The wait is over. After six months in government, Chancellor Rachel Reeves has decided that today is the day to step forward and pull the big lever marked ‘growth’. In a widely-trailed speech, she has outlined all the different ways her government is going to get the economy moving again. There is just one snag. The lever isn’t attached to anything. In reality, Reeves doesn’t have a clue where growth comes from – and that means her big speech this morning won’t change anything.
Reeves has, at least, finally got round to detailing how she plans to make the UK the fastest-growing economy in the G7. Cynics might wonder why she has been keeping it all to herself for so long, and why she didn’t include any of the new measures in her Budget. Still, never mind.
There is accelerated approval for big infrastructure projects, such as a third runway at Heathrow (which Reeves backed), fast-track approval for planning applications close to railway stations, and some reduction in environmental assessments for building new stuff. It is not exactly the chainsaw Argentina’s Javier Milei would take to the state machine, but it is at least something.
There are two big problems, however, one minor and one major. The minor one is that Reeves is likely to face fierce opposition from within her own party, especially to initiatives such as the third runway. It will damage the environment, it will exacerbate regional imbalance, and it will do nothing for equality, her critics will argue. Reeves may well be able to bully it through parliament, but it will make her very unpopular.
The bigger problem is this: even if she does get it through her party, it is not going to shift the dial. ‘Growth, growth, growth’, as Reeves has taken to calling it, doesn’t come from the Chancellor, no matter how hard she works, or how much ‘investment’ she manages to drum up at Davos.
If she really wanted to create more wealth, Reeves would restore the entrepreneur’s rate of capital gains tax, she would exempt family businesses from paying anything when they are passed from one generation to another, she would lower the levies on employment, designate whole swathes of the country as light-regulation investment zones and slash the rate of corporation tax to match Ireland’s 12.5 per cent, while raising VAT to make up the shortfall in revenue. Then she would sit back and leave it to start-ups and existing businesses to innovate and expand without the government getting involved at all. That genuinely would kick-start growth – unlike anything Reeves unveiled in her speech today.
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