Labour remains coy on getting the economy moving

Harnessing state-owned land is the way forward for a party touting planning reform, not ‘securonomics’

How would a Labour government get the economy moving? His Majesty’s Opposition remains coy. I asked Rachel Reeves what policies she would put in the budget statement on March 6 were she delivering it, rather than Jeremy Hunt.

The shadow chancellor replied in coded terms, talking about “not having access to the same detailed data on the public finances” as ministers and her determination to “avoid making commitments [she] can’t keep”.

I spoke to Reeves at Labour’s hastily-convened press conference, after news broke that the UK economy tipped into recession last year.

GDP fell during the final two quarters of 2023, the Office for National Statistics said – the technical definition of “recession” being two successive quarters of contraction.

Compared with other large economies, the UK is middling. The US grew 2.5pc last year, partly due to America’s cheap-energy fracking revolution. German GDP, in contrast, contracted 0.3pc during 2023 as a whole and has been in and out of recession for almost 18 months.

Britain just about grew, by 0.1pc, last year. And while the second half of 2023 marked our first non-Covid era recession since 2009, the GDP drop was tiny. And there’s compelling survey evidence growth resumed last month, as shown by yesterday’s strong retail sales figures. While the recession is both shallow and short, the ONS fine-print shows disturbing trends in GDP per head – a more accurate gauge of living standards. Our population has grown sharply over recent years, with net immigration hitting 745,000 in 2022 – an increase, in just 12 months, equivalent to the city of Leeds.

When a shrinking economy supports more people, GDP per head falls even more – by 0.4pc during the third quarter of 2023 and 0.6pc during the fourth. GDP per head hasn’t grown, in fact, since the first quarter of 2022.

That’s why, along with rising prices and a higher tax burden, so many of us “feel poorer” than before Covid.

With Labour 20 points ahead in most polls, and particularly after this double by-election drubbing, the Tories look set to be turfed out of office. Their strategy, to the extent they have one, is to delay the general election until the autumn, in the hope the economic outlook improves.

By then, the Bank of England should have made several interest rate cuts. Together with a few tax reductions that could generate a “feel-good factor”.

But even if the economy does perk up, an outgoing Tory government will bequeath Labour an economic can of worms: low growth, high taxes, politically untouchable spending, huge government debt, unsustainably high immigration and infrastructure that is crumbling. I get Reeves’s reluctance to reveal her party’s preferred economic measures now. If the Opposition announces strong policies months before an election, ministers can steal them, spiking their rivals’ guns.

Over recent weeks, though, Labour has all-but-abandoned its flagship “green prosperity” pledge to spend £28bn a year on green investment. Yet that was the centrepiece of the party’s growth strategy. Reeves also talks a lot about “securonomics”, the strategy she describes as “putting economic security first, for family finances, for our national economy, rebuilding our ability to do, make and sell here in Britain so we’re less exposed to global shocks”. Securonomics is about “an active, strategic, state working in harmony with vibrant and open markets”, she says. To me, that’s just faux-scientific verbiage. The Tories brought us “levelling-up”, which has delivered next to nothing. Is “securonomics” Labour’s version, a campaigning slogan rather than a set of thought-out and costed policies?

One area where Labour’s rhetoric has been bold is planning reform. In late 2022, Rishi Sunak dropped compulsory house building targets for local authorities – targets Sir Keir Starmer immediately promised to reinstate.

The Labour leader has pledged to oversee a “major boost” in affordable and social housing. He wants fast-track planning and an undisclosed number of “post-war new towns”. This makes sense – Britain hasn’t created a sizeable new settlement since the late-1960s. During that period, the population has expanded by 15m, driving up housing costs. When it comes to securing privately-owned land for new towns, Labour wants to return to the post-war compulsory purchase order (CPO) system, transferring all “planning uplift” to the state. That value can then be used to build schools, hospitals and other infrastructure new dwellings need. In my book Home Truths,I proposed a more moderate mechanism, not reliant on CPO, with planning gain split evenly between local authorities and landowners. Labour’s plans are unduly confiscatory and would spark countless lawsuits.

Labour should instead be looking to use state-owned land. If the state released just one 20th of its land, that is room enough for more than 2m homes – far more in cities, where building densities are higher.

Subsidised sales of government land should be restricted to small, local builders – with strict conditions relating to affordable and social housing provision. This “Great British sell-off ” would be a centre-Right policy that also appeals to the Left – a market intervention that helps the less well-off. That’s the political sweet spot Labour should be aiming for.

Harnessing state-owned land could help a generation of priced-out youngsters buy their own home, avoiding the pitfalls and disadvantages of renting. Is that “securonomics”?

‘Starmer has pledged to oversee a major boost in affordable and social housing and post-war new towns’