The government’s plan for economic growth is clear: tax cuts and deregulation. Labour must set out its own plan for growth that is as easy to understand and sum up in a few short sentences.
In her speech to the party conference today (26 September) Rachel Reeves, the shadow chancellor, announced that Labour would set up a National Wealth Fund to invest £8 billion in British industries as part of a £28 billion-a-year Green Prosperity plan. The fund – based on sovereign wealth funds in countries such as Norway and France – will support new factories, steel plants and hydrogen ports. Alongside that Jonathan Reynolds, the shadow business secretary, outlined his industrial strategy, which included a commitment to a zero-carbon electricity system by 2030. The strategy is to promote the green economy and high-paying jobs in towns and regions.
That’s the plan – but is it achievable? Reeves’s team began writing her speech in July, holed up in a room in Leeds. A lot has changed since then. By the time Reeves took to the conference stage the pound had hit its lowest ever level against the dollar. The mini-Budget on Friday and the market’s response has materially changed what Labour can do. It’s now difficult for the party to promise the same level of spending without risking breaking their own fiscal rules, which broadly state that national debt should be falling. The budget deficit is now set to hit £67 billion by 2026-7, the Resolution Foundation estimates. The shadow chancellor’s desire to win the public’s trust for fiscal responsibility – a key theme that her team wanted to convey in the speech – means a Labour government would be under even more pressure to constrain spending after the present administration’s splurge.
The unpredictability of the economy makes it difficult for Labour to set out a comprehensive economic proposal. In any case, the party would not do that until closer to a general election. We can decipher central principles, however. Those close to the preparation of the speech emphasised three key ideas: inequality inhibits growth; an active state is key to levelling up the country; and strong public services are not a drain on the exchequer but are central to higher growth. “Our approach is the one that rises to the moment, that can deal with the energy crisis, climate crisis and tech in a big way,” said one source. Labour has been inspired by other centre-left governments around the world and believes the Tories are moving against the spirit of the times.
But the question still stands: how will they sell this to the public?