| 11 mins read
Giving a statement of economic policy is always fraught with danger for any opposition politician and even more so for a Labour politician—doubly so in the run up to a general election. Whatever you say will be attacked from all sides. The biggest danger is from the Conservatives: if you give any detail at all they will try to find ways to undermine it, to claim it implies all sorts of things (usually more taxes) and try and make the media and the public pick them up. If you instead give little detail, they say you really do not have a plan or have a hidden agenda.
On your own side, different factions will fight furiously over what you said, did not say or what they take you to be meaning. If their favourite policy or approach is not clearly highlighted, then you will hear talk of disappointment or even betrayal. Some loyal supporters will say it is all brilliant, wanting it so much to be so, but enough others will wonder what is going on. Meanwhile, the general public and the key marginal voter will probably hardly notice you gave the speech.
So, why do it? What—perhaps—was Rachel Reeves trying to achieve in giving the prestigious Mais lecture while still shadow chancellor and did she achieve it? The last shadow chancellor to give the Mais lecture was Anneliese Dodds. Her job was very different. She delivered it in the early days following the demise of the Corbynist grip on Labour and was part of the long and difficult road of restoring economic credibility to the Labour Party by sounding sensible and relatively mainstream. Reeves, in contrast, was giving her speech with Labour thought likely by many commentators to form the next government—as indeed it proved.
But Labour rightly remained nervous that a seemingly healthy lead can disappear fast—as it did in 1992. So, part of the speech had to be about reassuring floating voters. There was a lot of talk about stability, of working in partnership with business and of unlocking the untapped potential of working people. There was almost nothing precise about spending or tax, so difficult to do when the government’s baseline becomes the basis of any conversation and when the forthcoming election was bound to see a Tory onslaught on Labour’s supposed ‘unfunded spending ambitions’ and ‘secret’ tax plans. It was job well done.
But getting the UK economy growing again has been and remains Labour’s big theme, one of the five missions that apparently will guide them now they are in office. Many political and economic commentators want to know what Reeves intends to do about that and this desire is more intense now she is the Chancellor of the Exchequer. And while pleasing them must never be the main aim of a speech, there is no doubt that a consensus that the then-shadow chancellor was serious, has serious ideas and understands her economics undoubtedly feeds into the way they write about her and how the general debate is shaped.
We did not learn an enormous amount here. We knew already that some massive dash for growth through fiscal policy was not on the cards—not least given that the economy, despite low growth, does not appear to have much spare capacity at present. We got a sense, though, that fiscal policy under Reeves would be more sensible with the key golden rule (the annual deficit) applied only to current spending, not total spending, so allowing capital spending out of that stupid straitjacket. Yes, the Conservative debt policy was to be held onto—it would have been particularly politically daft to do anything else at that point—but we all know that this strange, imperfect and distorting policy that only implies having to reduce the debt-to-GDP ratio in the fifth year in the future is hardly much of a constraint in practice.
One clear theme is stability, harking back to the (over the top) claims of chancellor Brown to end boom and bust. For that is a crucial background to allowing business to invest with confidence and to allow people to plan. Her promises to have only one budget a year, to set out her business tax plans at the beginning of the parliament and to give some research type bodies ten-year budgets will help. Plans to get the Office for Budget Responsibility to analyse longer-term impacts of capital spending decisions and go beyond the normal debt figures to report on wider measures of public sector assets and liabilities at fiscal events will create a more sensible framework.
New institutions being created—the Industrial Strategy Council, the British Infrastructure Council and Skills England, amongst others—are useful attempts to shift the balance to the longer term. However, the idea that setting up a new body fundamentally changes things has perhaps got too much airtime on the centre-left because of the (reasonable) success of the independent Bank of England and Monetary Policy Committee. But there was no mention of something valuable she has floated before: an ‘office for value for money’ and none of an institution that really helped Gordon Brown steer the economy through choppy times like the National Economic Council. This brought all the key secretaries of state together in a PM-and-chancellor-chaired body that helped the Labour government keep focus and energy on the economy as it tried to cope with the consequences of the financial crisis.
Unlike some, I do not believe that the Treasury is always and everywhere a brake on positive progressive policies as long as it has the right political leadership. So, it is good to see the proposal to beef up the status and influence of the Treasury’s Enterprise and Growth Unit (EGU), a sign of the type of Treasury Reeves wants to lead.
Many have been delighted—and a few appalled—by what they feel is Reeves putting to bed ultra-New Labour neoliberalism and the cult of globalisation, replacing it with a world of state activism, strong industrial policy, a bit more mercantilism, and so on, that may help drive domestic growth and do so in a more equitable way. I think much of this is a misunderstanding of the reality (not rhetoric) of New Labour, but it is a sensible rhetorical shift given international events and new agendas—the power of China, new wars, the climate crisis, artificial intelligence, Bidenomics—and the public’s desire to hear a bit more about the role of the state. No long lectures about endogenous growth theory or Clintonomics, but to my mind, some of the same kind of thinking, especially with the focus on the supply side.
Reeves often likes to talk about the ‘everyday economy’ and ‘securonomics’. These are useful terms to get across the heart of what she is trying to do and to galvanise a sceptical public. The question as to how these concepts will turn into practice and in turn into boosting productivity is still to be answered, but that is not necessarily an issue. Remember that the theory behind a lot of what chancellor Gordon Brown did was not codified until the Balls/O’Donnell book well into his period as chancellor.
Reeves is rather restrained about devolution and letting the combined authority areas go—perhaps because Labour was to deliver a statement on that a few weeks later. But that could be a profound change for the better—if we can overcome Labour’s natural tendency to worry too much about spatial inequalities that can grow if too much is localised without redistributive mechanisms and can find ways to allay the Treasury’s concern about the poor state of local government at present (a lot, but not all, owing to spending cuts).
The big lean is on planning reform. It makes sense and it does not cost much money (mostly to hire more planners). But the warning has to be that it has been tried before a number of times in the Labour years and beyond—and it did not really happen. It is a complex web of tricky practical, democratic, parliamentary and political issues. Second, it is clearly not the only thing that needs to change and cannot change our underlying growth rate on its own. So, the push on skills matters. It would be good to hear a bit more about using competition and consumer policy to drive business in the direction of innovation and productivity, rather than monopoly and restrictive practices. In addition, more about keeping Britain open to trade post-Brexit, even if Reeves rightly argues that in this more uncertain world, we need to be more focussed on robust supply chains and energy security than in past New Labour times.
So, mostly ticks for Rachel Reeves with this Mais lecture. Setting out an approach that most will feel makes sense, showing she is on top of her brief and giving few hostages to fortune. Of course, the job of actually being the Chancellor of the Exchequer will be far more difficult and details will have to be filled in and trade-offs made. But this speech gives confidence that Reeves is up to it. We shall now see how that works out.
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