The helium-filled Airlander aircraft in a giant airship shed on February 28, 2014 in Cardington. Photograph: Getty Images.
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How to build an innovation economy

Backing tech, thinking global and reducing the tax burden for entrepreneurs will make Britain an economic world-beater once more.

The UK finds itself at a crossroads. With the economy now recovering strongly – as seen with buoyant GDP figures for Q1 on Tuesday – the dark days of the crisis might seem to be behind us. But as the Chancellor said in the Budget, we must face brute economic facts.

Though the view from the boardroom window on the top floor of UK plc may be sunnier, the continuing scale of the structural deficit effectively means there’s a fire in the basement. Despite very tough efficiency savings and cuts to rein in public spending, we are still running a serious deficit and accumulating debt. The rescue job is not yet complete.

Following the crisis, the key question of our time is how the UK can become the crucible of innovative approaches to public and private sector efficiency? I believe the only way we are going to get UK plc afloat again is through the power of innovation in both our public and private sectors to drive a new age of productivity and competitiveness.

First, we must continue to embrace the technological revolution to shake up existing markets. In tech, that means unleashing the power of the revolutions in IT and telecoms, digital media, genetics, data analytics and clean-tech solutions in energy, finding the twenty-first century’s equivalent of electricity or the invention of the internet, a new space race for the defining technologies of our age. As the Chancellor said in a landmark speech in Cambridge last week, it is about becoming the "best place to innovate".

We then need to think about how we innovate in terms of selling our products and services. Fundamentally, we need to turn our focus from the sclerotic eurozone to emerging markets. The western European nations are all grappling with the same structural weaknesses – and a currency and banking system weighed down in bad debts. We cannot afford to sit and wait for the eurozone alone to drive growth. We have to go and trade with the faster emerging markets, the BRICs and N11.

In my field of Life Sciences, for example, the emerging economies are driving vast new markets in food, medicine and energy. In food, we will have to double global food production with much less land, water and energy. In 30 years the exploding populations of these nations – who today need the basics of public health, nutrition and energy – will demand the modern biomedicines, Western foodstuffs and clean-tech that only their elites enjoy today. Far from giving up on emerging markets, such needs show why our exports are more sought after than ever.

To do that we need to make the UK the best place in the world to come and start a new business. That’s why for the last three years I've been advocating a "New Deal for New Business": if you’re starting or growing a small business, employing people and generating sales turnover, government should get off your back. No employers' National Insurance – a jobs tax. No VAT – a value tax. No regulations designed for big companies.

During the 15 years I worked in start-up venture capital, I was always struck by how many first-time entrepreneurs underestimated their turnover, and spent vast amounts of time and stress and accountants fees worrying about complying with government bureaucracy. Get off their backs and let them grow and we’ll find that they hit the threshold for tax that much quicker. Such a policy would be simple, clear and potentially revolutionary in its effect.

This Parliament has been about saving the UK from becoming another Greece. The next Parliament will be about making Britain an economic world-beater once more – investing, exporting and manufacturing more. Backing tech, thinking global and continuing reducing the tax burden for entrepreneurs are just three ways in which that can become a reality.

George Freeman is Chair of the 2020 Conservative Innovation Economy Commission, and a UK trade Envoy. This is an edited extract from 'The Modernisers' Manifesto’, published by Bright Blue

George Freeman is the MP for Mid-Norfolk and Minister for Life Sciences.

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In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”