibility (OBR) to deliver a financial forecast and deliver their first budget sometime from September.
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