No one can accuse the new government of moving slowly. Over the weekend Labour gave strong indication that both NHS reform and prison reform are going to be at the top of their agenda. But the staple offer of the new government remains what was promised throughout the election campaign: a sustained campaign to bring meaningful economic growth back to the UK. This morning, Chancellor Rachel Reeves starts to lay out those plans.
Speaking to business leaders at the Treasury this morning, Reeves will reiterate that boosting GDP is a ‘national mission’ and the ‘only route’ that will improve ‘the prosperity of our country and the living standards of working people. It’s an uphill battle Reeves has on her hands: even the best forecasts for UK GDP in the coming years don’t exceed 2 per cent. This is still below what would be necessary to sustain public service spending promises without having to make painful decisions on taxing and spending. Reeves will put much of her emphasis on what’s been – ‘fourteen years of chaos and economic irresponsibly’, she’ll say – with most of the details of how to address the growth gap still forthcoming.
But the big announcement expected in her speech this morning is one of the most important updates: Labour’s plans to kickstart more house-building. The Chancellor is expected to bring back the mandatory house-building targets that were scrapped by the last government, under pressure from the NIMBY (Not In My Back-Yard) wing of the Tory party to keep building to a minimum. The return of the target is expected to be the first in a series of announcements in the coming weeks, as Labour prepares a planning overhaul, which has previously included addressing the ‘grey belt’ (prime building sites classified as green-belt land) to help increase areas where homes can be built.
Housing and planning has long been one of the most obvious areas for growth reforms. The increasing inability to build just about anything in the UK (houses, energy infrastructure) has been one of the biggest weights on GDP, killing opportunities for people to move to where the work is and to live where they can be most successful and productive. But just how comprehensive – and radical – these plans reveal themselves to be later this month will give a strong indication about how serious Labour is about using its new mandate to really go for growth.
It seems Reeves has spotted another opportunity this morning. The growing instability brought about by the snap French elections, combined with the political mess in America, have positioned the Chancellor to make an early case that Britain is now the most stable country for investors. It’s good timing for Labour: Reeves and Keir Starmer acknowledged some time ago that private investment is going to be vital for their plans (not least because spending is going to remain tight in the Treasury). To achieve anything like the green investment they originally pledged, it is going to require an optimistic and confident private sector that is willing to put up most of the cash.
That courtship started years ago, as Labour put serious efforts into reviving its relationship with the business community. But it gets serious today. That doesn't mean, however, there aren’t still major questions to answer: while Reeves has ruled out any more hikes to corporation tax over this parliament, what Labour plans to do on almost every other tax is largely unknown. Expect these questions to ramp up over the summer, now that the party is actually in charge and working towards its first fiscal event.
Due to Reeves’s own rules about involving the OBR – which needs roughly a 10-week notice period – the earliest we’ll be getting that first event is mid-September. There are good reasons to think Reeves might want to wait until the Autumn Statement in November: not least because the concept of an ‘emergency Budget’ is counterintuitive to the party’s narrative of renewed stability and a return to business as normal. Whenever it comes, it is likely to be the first big test of Labour’s budding relationship with business: one which Reeves will be eager to strengthen, to the point it doesn’t just result in an endorsement for the party, but also into the billions needed to get major infrastructure and building projects off the ground.
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