Tony Blair’s institute just torched Labour’s economic agenda – here’s the plan they say could save the UK

The Tony Blair Institute for Global Change has launched a sharp critique of the UK Labour government’s economic approach, warning that without urgent reforms to boost economic dynamism, the country risks prolonged stagnation, higher taxes, spending cuts, and falling behind in a fast-changing global economy driven by AI, the green transition, and geopolitical shifts.

In a new report published on Sunday (1 March), the institute, founded by the former prime minister, argues that Britain’s growth has been hampered by declining adaptive capacity since the 2008 financial crisis.

Key statistics highlight the problem: job reallocation has slowed significantly (from 17.4% annually pre-crisis to 13.6% in the 2010s, equating to nearly 1 million fewer worker movements per year), young firms now generate only 10% of turnover (halved since 2005), and ‘zombie firms’ unable to invest properly make up 10% of listed companies (twice pre-2008 levels). Creative destruction now contributes just 0.1 percentage points to productivity growth annually, down from 0.7 points.

The report implicitly criticises aspects of Labour’s agenda, including higher employer National Insurance contributions, expanded employment protections under recent legislation, stricter migration rules, and an energy strategy that prioritises rapid net-zero progress over affordability.

These policies, it suggests, add rigidity at a time when flexibility is essential to redeploy labour, capital, and resources toward high-value opportunities. Without restoring dynamism as the “north star” of policy, the government could face tough choices on fiscal consolidation later in the parliament.

To address this, the Tony Blair Institute proposes a comprehensive reset focused on three pillars: revitalising labour-market flexibility, modernising finance for intangible and risk-taking investments, and streamlining regulation. It outlines a plan of targeted reforms:

1. Simplify domestic employment legislation: Introduce tiered employment protections (lighter for high-paid roles above £75,000), cap non-compete clauses at three months for high earners, and halt automatic minimum-wage rises relative to median earnings while making youth-rate convergence conditional on employment outcomes.
2. Amend migration and tax rules for global talent: Expand the Global Talent visa, exempt elite visa holders from the immigration health surcharge, create a targeted investor visa, reform overseas income taxation grace periods, introduce a permanent Key Worker visa for roles like construction and care, and negotiate an EU Youth Mobility Scheme.
3. Ease worker transitions to better jobs: Invest in AI-powered job-matching platforms, create a contributory personal transition fund for redundancy or retraining periods, and reform stamp duty to allow spreading payments via government-backed loans.
4. Boost entrepreneurial education: Embed entrepreneurship in Key Stage 3 PSHE curriculum and introduce a GCSE-equivalent Certificate in Entrepreneurship at Key Stage 4, focusing on business literacy, AI, and real-world projects.
5. Create a market for IP-backed finance: Establish a dedicated lending window through the British Business Bank, extend guarantee schemes, and work toward recognising intellectual property as collateral in banking rules.
6. Align taxes with an intangible economy: Extend full expensing to intangibles like software and IP, and refocus R&D tax relief with a £30,000 de minimis threshold to cut fraud and target real innovation.
7. Reduce the personal cost of business failure: Bring personal-guarantee lending under FCA oversight, shorten bankruptcy restrictions and credit-file impacts, and expand Business Asset Rollover Relief for tax-free reinvestment.
8. Reform planning for faster land repurposing: Shift to zonal planning, fast-track brownfield sites, expand local development orders, and streamline approvals for housing, energy, transport, and AI data centers.
9. Modernise tax administration: Introduce a Business Digital ID, expand e-invoicing, and accelerate Making Tax Digital to cut compliance burdens.

The institute emphasises that these changes would help the UK adapt to major disruptions: AI could displace 1-3 million jobs by 2050 but create comparable new ones; the green transition will see 700,000 carbon-intensive roles decline while new industries rise; and an ageing population demands 500,000 more social-care workers.

While the report frames its recommendations as essential first steps for any government serious about growth, its timing and pointed references to recent policy choices position it as a direct challenge to Labour’s current direction.

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