Labour’s plan for the economy
The probable next chancellor has laid out her grand vision for Britain. Emily Hohler reports
Shadow chancellor Rachel Reeves delivered the prestigious Mais Lecture on Tuesday, setting out a Labour government’s plans to secure higher growth and greater prosperity, says Stephen Bush in the Financial Times. Summoning up the spirit of Margaret Thatcher – but without mentioning her by name – Reeves said that the UK stood at an “inflection point”, as it did in 1979, and that a Labour government would embark on a “decade of national renewal”.
Reeves told the BBC’s Faisal Islam she was under no illusion about the challenges and said a Labour government would have to make “almost impossible trade-offs” on tax and spending if the economy failed to grow. In her speech, she said Labour would stick to the same fiscal rules as the Tories: public debt to fall as a share of the economy by the end of five years.
She suggested the Treasury had not been sufficiently focused on growing the economy in its tax spending policy, and proposed reviving a Treasury unit focused on growth and high productivity to feed ideas into Budgets and spending reviews. The official forecaster, the Office for Budget Responsibility (OBR), would also get a “beefed-up role”. No new tax-and-spend policies were announced. Instead, Reeves hopes to achieve growth without significant borrowing through investment from the private sector, “enticed by significant changes to planning and industrial policy”.
Ghastly inheritance
This was not the first time Reeves has outlined her “Securonomics” strategy, predicated on the idea that any viable growth strategy today must rest on “resilience for our national economy and security for working people”, but it was the most detailed, says Paul Mason in The Spectator. Labour knows that today’s high taxes, high debt and high debt-servicing costs mean there “can be no return to “borrow-and-spend” unless the economy achieves sustained growth. To trigger this growth, it will use the “suite of policies associated with Bidenomics: clear, long-term signals of government intent, accompanied by multi-year Treasury settlements, a planning revolution and regulatory change to encourage pension funds to invest in UK entrepreneurship”.
The real “zinger” concerns the OBR, which will be asked to start modelling the long-term impact of capital spending decisions. And Reeves is signalling that the Treasury will “start weighing the assets created by borrowing, alongside the liabilities”. Her message is, if Labour can “demonstrate that investment can drive growth, it can win the argument with fund managers for investment here and meet its own fiscal rules more easily”. But in the end, it will “all be about execution”. How will Reeves cope with adversity? A shortage of capital to build solar farms, a National Grid that “drags its feet”, truculent unions?
“Happily for Labour, it is perfectly placed to tread where the Conservative Party dare not go with let-rip housing, industrial and infrastructure development,” says Jeremy Warner in The Telegraph. It loses “few if any votes” by freeing up the planning system and cutting a “great swathe” through Nimbyism. But her “grand pledge” is still likely to “fall flat”. A “ghastly inheritance” awaits, and beyond planning reform and beefed up workers’ rights, there’s “little else on offer”.
Labour can hardly be blamed for keeping key details “under wraps”, says Steven Swinford in The Times. It wants to avoid the Tories stealing its clothes – which Jeremy Hunt did at the spring Budget with his pledge to scrap non-dom status and extending the windfall tax on energy firms – and is attempting to give them “as small a target as possible before the election”.