What is the purpose of Rishi Sunak’s premiership? The events of recent weeks have left the answer to this question less clear than ever. The Prime Minister’s politically and intellectually exhausted administration has no great cause beyond its own survival. Mr Sunak has declared that 2024 will be “the year Britain bounces back” under his leadership (economic data suggest the UK will soon exit recession). But the problem is one of long-term stagnation: since 2019, the economy has grown by just 1 per cent, the worst performance of any G7 country other than Germany. Even under the Office for Budget Responsibility’s optimistic forecasts, average real wages will not return to their 2008 level until 2026.
As the Conservatives contemplate a third unelected prime minister, the case for a general election is overwhelming. And Labour is preparing for power. On 19 March, Rachel Reeves, the shadow chancellor, delivered the annual Mais Lecture in the City of London, an address previously given by Nigel Lawson, Tony Blair, Gordon Brown, George Osborne and Mark Carney.
Ms Reeves, who is Labour’s chancellor-in-waiting but also its chief ideologue, used the speech to reaffirm her belief that we have entered a new economic era. “As we did at the end of the 1970s, we stand at an inflection point,” she said, invoking the ideological sea change that led to the Thatcherite revolution. But she emphasised that “unlike the 1980s, growth in the years to come must be broad-based, inclusive and resilient”.
Influenced by the Biden administration in the US, Ms Reeves is keen to emphasise the need for resilience, security and active government – what she calls “securonomics”. Unlike the Corbynites who preceded her, the shadow chancellor regards business as a genuine partner and is sceptical of default nationalisation. But in contrast to free-marketeers, she is a champion of an active state. “The old model – of the fastest, the cheapest, not mattering about who owns things – has passed,” she told the New Statesman on a trip to New York last year.
The shadow chancellor is proposing an agenda significantly to the left of New Labour. This includes the establishment of GB Energy, a publicly owned energy company, the creation of a sovereign wealth fund, the renationalisation of the railways and a bold workers’ rights programme, including the abolition of zero-hours contracts and the extension of full employment rights to all employees.
But tension and ambiguities remain: is Ms Reeves’ agenda merely Bidenomics without the money? The US president’s Inflation Reduction Act (IRA) included $375bn of subsidies for green industries – and he has been rewarded with growth. The US economy is now 8.2 per cent larger than at the end of 2019.
Labour, however, has moderated its ambitions. Earlier this year it formally abandoned its promise to invest £28bn a year in green industries, committing to only £4.7bn of new investment a year. The party has also yet to explain how it would fund its limited public spending pledges after the Conservatives adopted two of its key revenue raisers: the abolition of non-domicile status and the extension of the windfall tax on oil and gas companies.
Ms Reeves maintains that she would fund higher public spending by improving the UK’s dismal economic performance. She concluded her Mais Lecture by vowing to use measures such as radical planning reform to “drive investment, remove the blockages constraining our productive capacity and fashion a new economic settlement”.
Labour’s history is replete with warnings. Harold Wilson’s dream of a new Britain forged in the “white heat” of technology foundered as he was forced to devalue the pound in 1967. Gordon Brown’s promise of an “end to boom and bust” was destroyed by the 2008 financial crisis. Can Keir Starmer and Rachel Reeves avoid such pitfalls? Would their fiscal caution give way to greater radicalism in office?
The answers, as Labour seeks to shield itself against Conservative attacks, are unknown. But Ms Reeves’ ambition is not. Like Margaret Thatcher before her, she aspires to establish nothing less than a new economic consensus, but this time from the left rather than the Hayekian right. The contrast with Rishi Sunak’s marooned and directionless Conservative Party could not be greater.
[See also: Europe’s new age of insecurity]
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This article appears in the 20 Mar 2024 issue of the New Statesman, Easter Special 2024