20 Mar 2024

Political Insider: Rachel Reeves’ economic vision for the UK

Shadow Chancellor, Rachel Reeves, set out Labour’s economic blueprint for the country at the annual Mais Lecture, where she pledged to bring about a "new chapter in Britain's economic history".

Grace Curley
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A prestigious rite of passage for Shadow Chancellors before her, Reeves drew parallels to 1970s Britain, arguing that we are in a moment of flux, and that the solution is an “active government” underpinned by theories of “Securonomics” and driven by three imperatives: stability, investment, and reform.

What did we learn from the Shadow Chancellor?

Securonomics

  • Drawing comparisons to Harvard Economist Dani Rodrick’s “new productivist paradigm” and the Biden administration’s commitment to “modern supply side economics”, Reeves defined Securonomics as a broad-based “platform from which to take risks” and embrace change with stability of action.
  • Spoke of the benefits of an “active” and “strategic” (“not big”) state, which she suggested was an economic imperative to protect Britain from global instability.

Stability

  • Pledged that a Labour government would retain a 2% inflation target.
  • Labour would make financial institutions and FTSE 100 companies publish carbon footprints and would create a UK green taxonomy.
  • Recognised that businesses need stability in tax, she also pledged that Labour would hold a single autumn budget every year; cap incorporation tax at 25% and row back on business taxation for the duration of parliament.
  • Labour would move the current budget into balance and would target government debt to fall as a % of GDP by the fifth year of the OBR’s forecast.
  • Labour would end the changing of fiscal rules, adding an escape clause that would only be used to suspend existing tax rules if the OBR could officially declare the UK was in an economic crisis.
  • Commented that Labour would focus on day-to-day spending, prioritising investment within a framework which would get debt falling at a share of our GDP over the medium term.
  • Noted that Labour would reverse the current Chancellor’s decision to remove climate change from a list of four objectives for the Financial Policy Committee and Monetary Policy Committee.

Partnership with businesses to encourage investment

  • Noted Labour’s desire to work with business to identify areas where Britain can develop comparative advantage.
  • Pledged that Labour would review the pension system to ensure that it is serving British savers and UK plcs.
  • Labour would end the practice of one-to-three-year funding cycles for key Research and Development institutions, instead outlining 10 year budgets which would allow for meaningful partnership with industry.
  • Commented Labour would work with universities to make sure spin outs can attract private capital.

Reform

  • Suggested that our current planning system is a barrier to economic growth and home ownership, pledging that Labour would carry out a once in a generation overhaul of nationally significant projects, updating all national policy statements within six months of coming into office to reflect the type of infrastructure crucial to our economy.
  • Labour would reintroduce mandatory local housing targets, and recruit hundreds of new town planners to tackle the backlog.
  • Highlighted the benefit of decentralisation, correlating it with higher investment, stronger growth possibilities and better educational outcomes. She said that Labour would give greater economic power to regional and local leaders, who “know their leads and assets best.”
  • Commented that the “broken” apprenticeship levy would be replaced by a growth and skills levy.
  • Pledged a “new deal for working people,” which would guarantee basic rights from day one, protection from unfair dismissal, sick pay, and parental leave; ban zero hours contracts and reverse Trade Union legislation introduced since 2010. She noted that none of this would impede businesses’ abilities to fairly dismiss employees or offer overtime/hire on the basis of short-term demand.
  • Recognised that a productive workforce required stronger public services. She re-stated Labour’s pledge to urgently resource injection into public services to get the long-term sick back into work.

Labour Insight on Reeves-ism

Joshua Kaile, Public Affairs, Associate Director and former Labour Party advisor

Depending on who you read or listen to, Rachel Reeves speech last night at the Mais Lecture was either indicating a return to New Labour, a move to radical economics, or a continuation of Tory and Rishi Sunak’s economic rules.

The Conservative accusation is that Rachel Reeves has no plan, but risks borrowing too much to invest in the growth she has promised.

The charge from some of the trade unions, most notably Unite, and those on the far left is that Reeves plans are too close to the Tories. What is the point of a Labour Government if it doesn’t look like one, they ask.

And then there are others who claim that the Shadow Chancellor is following the fiscal rules of Gordon Brown and therefore it’s a ‘return to New Labour’.

So, whilst the Tories say she’s like Corbyn, the unions say she’s like Thatcher and others claim she’s like Brown, the truth is that none of these charges quite fit.

Perhaps we need to stop trying to compare Rachel Reeves to somebody or something else. With Labour holding a commanding lead in the polls, the UK is close to having its first female Chancellor. An extraordinary achievement, smashing the remaining glass ceiling at the Treasury.

So, who is Rachel Reeves and what will a Treasury lead by her really look like?

What we know is that Rachel prioritises fiscal responsibility and is not afraid to be a Labour Shadow Chancellor stating so clearly. She will not be nudged into any direction she is uncomfortable with, and so the comparisons to Thatcher are real and fair in that respect.

But in her speech last night, Rachel made clear that she will drive forward the party’s New Deal for Working People with commitments to end zero-hours contracts and protecting workers from unfair dismissal amongst other rights. And there the comparisons to Margaret Thatcher come to a crashing halt.

The Shadow Chancellor talked eloquently about the need for investment, driven by new institutions including Labour’s National Wealth Fund and Great British Energy. This goes beyond what Gordon Brown and New Labour every managed to deliver, so accusations that she is returning to the ‘noughties’ doesn’t really stack up.

Indeed, this level of investment is closer to that promised by the two previous Labour leaders, but with one key difference. Rachel’s clear fiscal rules, including matching the Tories pledge to reduce debt as a share of GDP on a five-year basis. Her pitch to the public is that she will deliver economic growth, without borrowing too much, and use that growth to drive further investment, raising living standards for those across the country. Not just in London and the South-East.

The Tories will continue to say that this is simply not possible, and that Labour will have to borrow more or raise taxes to deliver it. Unfortunately for them, after 14 years of Conservative rule and Liz Truss’s brief but disastrous premiership, the public simply doesn’t trust them anymore.

Rachel may be often simply referred to as ‘the iron shadow chancellor’ but in private she would be just as happy being described as ‘the campaigning shadow chancellor’. And in that I think we see what a Rachel Reeves Treasury will look like. Fiscally responsible and putting growth front and centre. But whenever she is able to, we will see her drive improving living standards, and ensuring the burden lies with those with the broadest shoulders.

With a General Election just a matter of months away, it’s time we stop comparing Rachel to others and start learning what Reeves-ism really is.

MHP’s Public Affairs team will be keeping you up to date with the latest news and analysis in this important election year. Please contact [email protected] Head of Public Affairs for further information.

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