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What is Labour’s plan for growth?

What is Labour’s plan for growth?

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A recession is on its way, inflation is biting, and more and more people are going on strike. The UK has been the worst-performing economy of the G7 countries over the past three years and is forecast to grow by next to nothing in 2023. As attention shifts away from the Conservatives, many are wondering, does Labour have a plan for growth?

Transcript

In one sense, Liz Truss and Kwasi Kwarteng were right.  It is about growth.  

A recession on its way.  Inflation biting.  More and more people going on strike.  Even more people living in in-work poverty.  Public services screaming for more money.    The challenge facing Britain is much bigger than the mini-Budget mess.   It goes well beyond getting the public finances back under control and reining in inflation. 

For sure, Jeremy Hunt, the UK’s new chancellor, will set out plans to restore credibility in the British Government and the Conservative reputation for competence next week with a budget update that looks to get debt under control.  

But the real task is growth: the UK, the worst performing economy of the G7 countries over the past three years, is forecast to grow by next to nothing in 2023.    

The Truss-Kwarteng Budget delivered the funeral rites, for now, for a certain Conservative dream of growth: low tax, small state, let the animal spirits of enterprise rip.  And yet, no Labour phoenix has yet emerged from the ashes of the Truss and Kwarteng’s Britannia Unchained project.  

I’m James Harding and in this week’s Editor’s Voicemail, I want to flag up how little we have so far learned and how much we need to know of Keir Starmer and Rachel Reeves’ plan for – real, green, shared – growth. 

The two most important economies in the UK’s orbit – the EU and the US – have just engaged in an unprecedented state-sponsored spending spree to kick start growth and seed-fund the next generation of green industries.  The Biden Administration’s so-called Inflation Reduction Act is a $2 trillion kind of new New Deal, so that America dominates the climate tech in much the way Silicon Valley controlled internet tech.  The EU’s $800 billion recovery plan, called Next Generation EU, is similarly targeted at investment in green and technology businesses.  

But what have we heard from Labour?  Rachel Reeves’ big idea at the Labour Party conference was the National Wealth Fund, an £8 billion pot of public wealth intended to ignite more private investment.  It’s not enough.  Not financially.  Not enough of an idea.  It’s small, incrementalist and inadequate.  It speaks of a party which hasn’t yet recognised the moment that it’s in.  But the public has.  It wants to know what Labour’s going to do about Europe.  As attention shifts from the Conservatives to Labour, this threatens to become a refrain: the Conservatives may have lost the plot, but Labour hasn’t yet got a plan.  

Likewise, take not just Britain’s prosperity problem, but the inequality issue.  Put aside ‘levelling up’ slogans; look at the lever that matters, education.  Britain’s spending on education is going to be roughly 5 per cent of national income at the end of this Parliament, the same level as it was in the 1970s.  So much for Tony Blair’s “education, education, education” mantra.  British governments – Conservative and Labour – have not moved the needle on investment in education in more than a generation.   And from Labour’s would-be Education Secretary, Bridget Phillipson, there’s no reason yet to believe a step change in education spending is coming.  

And what about responsible growth?  The COP summit is, sadly, a reminder of how hard it is proving to change economic course on global warming.  The promise of ESG – environmental, social and governance – investment has so far moved only a fraction of the capital needed.  And the regulatory system intended to ensure big business is a public good is a muddle.  These days, it’s not entirely clear who’s setting climate targets: is it management, the board, the investors?  There’s a reckoning coming around the woolly language of the Companies Act, particularly the seemingly toothless Section 172 that asks boards to look both to the success of the company and its broader impact on society.  Where does Labour stand in the argument that’s increasingly preoccupying business, between the toll of corporate governance and the demands of business performance?  Who knows?  

Politically, you might say it makes sense for Labour to do the job of the Opposition – i.e. hold up a critical mirror to the Government – and keep its plans to itself.  It doesn’t need to hand the Tories its best ideas.  But the Conservative government fiasco of 2022 means that we need to look more keenly at Labour.  When Hunt announces his Budget update next week, Britain’s media will tear into the Conservative Party’s hodge-podge of tax and spend measures to get a grip on debt.  It’s time we lent into Labour on growth.  

Have a very good weekend.