Reeves seeks to distance herself from New Labour’s economics
RACHEL REEVES has sought to distance herself from New Labour’s economic track record, criticising her predecessors for falling short of addressing some of Britain’s biggest weaknesses.
The shadow chancellor said that Tony Blair, the former prime minister, failed to sufficiently regulate the financial sector and let globalisation increase inequality.
Speaking at the Bayes Business School last night, Ms Reeves said that although Mr Blair oversaw a decade of sustained economic growth and stability, his economic policies were built on “narrow principles” that brought problems further down the line.
New Labour came into power after a landslide victory in 1997 but by the time the Tories took over again in 2010 Britain was reeling from the global financial crisis and the outgoing Labour government famously left a note saying “I am afraid there is no money”.
Ms Reeves said: “An under-regulated financial sector could generate immense wealth but posed profound structural risks too. And globalisation and new technologies could widen as well as diminish inequality, disempower people as much as liberate them, displace as well as create good work.”
Although New Labour increased economic security through a new minimum wage, Mr Blair and his chancellor Gordon Brown failed to properly address weak productivity and regional inequality, Ms Reeves said.
“[These issues] persisted, and so too did the festering gap between large parts of the country and Westminster,” she said. These shortfalls in economic planning were laid bare by the credit crunch, Ms Reeves said. “The ‘great moderation’ could not last. And as the global financial crisis unfolded, these weaknesses were exposed,” she said.
Her comments came after she attracted criticism from the Labour Left after likening the challenges awaiting the next government to those faced by Margaret Thatcher. She argued that Britain faced a “1979 moment” – a reference to the year Thatcher took office.
But Ms Reeves came under fire from inside her own party with demands for a “true break with Thatcherism” from Left-wing activists. She has promised to “hardwire” economic growth into future fiscal events by giving the Treasury’s Enterprise and Growth Unit a greater role in developing policies, while making it clear she and Sir Keir Starmer have abandoned the economic outlook of Jeremy Corbyn.
Martin Abrams, of the Left-wing campaign group Momentum, said: “As we witness today the exhaustion of a Tory ideology based on privatisation and financialisation, Labour should be offering a true break with Thatcherism, with a popular programme based on public ownership, state investment and wealth taxes.”
The backlash came despite Ms Reeves having clearly rejected Thatcherism elsewhere in her speech by promising an approach that was “unlike the 1980s” and instead arguing that “growth in the years to come must be broadbased, inclusive and resilient”.
Rachel Reeves, the shadow chancellor, invoked memories of 1979 in her Mais Lecture in the City yesterday. She was just a babe in arms in the year that Margaret Thatcher came to power. Older readers will remember why Labour lost. Inflation was well into double figures, much of the country’s workforce was on strike and the economy was held back by low productivity.
One of the first acts of the Thatcher government was to abolish exchange controls, among the earliest such deregulation anywhere in the world, helping to promote the City of London as a global financial centre and underscoring a commitment to free market principles.
Ms Reeves is right to emphasise the importance of pursuing policies intended to boost growth, but this is meaningless rhetoric unless accompanied by specific measures and a basic understanding of Thatcherite economics.
The 1979 moment she apparently wants to replicate involved getting the state out of swathes of industry, service provision and manufacturing through a programme of privatisation. Taxes were brought down and spending controlled. Can we expect Labour to emulate any of these policies?
The party is already committed to renationalising the railways within five years, though several lines and the track have been taken back under state control already. Pressure is growing on the Left for utilities to be publicly owned once more. This is all dressed up by Labour today as a “partnership” with the private sector, but it is in reality state interference.
The problem is that the monumental mess made by Labour in the 1960s and 1970s is so long ago that people today think it is a good thing for governments to run our lives. Moreover, the Tories are hardly making a coherent philosophical case against this trend.
The financial crisis of 2008 brought collectivist attitudes roaring back to a point where many voters now have totally unrealistic expectations of what is possible. This concept of a paternalistic state was reinforced by the Covid pandemic, epitomised by Boris Johnson promising to throw a protective arm around the nation.
Ms Reeves proposes to revive a Treasury unit focusing on growth and high productivity to feed ideas into Budgets and spending reviews. This is precisely the top-down approach that Mrs Thatcher rejected. Labour may claim her mantle but is ideologically unfit to wear it.